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Obama, on Anniversary of Wall Street Collapse, Kicks Up Drive to Prevent More Meltdowns

6 years ago
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President Obama makes a quick visit to Wall Street on Monday for a lunch-hour speech on the economy. A day short of the one-year anniversary of the fall of financial giant Lehman Brothers, which filed for bankruptcy Sept. 15, 2008, Obama will tell the nation that he believes we are back from the brink.

But America is far from economically healthy again, and even with an enormous focus on pending health care legislation, the president wants to keep pressure on Congress to pass his package of financial system reforms while the memory of how close the nation was to another Depression is still fresh in voters' minds.
An administration official told Politics Daily Sunday night that Obama "will discuss the administration's plan to wind down government involvement in the financial sector, lay out a strong case for immediate action on regulatory reform and reiterate the importance of global coordination in preventing future crises.

"He will reflect on the state of the economy one year ago and the aggressive actions taken by the administration to stabilize the financial system and bring about a broader economic recovery," the official added. "He will also urge the financial community to take responsibility, not only to support reforming the regulatory system but also to avoid a return to the practices on Wall Street that led us to the financial crisis, and to recognize their obligation to help produce a wider recovery on behalf of the American people."

Obama's audience at Federal Hall will be members of the financial community, but not just Wall Street elites. Consumer advocates will also be in the room, as will Treasury Secretary Tim Geithner and Christina Romer, who chairs the president's Council of Economic Advisers.

Geithner himself signaled the entry of the White House into a new phase of wrangling the economy during his testimony last Thursday before the Congressional Oversight Panel, chaired by Harvard Law School Professor Elizabeth Warren.

The panel was created by former President Bush on Oct. 3, 2008, to oversee the spending of TARP (Troubled Asset Relief Program) funds, which Congress hurriedly approved when a total meltdown of the economy seemed possible.

Remember how fast the good times evaporated? How all of a sudden during the presidential campaign last year Barack Obama and John McCain started talking apocalyptically about the economy as this frightening new financial crisis unfolded, housing prices plummeted, the stock market nose-dived, and mortgage foreclosures skyrocketed? Besides Lehman, Fannie Mae and Freddie Mac were placed in government conservatorship on Sept. 7, 2008. The Fed loaned AIG $85 billion on Sept. 16. Citigroup got a bailout bundle on Nov. 23. The Treasury approved massive loans to General Motors and Chrysler on Dec. 19.

Obama, sworn in on Jan. 21, inherited a frozen economy as housing and stock prices continued to plunge while the unemployment rate surged. There was near panic in Washington -- and on Wall Street.

As Geithner told Warren's panel: "Last September, of course, we faced the risk of catastrophic financial failure and the risk of a great depression, and today, I believe because of comprehensive policy actions put in place since then, we are back from the edge of the abyss.

"The consensus among private forecasters now is that the U.S. economy is now growing again," he added. "The financial system is showing very important signs of repair. Cost of credit has fallen dramatically, not just for homeowners, for households, but for businesses as well. Because of these signs of early progress, we are now in a position to start to adjust our strategy, moving from crisis response to recovery, from rescuing the economy to repairing and rebuilding the financial system, to repairing and rebuilding the foundations for future growth."

Obama is pushing for comprehensive reform of how the financial institutions in the U.S. are regulated in order to stabilize financial markets and manage systemic risk. The widespread malfeasance, greed and fraud exhibited by many of the nation's top investment banks and financial institutions -- personified by Bernard Madoff's multi-billion-dollar Ponzi scheme -- have convinced the president and his top economic advisers that responsible governance entails more than just cheerleading the nascent recovery.

"There's a lot of concern that as things have improved, that we're going to let the market, the financial world, go back to the conditions it enjoyed before the crisis, and we're not going to let that happen," Geithner testified.

A key proposal in Obama's regulatory reform package is the creation of a Consumer Financial Protection Agency, first proposed several years ago by Elizabeth Warren. The new agency would look at the nation's complex financial system through the eyes of consumers to keep financial institutions from exploiting the gaps in the fractured federal regulatory system.

The byproduct of the financial meltdown could be an improved system that cannot be gamed by the next Bernie Madoff, or the would-be whiz-kids at savvy Wall Street investment houses. But for that to happen, said Geithner, "the Congress of the United States needs to come join with us in passing comprehensive financial reform so we have much stronger rules of the road and constraints in place."

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