Obama: Financial reform key to avoiding crisis
In a speech in New York laying out his case for legislation to crack down on Wall Street regulation, Obama will tap into widespread anger at large financial institutions by highlighting the impact of the 2008-2009 financial crisis on the broader economy. The speech is scheduled for 11:55 a.m. EDT
"One of the most significant contributors to this recession was a financial crisis as dire as any we've known in generations," Obama will say, according to excerpts from his speech released by the White House.
"And that crisis was born of a failure of responsibility -- from Wall Street to Washington -- that brought down many of the world's largest financial firms and nearly dragged our economy into a second Great Depression."
Obama will also call on big banks to get behind the Democratic package of reforms that appears headed for a Senate vote next week.
One of Obama's aims in the speech will be to put pressure on Republicans to support the bill amid signs their opposition to it has softened.
Financial reform is a popular issue with voters and Democrats believe it could help them in the November congressional elections. The legislation appears to have gotten a boost from fraud charges brought against Wall Street powerhouse Goldman Sachs last week.
Obama will deliver his speech at the historic Great Hall at Cooper Union college in Manhattan, the venue for several important addresses by leading Americans, including Abraham Lincoln who argued there against the expansion of slavery in a speech that helped assure his 1860 presidential victory.
Obama spoke at Cooper Union in March 2008 in a campaign speech in which he outlined principles for financial reform.
On Thursday, he will address an audience of about 700 people, including financial industry leaders, members of the President's Economic Recovery Advisory Board, local officials and Cooper Union students and faculty.
Oversight To Hedge Funds
"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," Obama will say, according to the excerpts.
The 1,336-page bill authored by Senate Banking Committee Chairman Christopher Dodd would bring new oversight to hedge funds and derivatives while cracking down on risky bank trading and putting in place protections for consumers of financial products.
It would also establish a system for unwinding troubled financial companies to prevent a repeat of catastrophes such as the collapse of Lehman Brothers in 2008 and the near-failure of insurance giant AIG.
A White House official said Obama will list five essential elements to the reform legislation in his speech.
Those include the "Volcker Rule," which would ban banks from engaging in proprietary trading, or trading for their own account. It is named after former Federal Reserve Chairman Paul Volcker, an outside adviser to Obama.
Obama also wants to see a system for winding down large firms whose failure could disrupt markets, transparency for derivatives, b consumer protections and a provision giving shareholders more say on executive pay.
Democrats hold a 59-41 vote majority over Republicans in the Senate -- one vote short of the number needed to overcome procedural hurdles to the bill's passage.
Obama therefore needs at least one Republican vote. The White House has signaled increasing optimism about garnering Republican support and is targeting several moderate Republican senators, including Scott Brown of Massachusetts and Susan Collins and Olympia Snowe of Maine.
Several Republicans have taken aim in particular at the mechanism for winding down failing financial institutions, saying it would lead to perpetual bailouts of Wall Street. The White House says that is not true.
The House of Representatives approved a bill in December that called for the most sweeping regulatory changes since the Great Depression of the 1930s. The House bill embraced most of a comprehensive package of financial reform proposals introduced by Obama in 2009.
The Senate version, if passed, would have to be reconciled in joint committee with the House before it goes to Obama for his signature and becomes law.
Few, if any, chief executives of the big U.S. banks will be in the Cooper Union audience.
JPMorgan Chase & Co executives, including Chief Risk Officer Barry Zubrow, will attend Obama's speech, but Chief Executive Jamie Dimon is speaking in Chicago, a spokesman said.
Morgan Stanley said its chief financial officer Ruth Porat and chief operating officer Thomas Nides are expected to go to the speech but there are no plans for chief executive James Gorman or Chairman John Mack to attend. Bank of America said chief risk officer Bruce Thompson will be there but chief executive Brian Moynihan will not attend because of a long-standing scheduling conflict.
Goldman Sachs did not immediately respond to emails seeking comment, Citigroup declined to comment and an official at Wells Fargo & Co said they are not aware of anyone from the bank attending.
[Source: By Caren Bohan, Reuters, Washington, 22Apr10]
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