President Obama urged Wall Street executives today to help him pass new financial regulations, saying they would help their businesses, their customers, and the U.S. economy as a whole.
“We need to enact a set of updated, common-sense rules to ensure accountability on Wall Street and to protect consumers in our financial system,” Obama told invited guests — “titans of industry,” he called them — during a speech at Cooper Union in New York City.
At the same time, Obama denounced “the furious efforts of lobbyists” to shape legislation “to their special interests.” He added, “I am sure that many of those lobbyists work for some of you — they’re doing what they are paid to do.”
The U.S. House has passed a financial reform bill, and the Senate is moving toward a bill of its own, both designed to address problems that led to the near-meltdown of the financial system two years ago.
Business groups, including the U.S. Chamber of Commerce, said they welcome reasonable regulations, but proposals under consideration would stall economic recovery and deprive businesses of money that need to fill jobs.
“Unfortunately, the Senate may soon vote on reforms that miss the mark on job creation and still fail to fix our financial system,” wrote Thomas J. Donohue, president and CEO of the U.S. Chamber of Commerce, in an editorial for USA TODAY.
In backing the efforts of congressional Democrats, Obama said he backs a financial regulation package that would do several things, including:
End bailouts. Obama disputed claims by Senate Minority Leader Mitch McConnell, R-Ky., and other Republicans that the bill allows more taxpayer bailouts for big financial firms. Obama and the Democrats say a special liquidation fund is designed to help phase out failing companies, with the financial industry itself shouldering the costs.
Restrict the size of big banks. Democratic proposals would establish the “Volcker Rule,” Obama said, named for outside White House adviser and former Fed chairman Paul Volcker. His rule would restrict the size of big banks, the president said, ending the idea that some firms are “too big to fail.”
More transparency. The bill would require better explanations to investors about complex financial transactions — particularly derivatives — that carry now-hidden risks. Obama said,”there is a legitimate role” for these kinds of transactions, but they also require new regulations against “reckless risk taking.”
Consumer protection. Obama again proposed creation of a new Consumer Protection Agency to protect people who are “duped” by financial firms, and “misled by deceptive terms and conditions, buried deep in the fine print.”
Chamber of Commerce President Donohue, in his USA TODAY op-ed, said the board as proposed has “unprecedented and unchecked powers” that could hurt businesses.
Obama said, “unless your business model depends on bilking people, there is little to fear from these new rules.”
More power for shareholders. Obama said those who have invested in companies should have a “say on pay” when it comes to executive compensation. “Some of the salaries and bonuses we’ve seen created perverse incentives to take reckless risks” to the financial crisis that began in 2008, Obama said.
These changes will help bolster an economy that is starting to turn around, Obama said. He said, “ultimately, there is no dividing line between Main Street and Wall Street” and “we rise or we fall together as one nation.”
“But we have more work to do,” Obama said. “Until this progress is felt not just on Wall Street but Main Street we just can’t be satisfied.”
