I was a trader of mortgage backed bonds. I carried positions to enable customer activities and oppositely ran short positions to hedge my book. I would accumulate positions in bonds I thought were good value based on research and my own opinions so when customers agreed and wanted to buy them I could offer them competitively. It was very important to ‘do the business’ but it was also important to ‘make money.’ Proprietary trading is what enables you to do both. YES, there is a downside to prop trading and the government should not ‘bail out’ risk takers, but this rule shoots the baby out with the bathwater. Without ‘prop trading’ I do not see how Wall Street firms can do their business.
As for the ownership of private equity and hedge funds I think this issue is complicated as well and not as simple as just now sorry, you cannot do it. Again, financial reform is needed, but thoughtful reform.
What I take biggest issue with frankly is the language and the tone the administration is using. You can be strong without being aggressive and confrontational. Wall Street played by the rules by and large and yes the rules were messed up but blame the regulators for that one. President Obama daring Wall Street to challenge what they are doing is just not appropriate in my book and clearly populist.
Lastly if you really want to get annoyed and ponder what happens if the government takes financial institutions continue to follow what is happening with Fannie and Freddie.
Here is the latest from the Wall Street Journal. (Fannie, Freddie Losses May Hit US)