WASHINGTON (AP) - Ramping up pressure for a financial overhaul,
President Barack Obama is heading to the place where the economic
meltdown began to argue for stronger government oversight of the
industry and to urge Congress to finish a regulatory bill quickly.
Otherwise, he says, we are doomed to repeat the past.
In a speech Thursday at New York's Cooper Union college, near
Wall Street, Obama was outlining the need for new financial
regulations and explaining what the nation would be risking if the
existing framework is allowed to remain in place unchanged.
The president also was calling on Wall Street to join - not
fight - the overhaul effort.
Obama spoke at Cooper Union as a presidential candidate in March
2008 and decried practices that he said too often rewarded
financial manipulation instead of productivity and sound business
"I take no satisfaction in noting that my comments have largely
been borne out by the events that followed," Obama said in
excerpts of his prepared remarks for Thursday, which the White
House released several hours before the speech.
"But I repeat what I said then because it is essential that we
learn the lessons of this crisis, so we don't doom ourselves to
repeat it. And make no mistake, that is exactly what will happen if
we allow this moment to pass - an outcome that is unacceptable to
me and to the American people," he said.
The sweeping regulation, representing the broadest attempt to
overhaul the U.S. financial system since the 1930s, aims to prevent
another crisis. Democrats are preparing to bring the Senate version
of the bill up for debate, but solid GOP opposition has complicated
the effort. The House passed its version of the bill in December.
The bills would create a mechanism for liquidating large,
interconnected financial firms considered too big to fail. At the
height of crisis in 2008, the Bush administration and the Federal
Reserve were forced to provide billions of taxpayer dollars to prop
up the giant insurer American International Group Inc., several
banks and various financial institutions. The moves were highly
unpopular with voters.
The bills also, for the first time, would impose oversight on
the market for derivatives - complicated financial instruments
whose value is derived from the value of other investments. The
measures also would create a council to detect threats to the
broader financial system and establish a consumer protection agency
to police consumers' dealings with banks and other financial
The Senate Agriculture Committee on Wednesday approved a bill by
its chairwoman, Sen. Blanche Lincoln, D-Ark., to limit banks'
ability to trade derivatives and to make such transactions more
open. Lincoln's proposal is more sweeping than those offered by the
Obama administration and the House, but it is expected to become
part of the Senate financial overhaul bill.
Both political parties agree that an overhaul is in order, but
Senate Republicans are insisting on changes to the bill. All 41
Senate Republicans signed a letter last week saying they would
block the measure.
Republicans contend that Democratic plans to create a $50
billion fund, paid for by the industry, to help unwind failing
institutions would encourage Wall Street banks to take risks and to
expect future bailouts. Democrats say the fund would lead to
bankruptcy, not rescue. The Obama administration does not support
the fund and would not object to its being removed from the bill.
At the same time, Senate Banking Committee Chairman Chris Dodd,
D-Conn., and Sen. Richard Shelby of Alabama, the panel's top
Republican, have been trying to negotiate a compromise measure that
could win GOP support.
Democrats have accused Senate Republican leader Mitch McConnell
of Kentucky of aiding efforts by the financial industry and others
to fend off the attempt to impose tighter regulation.
Obama said Thursday that he believes in the power of a free
market, but that in a 21st century economy there no longer is a
dividing line between Main Street and Wall Street. That means
decisions made in corporate boardrooms can have lasting effects on
decisions made around kitchen tables, he said.
"A free market was never meant to be a free license to take
whatever you can get, however you can get it," Obama said in
remarks identical to those in his speech two years ago.
"That is what happened too often in the years leading up to the
crisis," he said. "Some on Wall Street forgot that behind every
dollar traded or leveraged, there is family looking to buy a house,
pay for an education, open a business or save for retirement. What
happens here has real consequences across our country."
New York Mayor Michael Bloomberg was expected in the audience of
approximately 700 financial industry leaders, consumer advocates,
presidential advisers, local officials, students, faculty and
others for Obama's speech.
The billionaire Bloomberg, who got his start on Wall Street in
the 1960s, has argued that too much regulation could jeopardize the
economy as much as others say tighter regulation would protect it.
The industry helps fill New York City's coffers with millions of
dollars in revenue from taxes on Wall Street profits.
But Bloomberg's administration says the mayor backs the idea of
regulating derivatives, creating a council to detect threats to the
financial system and establishing a consumer protection agency.