Obama chastises Wall Street in call to stiffen rules
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President Barack Obama made a high-profile foray Thursday to the nation's financial capital to chide Wall Street bankers for their "reckless practices" and to press for tighter regulations meant to avert another crisis.
Addressing leaders of New York's financial giants, including Goldman Sachs, Mr. Obama embraced his role as a champion of change battling "battalions of financial industry lobbyists" and the "withering forces" of the economic elite. With the president's poll numbers sagging, the choreographed confrontation seemed aimed at tapping the nation's anti-establishment mood as well as muscling financial regulation legislation through Congress.
But Mr. Obama also struck a note of conciliation with an industry that has contributed generously to his party, beseeching bankers to work with him to forge a new regulatory structure. While he spoke, his Senate Democratic allies in Washington moved to force a showdown Monday, scheduling a procedural vote that will test the prospects for bipartisan compromise and Republican resolve to block the president's plans.
"I want to urge you to join us, instead of fighting us in this effort," Mr. Obama said in his address at Cooper Union in Manhattan. "I'm here because I believe that these reforms are, in the end, not only in the best interest of our country, but in the best interest of the financial sector."
The regulation battle has become the president's top legislative priority since he signed his health care program into law last month, and both parties are jockeying for position six months before midterm elections. Mr. Obama and his allies have eagerly portrayed Republicans as handmaidens of Wall Street, while Republicans have accused Democrats of trying to strangle the market and institutionalize bailouts.
While Mr. Obama avoided directly criticizing Republicans in his address, the partisan tension in the capital heated up again when Senate Republicans blocked an effort by Democrats to start debate on their regulation bill. Senate Minority Leader Mitch McConnell, R-Ky., said Democrats were pre-empting negotiations, while Senate Majority Leader Harry M. Reid, D-Nev., said Republicans were simply stalling.
Business interests and their allies used Mr. Obama's visit to New York to trumpet their opposition to his plans. The New York Post ran a front-page editorial under the banner headline, "Dear Mr. President, Don't Kill the Golden Goose: City Economy Imperiled in the Name of 'Reform.' " The U.S. Chamber of Commerce took out full-page ads in New York newspapers echoing the concerns of Mayor Michael R. Bloomberg, saying "beating up on Wall Street may be good short-term politics - but not if it gets in the way of the right solutions."
Republicans argued that Mr. Obama's plan would encourage risky behavior and empower regulators who failed to use the authority they already have. "President Obama says he believes in the power of free markets, but his policies prove otherwise," said Alabama Rep. Spencer Bachus, the House Financial Services Committee's senior Republican. "Under the Democrat plan, certain financial institutions have no freedom to fail, and are instead propped up by taxpayer bailouts and government loan guarantees."
But Mr. Obama argued that he was advocating "a common-sense, reasonable, nonideological approach" that would strengthen consumer protection, limit the size of banks and the risks they can take, enforce greater transparency for derivatives and other complex securities, and impose more scrutiny of executive compensation.
"Unless your business model depends on bilking people, there is little to fear from these new rules," he said.
He also bristled at the claim that Democratic legislation would institutionalize future bailouts of big banks. "That may make for a good sound bite, but it is not factually accurate," he said. "It is not true. In fact, the system as it stands is what led to a series of massive, costly taxpayer bailouts. And it's only with reform that we can avoid a similar outcome in the future."
As he castigated Wall Street for its "failure of responsibility" that led to the financial crisis in 2008, listening in the audience were some of the city's most prominent bankers, including Lloyd C. Blankfein, chief executive of Goldman Sachs, and Gary Cohn, its chief operating officer. The bank was accused by the federal government last week of defrauding investors during the crisis.
Also on hand were top executives from JPMorgan Chase, Morgan Stanley, Credit Suisse, Barclays and Bank of America, as well as Mr. Bloomberg, Gov. David A. Paterson and New York Attorney General Andrew M. Cuomo. The bankers all left the room swiftly after Mr. Obama's remarks without stopping to offer much reaction.
At the Capitol, Republicans rejected Mr. Reid's efforts to start a debate leading to a vote, arguing that bipartisan discussions were still under way.
"I'm not going to waste any more time of the American people," Mr. Reid said at a news conference.
"I don't think bipartisanship is a waste of time," Mr. McConnell retorted later in the day.
Mr. Reid scheduled a first procedural vote for Monday evening that will force Republicans to choose between starting debate or blocking the motion. Some Republicans said they expected Democrats to force several such votes before any deal is reached, as a way to paint the GOP as obstructionist. Democrats have expressed little willingness to make big concessions but need at least one Republican to overcome a filibuster.
First Published April 23, 2010 12:00 am