Obama's Banking Plan Could Batter Private Equity, Weigh on Markets

Flush with easy loans to fuel buyouts, American private equity funds were famously compared to locusts by foreign workers and government officials as they marched overseas during the credit bubble.

Now, as the private equity industry attempts to pick itself up in the wake of the credit crisis, it will face another major obstacle. Under President Obama's new proposals, banks may be forbidden from investing in private equity funds. The plan would cut off a major source of funding for the already battered private equity industry while doing little to make banks safer.