Hot on HuffPost:

See More Stories

Obama Takes Tough Wall Street Reform Pitch to NYC

3 years ago
  0 Comments Say Something  »
Text Size
NEW YORK -- More than 18 months after the U.S. economy nearly collapsed under the weight of dangerously over-leveraged investments, President Barack Obama went to New York City on Thursday to make the case for significantly reforming the way Wall Street does business.

He also delivered a pointed message to CEOs and financial executives, long the focus of his populist ire, that they share the blame for nearly taking the country into "a second Great Depression," and urged them to call off the legions of lobbyists now working in Washington to blunt the effects of his reform efforts. "I want to urge you to join us, instead of fighting us in this effort," he said in the speech at Cooper Union College.

Central to those reforms is a bill in the Senate that would limit the types of investments that financial institutions can make; add consumer protections to financial instruments; create and regulate a derivatives market; and establish a process for the government to unwind failing companies without using taxpayer money to bail them out.

Intending to bridge the gap between Wall Street and Main Street, Obama said that many working for the former "forgot that behind every dollar traded or leveraged, there is a 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." Without reform, he warned, "our house will continue to sit on shifting sands, leaving our families, businesses and the global economy vulnerable to future crises."

The goal, according to the president, will be to filter out the unbridled recklessness that saturated Wall Street's high-flying culture before the meltdown, while still allowing enough risk-taking in the markets to let American business investments thrive. The people who will ultimately win, the president will say, are the American taxpayers.
Specifically, he called for:
- A system to shut down firms failing large financial firms "with the least amount of collateral damage to innocent people and businesses. And from the start, I've insisted that the financial industry – and not taxpayers – shoulder the costs in the event that a large financial company should falter."
- Enact "what's known as the Volcker Rule, which places some limits on the size of banks and the kinds of risks that banking institutions can take."
- Ensure transparency surrounding complicated financial instruments such as derivatives to avoid practices "so opaque and complex that few within these companies – let alone those charged with oversight – were fully aware of the massive wagers being made." The president emphasized that there is a "legitimate role" for these financial instruments, but that "reckless practices were rampant" and took place "in the shadows of our economy, invisible to regulators and to the public. "

- Enact "the strongest consumer financial protections ever," which are essential because millions of Americans "were, frankly, duped. They were misled by deceptive terms and conditions, buried deep in the fine print."

- "G
ive shareholders new power in the financial system. They'll get a say on pay: a voice with respect to the salaries and bonuses awarded to top executives. And the SEC will have the authority to give shareholders more say in corporate elections, so that investors and pension holders have a stronger role in determining who manages the companies in which they've placed their savings."

In an interview with CNBC that aired ahead of his speech, Obama said, "The reason we have to have strong rules in place, and those rules are for the benefit of the American people, is so that we are not incentivizing a set of risky decisions where banks reap all of the reward yet none of the responsibility for the decisions that they make."

Another key reason to reform Wall Street, the president told CNBC, is to avoid more bailouts like the ones he had to approve in the early days of his presidency. "Taxpayers have been put in a position where they had to make a choice a couple of years ago -- either we let the entire economy crash because of irresponsibility on Wall Street, or alternatively, we end up having to pony up money. I think a vast majority of Americans think it is unacceptable to have a situation in which tails, you win, and heads, I lose."

Despite that message, Republicans have countered that the bill the president is pushing, which includes a bank-funded pool to dissolve dangerously failing firms, will only ensure more bailouts in the future.

According to the White House, the audience on hand for the speech included leaders from the financial industry, members of the President's Economic Recovery Advisory Board, consumer advocates and "representatives of the millions of people impacted by the downturn of the economy."

As Obama spoke in New York, senators in Washington continued to hammer out a deal on a Wall Street reform bill that can win at least some Republican support.

Treasury Secretary Tim Geithner and White House adviser Larry Summers have been reaching out to Republicans daily, and Sen. Richard Shelby (R-Ala.) said Wednesday that bipartisan progress has been made. "We're not there yet, but we're closer than we've ever been," Shelby said in the Capitol.

A key sticking point remains on how derivatives should be treated, after years of little transparency and no oversight. Sen. Blanche Lincoln (D-Ark.) passed a measure out of her Agriculture Committee on Wednesday that would require all credit swaps to go through a clearinghouse and then be traded on a regulated exchange.

Although Republicans and even some Democrats have called Lincoln's approach too aggressive, she said Wednesday, "We all sit here today knowing what went wrong and to contemplate inaction is absolutely unacceptable."

Our New Approach to Comments

In an effort to encourage the same level of civil dialogue among Politics Daily’s readers that we expect of our writers – a “civilogue,” to use the term coined by PD’s Jeffrey Weiss – we are requiring commenters to use their AOL or AIM screen names to submit a comment, and we are reading all comments before publishing them. Personal attacks (on writers, other readers, Nancy Pelosi, George W. Bush, or anyone at all) and comments that are not productive additions to the conversation will not be published, period, to make room for a discussion among those with ideas to kick around. Please read our Help and Feedback section for more info.

Add a Comment

*0 / 3000 Character Maximum Comment Moderation Enabled. Your comment will appear after it is cleared by an editor.

Follow Politics Daily

  • Comics
robert-and-donna-trussell
CHAOS THEORY
Featuring political comics by Robert and Donna TrussellMore>>
  • Woman UP Video
politics daily videos
Weekly Videos
Woman Up, Politics Daily's Online Sunday ShowMore»
politics daily videos
TV Appearances
Showcasing appearances by Politics Daily staff and contributors.More>>