U.S. President Barack Obama will tell Wall Street Thursday to accept a sweeping bill to overhaul financial regulations, warning of another crisis unless rules are tightened to rein in the industry’s risky practices.
In a speech in New York that will be attended by several Wall Street executives, Obama will cite a “failure of responsibility” by both the financial industry and Washington before the 2008-2009 global market meltdown that threw the country into recession.
In his remarks, at 11:55 a.m., he will seek to tap into widespread public anger at Wall Street as he pushes a reform package that is gaining traction and which Democrats believe will help them in November’s congressional elections.
“A free market was never meant to be a free license to take whatever you can get, however you can get it,” Obama will say, according to excerpts from the speech released by the White House.
One of Obama’s aims in the speech will be to put pressure on Republicans to support reform legislation amid signs several in the opposition party may be willing to back the bill.
DIRE FINANCIAL CRISIS
“One of the most significant contributors to this recession was a financial crisis as dire as any we’ve known in generations,” Obama will say.
“And that crisis was born of a failure of responsibility — from Wall Street to Washington — that brought down many of the world’s largest financial firms and nearly dragged our economy into a second Great Depression.”
The legislation got a boost from fraud charges brought against Wall Street powerhouse Goldman Sachs last week and Treasury Secretary Timothy Geithner said on Thursday he was “absolutely confident” that the reforms will happen.
“If you just listen to the tone of the last couple of days, it’s changed. I spent a huge amount of time with Republicans over the last few weeks … and I think they really want to be for this,” he said in an interview on CBS’s “The Early Show.”
Obama will deliver his speech at the historic Great Hall at Cooper Union college in Manhattan, the venue for several important addresses by leading Americans, including Abraham Lincoln who argued there against the expansion of slavery in a speech that helped assure his 1860 presidential victory.
Obama spoke at Cooper Union in March 2008 in a campaign speech in which he outlined principles for financial reform.
On Thursday, he will address an audience of about 700 people, including financial industry leaders, members of the President’s Economic Recovery Advisory Board, local officials and Cooper Union students and faculty.
Goldman Sachs President and Chief Operating Officer Gary Cohn is expected to attend, a source familiar with the matter said but few, if any, other chief executives of the big U.S. banks will be in the audience.
OVERSIGHT TO HEDGE FUNDS
“It is essential that we learn the lessons of this crisis, so we don’t doom ourselves to repeat it. And make no mistake, that is exactly what will happen if we allow this moment to pass — an outcome that is unacceptable to me and to the American people,” Obama will say, according to the excerpts.
The 1,336-page bill authored by Senate Banking Committee Chairman Christopher Dodd would bring new oversight to hedge funds and the derivatives market while cracking down on risky bank trading and putting in place protections for consumers of financial products. It might be voted in the Senate next week.
It would also establish a system for unwinding troubled financial companies to prevent a repeat of catastrophes such as the collapse of Lehman Brothers in 2008 and the near-failure of insurance giant AIG.
A White House official said Obama among essential elements to the reform Obama would list was the “Volcker Rule,” which would ban banks from engaging in proprietary trading, or trading for their own account. It is named after former Federal Reserve Chairman Paul Volcker, an outside adviser to Obama.
Democrats have a 59-41 vote majority over Republicans in the Senate — one vote short of the number needed to overcome procedural hurdles to the bill’s passage. Obama therefore needs at least one Republican vote.
The White House has signaled increasing optimism about garnering Republican support and is targeting several moderate Republican senators, including Scott Brown of Massachusetts and Susan Collins and Olympia Snowe of Maine.
Several Republicans have taken aim in particular at the mechanism for winding down failing financial institutions, saying it would lead to perpetual bailouts of Wall Street. The White House says that is not true.
House of Republican leader John Boehner, in an opinion piece in Investors Business Daily, labeled the measure a “job-killing initiative” and said it “would provide the nation’s largest financial firms with permanent bailouts.”
He said Obama “talks a big game when it comes to Wall Street” but was promoting steps that “benefit the likes of Goldman Sachs.”
The House approved a bill in December that called for the most sweeping regulatory changes since the Great Depression of the 1930s. The House bill embraced most of a comprehensive package of financial reform proposals introduced by Obama in 2009.
The Senate version, if passed, would have to be reconciled in joint committee with the House before it goes to Obama for his signature and becomes law.
A spokesman for JPMorgan Chase & Co. said some senior executives, including Chief Risk Officer Barry Zubrow, will attend Obama’s speech, but Chief Executive Jamie Dimon is speaking in Chicago.
Morgan Stanley said its chief financial officer Ruth Porat and chief operating officer Thomas Nides are expected to go to the speech but there are no plans for chief executive James Gorman or Chairman John Mack to attend.
Bank of America said chief risk officer Bruce Thompson will be there but chief executive Brian Moynihan will not attend because of a long-standing scheduling conflict.
Goldman Sachs did not immediately respond to emails seeking comment, Citigroup declined to comment and an official at Wells Fargo & Co. said they are not aware of anyone from the bank attending.
(Additional reporting by Steve Eder, Editing by David Storey)
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