NEW YORK — Lecturing Wall Street on its own turf, President Barack Obama warned financial leaders Monday not to use the recovering economy to race back into “reckless behavior” that could cause a new meltdown. He declared that a bailout-weary public will not break their fall again.
Obama insisted there is an urgent need to tighten financial regulation, and he cautioned his audience not to try to block it. He spoke on the first anniversary of the Lehman Brothers investment bank collapse, the largest bankruptcy in U.S. history and a key part of the crisis that spread into a deep recession despite huge federal bailouts.
“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,” Obama said.
The president’s speech reflected public sentiment that taxpayers were immeasurably harmed from last year’s financial collapse and that, barring change, it could happen again. As investment giants return to profit, millions of Americans are still coping with unemployment, home foreclosures and ruined retirement portfolios.
For symbolic emphasis, Obama spoke from venerable Federal Hall on Wall Street.
“Unfortunately, there are some in the financial industry who are misreading this moment,” Obama told a quiet audience of investment leaders.
“So I want them to hear my words,” Obama said. “We will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis. . . . Those on Wall Street cannot resume taking risks without regard for consequences.”
Afterward, he joined former President Bill Clinton for lunch at a restaurant. The White House said Obama would address the annual meeting of the Clinton Global Initiative Sept. 22 while in New York for the United Nations General Assembly meeting.
The public is still edgy about Wall Street and the economy. A year after the meltdown, seven of 10 Americans lack confidence that the federal government has taken safeguards to prevent another financial industry meltdown, according to a new Associated Press-GfK poll.
Yet Obama’s reach goes only so far; his bid for huge regulatory change is up to Congress.
The president’s plan has yet to gain serious traction on Capitol Hill, as Democratic leaders have been consumed by the health care debate and staff members are still wrestling with the complexities.
The plan is being fought by a determined financial services lobby with a major assist from big business groups, and infighting among regulators who oversee the various portions of the sprawling financial architecture has further slowed the process.
But the pace is expected to pick up in coming weeks.
Democrats aim to stick to their promise of completing the bill by year’s end, a timeline Obama badly wants to keep, but they face long odds.
Sen. Judd Gregg of New Hampshire, once a candidate to be Obama’s commerce secretary, was among GOP lawmakers who responded to the president’s message with caution.
He said, “We must be wary of the reality that — in an attempt to address yesterday’s failures — Congress will put in place regulatory schemes which will fundamentally undermine risk taking.” Anticipating such criticism, Obama shot back against those pushing for less regulation.
“Do you really believe that the absence of sound regulation one year ago was good for the financial system?” he said. “Do you believe the resulting decline in markets and wealth and unemployment, the wrenching hardship that families are going through all across the country, was somehow good for our economy?”
He told Wall Street that it had no need to wait for new laws to begin helping consumers with straight talk in the meantime.
Much of Obama’s speech amounted to a recap of proposals first outlined in June.
He has sought tougher capital requirements for banks, arguing that banks’ buying of exotic financial products without keeping enough cash in reserve was a key cause of the crisis. He wants more openness for the markets in which banks trade the most complex products.
Obama’s plan gives the Federal Reserve new oversight powers and creates a consumer protection agency to make rules for financial products so people know what they are buying.
