WASHINGTON (Reuters) - The Obama administration reasserted its commitment to banning proprietary trading by banks with draft legislative language on Wednesday, despite signs that Congress is unlikely to adopt such a rule.

In a scant five pages from the Treasury Department, the administration put a two-year phase-in on its "Volcker rule" to curb "prop trading" -- or buying and selling of investments on financiers' own books unrelated to customer needs.

WASHINGTON - The Federal Reserve chairman, Ben S. Bernanke, urged senators on Thursday not to strip the central bank of its authority to supervise the country's largest banks, warning that to do so would pose a 'grave mistake.'

'It's hard for me to understand why, in the face of crisis that was so complex and covered so many markets and institutions, you would want to take out of the regulatory system the one institution that has the full range and breadth of skills to address those issues,' Mr. Bernanke said.

From William D. Cohan at Opinionator:

You'll get no argument here that President Obama was absolutely correct in saying in the State of the Union message that Wall Street needs to be held accountable for its bad behavior — as we all do, frankly — and that any near-term Wall Street reform legislation must figure out how to do precisely that.

The problem is that Obama's latest proposal to try to protect us all from the threat that Wall Street might be constructing yet another financial house of cards.

DAVOS, Switzerland - The billionaire investor George Soros said on Wednesday that he supported President Obama's proposal to limit the size of banks. But he warned that it was too early to put such a plan in place and that it did not go far enough.

Mr. Soros's comments at the World Economic Forum here clashed with those made earlier in the day by the president of Barclays, Robert E. Diamond Jr., who said that the effects of shrinking banks 'on jobs and the economy would be very negative.'

NEW YORK/BOSTON (Reuters) - If major banks give up their private equity and hedge fund investments, their bottom lines could take a real hit because these investments also are a key source of underwriting and advisory fees.

U.S. President Barack Obama is calling for major banks to reduce their risk taking and investors in financial stocks are clearly alarmed. Goldman Sachs Group Inc (GS.N) shares have fallen more than 7 percent since Wednesday, before the proposal was leaked, and JPMorgan Chase & Co (JPM.N) shares have fallen more than 9 percent.

Only a year after the government stepped in to aid Goldman Sachs and Morgan Stanley by granting them access to the federal safety net, policy makers are developing an exit path that would allow them and others to escape limits on banks being proposed by the Obama administration.

President Obama wants to limit the scope of risk-taking by barring banks with federally insured deposits from trading securities for their own accounts and from owning hedge funds and private equity funds. The plan.

LONDON (Dow Jones)--U.S. President Barack Obama's plan to restrict the activities of commercial banks could have a significant impact on private equity and the hedge fund industry, experts said Friday.

U.S. banks in particular make a tremendous contribution to the buyout sector and have raised 60 funds since 2006, with a total value of more than $80 billion, according to London research firm Preqin. Currently, U.S. banks have 18 new private equity funds on the road seeking aggregate funds of around $18 billion, and have $50 billion worth of "dry powder" waiting to be invested.

LONDON (Reuters) - Britain's ruling Labour party and opposition Conservatives on Friday threw their support behind President Obama's plans to stop banks taking on too much risk, but only the opposition indicated it might copy them.

The Obama proposals, which need congressional approval, would stop banks investing in hedge funds or private equity funds and bar institutions from proprietary trading operations, unrelated to customer needs, for their own profit.

LONDON (Reuters) - The Labour party and the Conservatives on Friday threw their support behind U.S. President Obama's plans to stop banks taking on too much risk, but only the Tories indicated they might copy them.

The Obama proposals, which need congressional approval, would stop banks investing in hedge funds or private equity funds and bar institutions from proprietary trading operations, unrelated to customer needs, for their own profit.

NEW YORK (Reuters) - U.S. President Barack Obama's plan to limit financial risk-taking could force banks, such as Goldman Sachs or JPMorgan , to shed parts of their private equity operations. Among the proposals, which require congressional approval, is that banks or financial institutions that own banks would not be able to own, invest in or sponsor private equity funds unrelated to serving customers.

NEW YORK (Dow Jones)--President Barack Obama's proposal to rein in banks contains a number of provisions that could have a serious impact on the private equity arms of banks, as well as the private equity industry overall, depending on how the vague outlines unveiled Thursday are filled in.

Obama said in his remarks on the proposal that "banks will no longer be allowed to own, invest in or sponsor hedge funds, private-equity funds or proprietary trading operations for their own profit, unrelated to serving their customers."

Jan. 21 (Bloomberg) -- President Barack Obama, tapping into voter anger over bank bailouts, called for limiting the size and trading activities of financial institutions as a way to reduce risk-taking and prevent another financial crisis.

The proposals, to be added to an overhaul of regulations being considered by Congress, would prohibit banks from running proprietary trading operations solely for their own profit and sponsoring hedge funds and private equity funds. He also proposes expanding a 10 percent market-share cap on deposits to include other liabilities such as non-deposit funding to restrict growth and consolidation.

WASHINGTON - Declaring that huge banks had nearly brought down the economy by taking 'huge, reckless risks in pursuit of profits,' President Obama on Thursday proposed legislation to limit the scope and size of large financial institutions.

The changes would prohibit bank holding companies from owning, investing, or sponsoring hedge fund or private equity funds and from engaging in proprietary trading - what Mr. Obama called the Volcker Rule, in recognition of the former Federal Reserve chairman, Paul A. Volcker, who has championed the restriction.