Obama did not include the restrictions in the comprehensive financial regulatory overhaul he proposed last summer. And the administration did not propose the changes even as the House last fall completed its version of the legislation, which gives regulators the ability to prohibit proprietary trading at financial firms whose failure could pose a risk to the economy.
But beginning with his description last month of Wall Street executives as "fat-cat bankers," Obama has been focusing more fire on large financial institutions. JPMorgan, Goldman and others have returned to big profits even as average Americans continue to struggle and unemployment remains at 10% nationwide.
Last week, Obama proposed a new tax on the 50 largest financial institutions to recoup projected losses in the $700-billion bailout fund.
The latest restrictions were designed over recent weeks, administration officials said, with input from Volcker, prompting Obama to refer to them as "the Volcker rule."
Large financial firms opposed the administration plan, and one trade group called it counterproductive.
But Bank of America said in a statement that it already had ended or reduced many of its high-risk activities, such as issuing certain derivatives and making "private equity investments that are not part of a client-banking relationship."
"We will look carefully at this proposal when its details become available," the Charlotte, N.C., bank said.
Obama's plan also would seek to limit the future growth of large institutions, adding to an existing prohibition on any firm holding more than 10% of the insured bank deposits in the nation.
The administration wants regulators to impose a new cap on a firm's liabilities other than deposits. The specifics of such a cap would have to be worked out by regulators, but administration officials said the terms were not designed to reduce the market share of any existing firm, but rather "to constrain future growth that leads to excessive concentration."
Goldman and Morgan Stanley could avoid any added regulations. They were conventional investment banks until they sought bank charters amid the crisis in late 2008 to protect themselves from the market turmoil. Should the new rules be enacted, those companies could decide they don't need the complications and give up their bank status.
Other banks, such as JPMorgan Chase and Bank of America, that have large traditional banking operations, would find such a move difficult.
The prospects for Congress passing Obama's newest proposals are unclear.
House Financial Services Committee Chairman Barney Frank (D-Mass.) told CNBC he supported the plan but that it probably would be phased in over three to five years.
Bills introduced last month in the House and the Senate would restore the Glass-Steagall restrictions. The Senate bill was co-sponsored by Sens. Maria Cantwell (D-Wash.) and John McCain (R-Ariz.), indicating some bipartisan support for the concept.
Times staff writer E. Scott Reckard contributed to this report.