The bailouts have largely stabilized the financial system, but regulatory reform is needed to prevent another similar crisis from happening again, said President Obama in a speech delivered Monday on Wall Street.
Marking the anniversary of the Lehman Brothers collapse, which set off a series of events that led to last fall’s financial crisis, Obama talked about the state of the economy one year later.
“Although I will never be satisfied while people are out of work and our financial system is weakened, we can be confident that the storms of the past two years are beginning to break,” said Obama. “In fact, while there continues to be a need for government involvement to stabilize the financial system, that necessity is waning.”
Taxpayers have lent hundreds of billions of dollars to systemically significant financial institutions and trillions more in lending programs aimed at easing the tight grip on lending. Obama said bailout money is flowing back to taxpayers, but “that doesn’t mean taxpayers will escape the worst financial crisis in decades unscathed,” he said.
Though the economy is beginning a “return to normalcy,” Obama said much more work is left to be done.
“We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses,” the president said. “Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.”
The president called for more stringent rules to prevent the domino-effect if one large firm collapses. He said an overhaul of regulations must be done in a way that does not smother innovation, but “the old ways that led to this crisis cannot stand.”
The administration’s proposals include a new Consumer Financial Protection Agency, closing loopholes and gaps in the regulatory system, and putting an end to “too big to fail” by creating resolution authority for non-bank financial institutions. Obama called on foreign economies to join the United States in its regulatory effort for a coordinated response to the financial crisis.
“Restoring a willingness to take responsibility — even when it is hard — is at the heart of what we must do,” said Obama. “Here on Wall Street, you have a responsibility. The reforms I’ve laid out will pass and these changes will become law. But one of the most important ways to rebuild the system stronger than before is to rebuild trust stronger than before — and you do not have to wait for a new law to do that.
