President Barack Obama travelled to New York on Thursday where he reached out to Wall Street to win its cooperation on his major financial regulation overhaul package awaiting a Senate vote.
Speaking at the Cooper Union educational institution in Lower Manhattan he said, ?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. And I am here to explain what reform will look like, and why it matters.?
The House of Representatives already passed a bill last December with sweeping reforms and now Mr. Obama hopes the Senate will follow suit in four key areas of regulation in the coming weeks after which he could sign the reforms into law.
First, Mr. Obama said, the bill being considered in the Senate would create new protections for the financial system and the broader economy, in particular ensuring that ?taxpayers are never again on the hook because a firm is deemed ?too big to fail.?? Arguing that the recent financial crisis had occurred because there was no process ?designed to contain the failure of a Lehman Brothers,? he said that it was for this reason that ?we need a system to shut these firms down with the least amount of collateral damage to innocent people and businesses. He said that he had insisted that the financial industry ? and not taxpayers ? shoulder the costs in the event that a large financial company should falter, with the goal being to make certain that taxpayers are never again on the hook because a firm is deemed ?too big to fail.?
Second, Mr. Obama argued that regulatory reform ought to bring new transparency to financial markets, for example by preventing firms such as AIG from making ?huge and risky bets using derivatives and other complicated financial instruments in ways that defied accountability, or even common sense.? In this regard he said that there was a legitimate role for these financial instruments in our economy, to allay risk and spur investment.
Third, he explained that his administration would enact the ?strongest consumer financial protections ever,? to protect people taking on mortgages and credit cards and auto loans from being misled by ?bandit? companies and losing their homes and fortunes.
Finally, he said that the Wall Street reforms he was proposing would give shareholders ?new power? in the financial system, including having a say on the salaries and bonuses awarded to top executives and a stronger role in determining who manages the companies in which they?ve placed their savings. ?Americans don?t begrudge anybody for success when that success is earned. But when we read in the past about enormous executive bonuses at firms even as they were relying on assistance from taxpayers, it offended our fundamental values,? Mr. Obama said, adding that this compensation structure had also created perverse incentives to take ?reckless risks.?