BARACK OBAMA yesterday sought to capitalise on the anniversary of the bankruptcy of Lehman Brothers to urge Wall Street to co-operate with Congress to enact the “most ambitious overhaul of the financial system since the Great Depression”.
Mr Obama’s remarks, intended to breathe life into the administration’s regulatory reform proposals on Capitol Hill, where there is growing scepticism they will be enacted by the end of the year, were also intended to reassure Americans that the era of big government bailouts was drawing to a close.
Mr Obama highlighted the fact that the banks had repaid $70 billion in bailout funds at a 17 per cent return to the taxpayer. “We can be confident that the storms of the past two years are beginning to break,” he said. “I certainly did not run for president to bail out banks or intervene in the capital markets. But . . . the very absence of common-sense regulations . . . is what created the need for that extraordinary intervention.”
Mr Obama also addressed the increasing public concern that Wall Street is returning to a “business as usual” mentality, telling bankers their taxpayer-funded rescue left them with new obligations to the American people.
This reflects the administration’s acute discomfort at the return of big bonuses and aggressive hiring practices at a time when Main Street is still struggling with home foreclosures and unemployment is nudging 10 per cent.
In effect, the financial sector – or parts of it – is seeing a V-shaped rebound, but the economy as a whole is facing a more protracted U-shaped recovery, or worse, some economists believe, the possibility of a Japan-style L-shaped recovery.
“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,” Mr Obama said. He told the financial sector, which is lobbying aggressively against some aspects of the reforms and hopes to kill a proposed new consumer products regulatory agency, to “embrace serious financial reform, not fight it”.
Administration officials are concerned the political window for significant reform may soon close as the sense of impending disaster fades and normality returns to the system. “The old ways that led to this crisis cannot stand,” he said.
“And to the extent that some have so readily returned to them underscores the need for change and change now. History cannot be allowed to repeat itself.”
Senior lawmakers on Capitol Hill say they plan to introduce the legislation by the end of October with a series of hearings to be announced this week.
