Obama Speech Aims at ‘Risky Decisions’ on Wall Street (Update1)
By Roger Runningen and Edwin Chen
“Financial reform is something that is born out of an economic collapse that started on Wall Street and spread to Main Street America,” White House press secretary Robert Gibbs said today in previewing the president’s address at New York’s Cooper Union.
Obama’s speech will “remind the American people what’s at stake,” Gibbs said. The president wants rules for financial markets “so that we don’t find ourselves at the mercy of a series of risky decisions as we have in the past.”
The president is giving the address as he and Democratic leaders push to get legislation through Congress by next month. The House passed its version last December. The Senate is poised to take up legislation sponsored by Connecticut Democrat Christopher Dodd, the chairman of the Banking Committee.
Obama is tentatively scheduled to speak just before noon.
Brian Gardner, senior vice president for Washington research at Keefe Bruyette & Woods Inc., said the speech is primarily a vehicle for Obama to campaign for passage of the legislation and isn’t likely to offer new policy directions.
“I don’t think Wall Street is expecting any kind of olive branch on the substance of the legislation, but I think folks on the street would like to see cooler rhetoric,” Gardner said. “I’m not sure that they’re going to get it.”
Wall Street Culture
Obama said in an interview with CNBC today that Wall Street’s culture hasn’t changed much. Financial firms will have to accept updated rules because it’s “unacceptable” to continue using taxpayer money to rescue banks, he said.
The “core” of the administration’s regulatory overhaul is assurance “that we don’t have to bail out firms if they acted recklessly, that we can unwind them in an orderly fashion that protects the economy as a whole, that taxpayers aren’t on the hook,” Obama said.
The other main elements are regulations governing the derivatives market to make it more transparent and an independent agency to protect consumers, he said.
The president is returning to the site where, during the 2008 campaign, he outlined his proposals for a new regulatory regime.
Obama blames a lack of effective regulation for failing to stem the worst financial crisis in two generations, which brought down Bear Stearns Cos. and Lehman Brothers Holdings Inc. and prompted a $700 billion bailout of the financial industry.
Negotiations on Bill
Senate Republicans have signaled a softening in their opposition after lobbying by the president and other administration officials and the Securities and Exchange Commission’s announcement last week that it was suing Goldman Sachs Group Inc. for fraud linked to derivatives.
All 41 Senate Republicans signed a letter last week vowing to oppose the legislation as it stood after passing Dodd’s committee. Negotiations on the measure are continuing, including whether to drop a $50 billion industry-supported fund the government would use to break apart failed, systemically important firms.
The fund has been a focal point of Republican objections, and administration officials have said it wasn’t part of Obama’s original proposal, suggesting they wouldn’t fight its elimination.
Republican Support
“I have an awful lot of Republicans who are willing” to vote for the regulatory bill, Dodd said today in an interview with Bloomberg Television. “The question is whether the leadership will allow them to do it.”
Senator Richard Shelby of Alabama, the ranking Republican on the banking panel, said he and Dodd are close to an agreement on the legislation.
Senate Republican Leader Mitch McConnell, of Kentucky, who last week called the regulation legislation “fatally flawed,” told the Louisville Courier-Journal there has been a more conciliatory tone in talks as progress is made on a compromise.
“I’m optimistic,” he in an interview published today.
Dodd’s measure, which may come to the Senate floor as soon as next week, would create an independent regulator within the Federal Reserve that would guard consumers against abuse and deception in such instruments as mortgages, credit cards or loans. It would also create the mechanism to unwind systemically important financial firms when they fail.
The Senate Agriculture Committee today approved a separate measure that would require U.S. lenders such as JPMorgan Chase & Co. and Bank of America Corp. to spin off their swaps trading desks.
To contact the reporters on this story: Roger Runningen in Washington at rrunningen@bloomberg.netEdwin Chen in Washington at Echen32@bloomberg.net
Last Updated: April 21, 2010 18:02 EDT
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