WALL STREET SPEECH:US PRESIDENT Barack Obama sought to increase the momentum behind his push for financial reform yesterday as he addressed a crowd including major Wall Street chief executives in lower Manhattan.
Mr Obama’s speech was by turns critical and beseeching as he tried to position himself on the side of citizens appalled by Wall Street excesses, but also to appeal to the industry for co-operation.
Mr Obama complained that the global financial crisis was the result “of a failure of responsibility from Wall Street all the way to Washington”. But he urged the executives in attendance “to join us, instead of fighting us in this effort”.
He also insisted that “there is no dividing line between Main Street and Wall Street” and asserted that the reforms working their way through Congress would “ensure that our economy works for consumers, that it works for investors, and that it works for financial institutions – in other words, that it works for all of us”.
Mr Obama delivered his remarks at Cooper Union, a small college a short distance from Wall Street. Students and staff were among the attendees, and they generally showed more enthusiasm for his remarks than did the industry executives.
Among those present was Lloyd Blankfein, chief executive of Goldman Sachs, which is attempting to rebut allegations of impropriety levelled against it by the Securities and Exchange Commission. Another Wall Street titan, JP Morgan Chase chief Jamie Dimon, stayed away, a decision that was perceived to underline his disenchantment with the administration.
The speech came as negotiations on reform are reaching a critical stage on Capitol Hill. The arcane nature of congressional procedure means that there are a number of different proposals emerging from different quarters. Mr Obama outlined five basic principles that he expected to see reflected in the final legislation.
Firstly, he insisted upon provisions that would enable the orderly winding-up of ailing financial institutions. Those measures, he said, must “protect the financial system, and the broader economy, and American taxpayers in the event that a large financial firm begins to fail”.
The president reiterated that it should be the financial industry itself, not the general public, that should “shoulder the costs” of such a failure. Secondly, he advocated again for the so-called Volcker Rule – named after former Federal Reserve chairman Paul Volcker – which would restrain commercial banks from engaging in proprietary trading or running hedge funds.
Thirdly, he called for greater transparency in the derivatives market. Derivatives are somewhat labyrinthine financial instruments that permit speculation on the future values of commodities, loans or investments. The relatively unregulated way in which they have been traded has been labelled as one of the causes of the financial crisis.
Mr Obama also demanded increased consumer protection, especially from opaque or misleading conditions attached to credit cards, mortgages or car loans; and for an increased shareholder say in executive pay.
The political landscape on the reform issue continues to shift. Republicans had initially been trenchantly opposed to Mr Obama’s plans, but on Wednesday, one Republican senator, Charles Grassley, voted with the Democrats on the Senate agriculture committee, as they approved a proposal to increase regulation of derivatives. Others in his party have also softened their rhetoric, perhaps mindful of the dangers of being painted as champions of the deeply unpopular Wall Street firms.
