Obama Tells Wall Street Bailout Days Are Over: Five Points to Ponder

Five matters to consider in the wake of President Obama's warning to Wall Street Monday, in a major speech a year after the collapse of Lehman Brothers, that the days of big bailouts are over.

1. Obama said that next time, the federal government won't be there to provide a fiscal safety net and he wants to avoid a next time. "While full recovery of the financial system will take a great deal more time and work, the growing stability resulting from these interventions means we're beginning to return to normalcy. But here's what I want to emphasize today: Normalcy cannot lead to complacency," Obama said.

"Unfortunately, there are some in the financial industry who are misreading this moment. Instead of learning the lessons of Lehman and the crisis from which we're still recovering, they're choosing to ignore those lessons. I'm convinced they do so not just at their own peril, but at our nation's. So I want everybody here to hear my words: We will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall."

2. Obama is pushing a broad overhaul of the nation's financial regulatory system at the same time he is pursuing health care reform. The Obama team believes two mega issues can work through Congress at the same time. Obama wants Congress to send him a bill by the end of the year. The House Financial Services Committee expects to mark up, or finalize the legislative proposals in the Obama financial reform package in October. The Senate timetable is not yet clear.

3. Don't expect many, if any, GOP votes on the Obama package in the House. But the measure will advance more smoothly than health care. Why? There is no pitched ideological battle between the left and center right wings of the Democratic family when it comes to overhauling the nation's financial system and installing more consumer safeguards.

The internal battles may be more about who is in the tank for the banks, financial exchanges and investment firms. On health care, the Obama White House was caught off-guard with the emergence of a potentially deal killing "public option" fight within the Democratic party over expanding health insurance coverage. There is nothing-at this point-in the financial package that backers see as being as meaty for opponents as those so-called death panels.

4. Obama wants to give consumers more help in the confusing financial marketplace, but he lectured that individuals shoulder some of the blame for the economic crisis the country is trying to dig out of.

"We're proposing new rules to protect consumers and a new Consumer Financial Protection Agency to enforce those rules,'' he said. "This crisis was not just the result of decisions made by the mightiest of financial firms. It was also the result of decisions made by ordinary Americans to open credit cards and take on mortgages. And while there were many who took out loans they knew they couldn't afford, there were also millions of Americans who signed contracts they didn't fully understand offered by lenders who didn't always tell the truth," Obama said.

"This is in part because there is no single agency charged with making sure that doesn't happen. That's what we intend to change. The Consumer Financial Protection Agency will have the power to make certain that consumers get information that is clear and concise, and to prevent the worst kinds of abuses. Consumers shouldn't have to worry about loan contracts designed to be unintelligible, hidden fees attached to their mortgage, and financial penalties -- whether through a credit card or a debit card -- that appear without warning on their statements. And responsible lenders, including community banks, doing the right thing shouldn't have to worry about ruinous competition from unregulated competitors."

5. The Obama White House continues to be frustrated over matters that should not require a law to change corporate behavior. That frustration includes: a. the pace-slower than hoped-of helping people get their home mortgages modified. b. companies paying hefty executive bonuses. c. consumers continuing to be befuddled because financial institutions are allergic to using plain language.

Watch for mortgage modification to emerge in Congress as a bigger issue in the weeks ahead.

Said Obama, "The fact is, many of the firms that are now returning to prosperity owe a debt to the American people. They were not the cause of this crisis, and yet American taxpayers, through their government, had to take extraordinary action to stabilize the financial industry. They shouldered the burden of the bailout and they are still bearing the burden of the fallout -- in lost jobs and lost homes and lost opportunities. It is neither right nor responsible after you've recovered with the help of your government to shirk your obligation to the goal of wider recovery, a more stable system, and a more broadly shared prosperity.

"So I want to urge you to demonstrate that you take this obligation to heart. To put greater effort into helping families who need their mortgages modified under my administration's home ownership plan. To help small business owners who desperately need loans and who are bearing the brunt of the decline in available credit. To help communities that would benefit from the financing you could provide, or the community development institutions you could support. To come up with creative approaches to improve financial education and to bring banking to those who live and work entirely outside of the banking system. And, of course, to embrace serious financial reform, not resist it."