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Banks Reform Shock: Just How Tightly Regulated?

With allegations of wrong-doing growing by the day, almost, are banks looking at significantly tighter regulation?

Perhaps the biggest concern for investors is a newly found momentum in the senate for a proposal to ban proprietary trades.

(Proprietary trading – or prop trading as it’s better known - refers to an financial firm using its own capital, instead of a client's money, for speculative trading.)

Although the idea has been floated before – as part of the Volcker rule - this time the legislation may have a better chance of making it through.

According to the WSJ, the amendment has the backing of the Treasury Department and Senate Banking Committee Chairman Christopher Dodd (D., Conn.), which could make it more difficult for the banks to defeat.

”We're confident that with Senator Dodd's support (the regulation) has an extremely good chance of passing" the measure, says Senator Carl Levin.

If you think Senator Dodd’s proposal will have a negative impact on banks, you’ve got to hear what BlackHorse Management chief economist Richard Duncan recommends.

"I’d like to see banks turned into utilities," Duncan says on Fast Money "We need to break these banks up into small tightly regulated entities."

*Want to hear more? Watch the video now! Says BlackHorse Management chief economist Richard Duncan


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Trader disclosure: On May 12, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour Owns (AAPL), (BAC), (DRYS), (INTC), (TIE); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Kelly Owns (FXE) Puts; Kelly Owns (FXB) Puts; Terranova Owns (PFE), (GLD), (XCO), (SWN), (TER); Terranova Owns Gold; Karabell Owns (GOOG), (AAPL), (IBM), (CSCO), (TIE), (GS), (C); Levy Owns (GS), (GS) Calls

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