Readers Speak: Bank Limits Would Fail

Financial reform, health care and real estate were at the forefront of the news this week, and SmartMoney.com readers voiced their opinions on those issues in daily polls. Here are the basics. You don t think President Obama will succeed in placing new restrictions on banks. You overwhelmingly believe that the health-care bill is dead. And, in most cases, your local housing market is stabilizing.

The polls were conducted over a five-day stretch when the Dow Jones Industrial Average lost the gains it had made so far this month. As of Friday morning, the index stood at around 10301 its lowest point in two months. The selloff raised the possibility that the market s long rally may be at or nearing an end. Economic data were also bearish: The Labor Department reported a rise in weekly unemployment insurance claims, which did little to raise hopes of a decline in the monthly unemployment rate. And bank earnings weighed on the market, as well. Bank of America (BAC) posted increased credit losses of $10 billion and Citigroup (C) reported a $7.6 billion loss from charges it took to repay money from the Troubled Asset Relief Program.

Much of the market s decline followed President Obama s proposal on Thursday to place new limits on large banks, including the elimination of proprietary trading. Tightening regulation on financial institutions remains at the top of President Obama s agenda to overhaul Wall Street and close the door on future taxpayer-funded bailouts. But 63% of SmartMoney.com voters say the president s new restrictions on banks won t go into effect (the remaining 37% said they will). The existing proposal would prohibit bank-holding companies from engaging in proprietary trading and from owning, investing in or sponsoring hedge funds or private-equity funds. The proposal also seeks to limit consolidation in the financial sector, in part by placing a cap on institutions market shares. Last week, President Obama proposed a new tax on around 50 of the largest banks to raise money to cover losses from the financial bailout.

Readers also had strong opinions on the new Congress. On Tuesday, the Obama administration was dealt a blow when Massachusetts voters elected Republican Scott Brown to fill the Senate seat of the late Edward Kennedy a staunch Democrat and supporter of health-care reform. The election negated the Democrats supermajority of 60 Senate seats which they would have needed to pass the legislation on party lines without a filibuster and sent health-care stocks soaring. After the election, 71% of SmartMoney.com voters say the health-care bill is dead, while 29% say it still has a shot.

More signs that the housing market s recovery remains sluggish left readers mixed this week. Housing starts fell more than expected to 557,000 in December, down from 580,000 the month prior. But building permits rose by more than expected to 653,000, up from 589,000 and above estimates. SmartMoney.com readers painted a mixed picture of their local real estate markets. Forty-seven percent say real estate in their neighborhood is holding steady and 14% say it s improving. On the flip side, 27% say their market is softening further and 11% voted with despair, Take my house -- please!