NEW YORK —Shares of big banks dropped Thursday, led by Morgan Stanley , as President Barack Obama proposed a plan to limit their size and the risks they can take on.

The proposal marks the administration's latest assault on Wall Street in what could mark a return—at least in spirit—to some of the curbs on finance put in place during the Great Depression, according to congressional sources and administration officials.

The White House plan, backed by former Federal Reserve Chairman Paul Volcker, would prevent commercial banks and institutions that own banks from owning and investing in hedge funds and private-equity firms, and limit the trading they do for their own accounts.

Goldman Sachs Group Inc., which makes most of its money from trading, could be particularly hurt by that, because if that trading is limited, it could hurt earnings, Raymond James analyst Anthony Polini said.

Bank bonds also weakened as the government's proposal to limit large banks' size and risk-taking outweighed a strong earnings report from Goldman Sachs.