Posted on 22 Apr 2010
President Obama is traveling to the shadow of Wall Street on Thursday to counter what he calls "the furious efforts of industry lobbyists" trying to weaken or kill new financial regulations that he says are needed to stave off a second Great Depression.
As the Senate debates how to rewrite rules governing the financial industry, Mr. Obama will lay out the elements he insists must be in any legislation to get his signature. Among them are more consumer protections, limits on the size of banks and the risks they can take, reforms on executive compensation and greater transparency for controversial securities known as derivatives.
In flying to New York City, the president wants to confront the financial industry more directly through a sharp speech just a few minutes’ subway ride from Wall Street, and with some of its leading corporate titans in the audience. After castigating their “failure of responsibility” in recent years, he intends to call on them to stop resisting tighter regulation through the army of lobbyists now staked out on Capitol Hill.
“I am sure that many of those lobbyists work for some of you,” Mr. Obama plans to say, according to excerpts of the speech provided by the White House for release on Thursday morning. “But I am here today because I want to urge you to join us, instead of fighting us in this effort. I am here because I believe that these reforms are, in the end, not only in the best interest of our country, but in the best interest of our financial sector.”
The fight for tougher regulation of the financial industry has become the president’s top legislative priority since he signed his health care program into law, and both parties are jockeying for position on the issue with midterm Congressional elections just six months away. The president and his allies have eagerly portrayed Republicans as handmaidens of Wall Street, while the Republicans have accused Democrats of trying to strangle the financial markets and even institutionalize the idea of bailouts in tough times.
The tensions appeared to ease somewhat in recent days as both sides predicted an eventual bipartisan compromise. A Senate committee on Wednesday sent to the floor a bill imposing tougher rules on derivatives, the complex securities at the heart of the 2008 financial crisis, and one key Republican senator joined Democrats in advancing the legislation.
In an interview with CNBC and The New York Times on Wednesday, and in the speech excerpts released ahead of the Thursday event, Mr. Obama avoided incendiary language attacking Republicans, suggesting he was angling for a deal with them. But in addition to setting demands for what to include in the bill, he included tough talk about the industry that he accused of putting profit ahead of propriety.
“Some on Wall Street 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,” he says in the excerpts released by the White House. “What happens here has real consequences across our country.”
The president’s address at Cooper Union in Lower Manhattan will circle back to another speech he gave at the same location in March 2008 warning of financial manipulation, market bubbles and the concentration of economic power. He repeats some of the same lines he gave two years ago and casts himself as a prescient forecaster before the collapse later that year.
“I take no satisfaction in noting that my comments have largely been borne out by the events that followed,” he says in the excerpts. “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.”
In the address, Mr. Obama plans to embrace both the financial regulation bill passed by the House last year and the version now emerging in the Senate. The White House said that Mr. Obama in the speech will lay out five elements that “must be included” in the final bill:
Instituting a system to ensure that “American taxpayers are protected in the event that a large firm begins to fail.”
Imposing the so-called Volcker Rule, named after Paul A. Volcker, the former Federal Reserve chairman who proposed limits on the freewheeling trading and risks taken by banks.
Setting new transparency rules for derivatives “and other complicated financial instruments.”
Assuring “strong consumer financial protections.”
Instituting “pay reforms” to give investors and pension holders “a stronger role in determining who manages the companies in which they’ve placed their savings.”
The White House said Thursday’s audience would include leaders from the financial industry, members of the President’s Economic Recovery Advisory Board, consumer advocates, local elected officials, representatives of those affected by the economic downturn, and Cooper Union students and faculty members.