President Barack Obama meets with former Federal Reserve chairman and current Economic Recovery Advisory Board chair Paul Volcker in the Oval Office, January 21, 2010.

European Union (EU) finance ministers and officials are reported to be uniting to oppose President Barack Obama’s proposal to limit banks’ size and risk-taking, saying his plan may run counter to EU policy, according to a draft document. Meanwhile in Washington DC, Republicans in the US Senate are opposing proposals that would require big banks to increase capital and liquidity requirements.

Big universal banks such as German's Deutsche Bank, France's BNP Paribas and Spain's Banco Santander, have come through the crisis relatively unscathed and according to Bloomberg News, the EU position, which they will ratify at a two-day meeting starting today, comes after Obama last month urged the adoption of the so-called “Volcker rule,” named for former Federal Reserve Chairman Paul Volcker. The plan would bar commercial banks from owning hedge funds and limit how much they can trade for their own account.

Bloomberg says the finance officials gathering in Brussels will express “their concern that the application of the ‘Volcker’ rule in the EU may not be consistent with the current principles of the internal market and universal banking,” the document obtained by Bloomberg News said.“Any policy choice should avoid pushing risks to other parts of the financial system.”

The Feb. 10 draft, entitled “Issues note on the most recent proposals of the U.S. administration in respect of Systemically Important Financial Institutions and the introduction of a financial crisis responsibility fee,” was prepared by a committee of officials from finance ministries, the European Central Bank and the European Commission.

In Washington, which is dominated by money politics, centrist Democratic Senator Evan Bayh, shocked colleagues on Monday by announcing that he wouldn't run for a third term.

In a New York Times/CBS News poll last week, 75 percent of respondents said they disapproved of the job Congress was doing and just 8 percent said members of Congress deserved re-election.

In an interview, Bayh said he was startled at how much the Senate had changed since he arrived in 1998, and even more since his father, Birch Bayh, served in the Senate, from 1963 to 1981.

“This is colored by having observed the Senate in my father’s day,” he said. “It wasn’t perfect; they had politics back then, too. But there was much more friendship across the aisles, and there was a greater willingness to put politics aside for the welfare of the country. I just don’t see that now.”

“In my father’s day, you legislated for four years and campaigned for two; now it’s full time. The politics never stops,”he said.“My bottom line is that there are a lot of really good people trapped in a dysfunctional system desperately in need of reform.”

The Financial Times reports today that talks between Chris Dodd, the Senate banking committee chairman, and Richard Shelby, the senior Republican on the committee, broke down more than a week ago because the two could not agree on a proposed Consumer Financial Protection Agency, which would oversee the sale of mortgages and credit cards.

Several aides from both parties involved in reform negotiations told the FT that Republicans had opposed in private a plan to impose tougher capital and liquidity requirements on companies that posed a risk to the financial system.

Meanwhile, people familiar with the continuing bipartisan talks say a council of regulators will be proposed to tackle “systemic risk”, rather than the alternatives of setting up a regulator or giving the power to the Federal Reserve.

SEE: Finfacts article, May 2009: America may be the most corrupt developed country