Four Small Banks That Obama Plan Helps

By Louis Navellier of Investor Place

In 1999, Congress repealed a piece of Depression-era legislation commonly referred to as the Glass-Steagall Act. It was intended to reduce risk at banks by limiting investment activities. In the wake of the financial crisis, this move has taken a lot of heat -- and not without reason.

After all, the repeal of Glass-Steagall enabled commercial lenders like Citigroup(C) to dip into the kinky investment acronyms we have come to despise -- CDOs, SIVs and other items that resulted in huge losses at Citi and others.

President Obama's proposal would prevent commercial banks from ever taking such bets again and putting depositors and the credit market at risk. The president has also proposed limits on financial mergers, in an effort to prevent the bailout of another bank that is "too big to fail."

More From Investor Place

Top 5 Stocks for 2010 - Free Report

Free Newsletters

Investors Insights

Let's be honest, though. This move is undoubtedly driven by election-year politics as much as the financial crisis, and big banks make an easy scapegoat for Democrats. Just look at Obama's other proposal -- a "Financial Crisis Responsibility Fee" that is expected to raise $90 billion over the next 10 years, with around 60% of the revenue coming from the 10 largest financial firms.

Clearly, the White House is looking to mitigate fallout from the big bonuses and profits posted recently by financial companies that took taxpayer cash.

What does this mean for investors?