April 22, 2010 -- President Obama took on Wall Street today from a nearby New York City college where he renewed his push to convince Main Street and Capitol Hill of the need for sweeping financial regulations.
"One of the most significant contributors to this recession was a financial crisis as dire as any we've known in generations. 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 president said.
"It is essential that we learn the lessons of this crisis, so we don't doom ourselves to repeat it," the president said. "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."
In his speech at the Cooper Union for the Advancement of Science and Art, which is two miles from the New York Stock Exchange, the president reminded Wall Street that their missteps have repercussions that are felt on Main Street. Attendees included Goldman Sachs CEO Lloyd Blankfein.
"I believe in the power of the free market. I believe in a strong financial sector that helps people to raise capital and get loans and invest their savings," he said. "But a free market was never meant to be a free license to take whatever you can get, however you can get it. That is what happened too often in the years leading up to the crisis. Some on Wall Street forgot that behind every dollar traded or leveraged, there is a family looking to buy a house, pay for an education, open a business, or save for retirement. What happens here has real consequences across our country."
To that end, the president urged Wall Street to join him -- rather than fight him -- in the push to overhaul the financial system. Treasury Secretary Tim Geithner recently cited that Wall Street firms are spending $1 million a day to employ lobbyists to fight the overhaul effort.
"I am sure that many of those lobbyists work for some of you. But I am here today because I want to urge you to join us, instead of fighting us in this effort," Obama said. "I am 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 our financial sector. And I am here to explain what reform will look like, and why it matters."
Any strong bill, the president said, will prevent a large firm's failure from resulting in taxpayer bailouts, set limits on the size and risk-taking of banks, bring transparency to the murky derivatives market, implement strong consumer protections and give shareholders a say on pay.
The administration's goal is to have new regulations in place before the fall, when the second anniversary of the economic collapse rolls around.
Critics of the Obama administration said it may be difficult for the president to continue to fire rhetorical volleys at Wall Street, given the campaign money he has received from the very industry he's now pointing the finger at.
"I think he's basically up against a wall here because he took $15 million in campaign contributions from Wall Street," said Peter Morici, professor at the University of Maryland business school, citing statistics from the Center for Responsive Politics.
"The Democrats have been mining Wall Street so effectively recently," he said. "The Republicans really aren't the party of big business anymore, rather the Democrats are, because the biggest businesses are Silicon Valley, Hollywood, and Wall Street."
Obama's audience of about 700 was comprised of leaders from the financial industry, consumer advocates, local elected officials, members of the President's Economic Recovery Advisory Board, and Cooper Union students and faculty.
Also in the audience were what the White House called "representatives of the millions of people impacted by the downturn of the economy."
Bipartisan Breakthrough Looming on Capitol Hill on Financial Regulations
After days of heated rhetoric and threats from the Republican minority to sink the bill, there is new momentum on Capitol Hill for overhaul legislation.
The burst of bipartisanship comes after aggressive finger-pointing by the president, who linked Republicans to the immensely unpopular Wall Street executives and said their opposition to the Democrats' legislative proposal was just politics as usual.
"The leader of the Senate Republicans and the chair of the Republican Senate campaign committee met with two dozen top Wall Street executives to talk about how to block progress on this issue," Obama said in his weekly address last weekend, referring to Sen. Mitch McConnell, R-Kentucky, and Sen. John Cornyn, R-Texas. "Lo and behold, when he returned to Washington, [McConnell] came out against the common-sense reforms we've proposed."
Obama charged McConnell with making "the cynical and deceptive assertion that reform would somehow enable future bailouts – when he knows that it would do just the opposite."
Over the weekend, Republicans were calling on Democrats to scrap the bill and start over. But only days later, members of both parties now say a broad bipartisan deal could be hammered out by the end of the week.
The Republicans are coalescing around the principles of the legislation because they believe the White House is willing to give up on a controversial $50 billion safety fund that was proposed in the event of future meltdowns.
Republicans have railed against this provision, deeming it another "bank bailout."
"Both parties agree on this point: no bailouts. In my view, that's a pretty good start," McConnell said on Monday. The Minority leader said that the problems between the two parties are "not insurmountable."
"This bill is not unfixable," McConnell said.
Another potential reason for the budding bipartisan cooperation could be the SEC's announcement last Friday of investor fraud charges against Goldman Sachs. The case provided Democrats with an easy talking point to push stronger regulations for Wall Street -- and put Republicans in the position of blocking overhaul at their own peril, lest they be seen as defending Wall Street excess and fraud.
House Republicans Wednesday questioned whether the SEC's announcement was timed to boost Democrats' calls for new Wall Street regulations.
"The events of the past five days have fueled legitimate suspicion on the part of the American people that the Commission has attempted to assist the White House, the Democratic party, and Congressional Democrats by timing the suit to coincide with the Senate's consideration of financial regulatory legislation or by providing Democrats with advance notice," nine Republicans on the House Oversight Committee wrote in a letter to SEC chairman Mary Schapiro.
Wall Street an Easy Target for Obama's Tough Talk
Obama dismissed such charges and said the White House found out about the SEC case like everyone else -- through the news media.
"We found out about it on CNBC," Obama said. The SEC is independent agency which we have no control over and never discussed with us. The notion that we would interfere with agency is completely false."
As the country struggles to rebound from the recent recession, many Americans still believe Wall Street banks have not done enough to repair the damage done in the wake of the financial meltdown. In a March 22 ABC News poll, 77 percent said these firms have not done enough to make amends for their role in the meltdown, while 69 percent said the banks owe it to the nation to try to help struggling Americans.
On the backs of that populist outrage, Obama has repeatedly directed strong rhetoric at Wall Street, but whether it has had any effect is unclear.
In a speech on Wall Street Sept. 14, the president said, "What I want to emphasize is this: normalcy cannot lead to complacency. Unfortunately there are some in the financial industry who are misreading this moment. Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them. They do so not just at their own peril, but at our nation's.
"So I want them to hear my words: We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall."
But the New York state comptroller has estimated that $20.3 billion was paid out in bonuses in 2009 on Wall Street.
In an interview with "60 Minutes" in December, the president said, "They don't get it. They're still puzzled why it is that people are mad at the banks. Well, let's see. You guys are drawing down $10 million, $20 million bonuses after America went through the worst economic year that it's gone through in decades and you guys caused the problem."
"I did not run for office," he said, "to be helping out a bunch of fat cat bankers on Wall Street."
The president's trip to New York City today comes at a crucial time for the White House, with the Senate pushing forward with financial regulatory overhaul proposals.
The Senate Banking Committee passed chairman Chris Dodd's bill out of the panel last month along a party-line vote. On Wednesday the Agriculture Committee passed legislation that would create more transparency in the derivatives market. Republican Sen. Chuck Grassley backed the measure.
The White House has called on lawmakers to pass financial regulatory changes as soon as possible, warning that taxpayers should never again be on the hook for bailing out Wall Street. With Congressional elections looming in November, all of the populist outrage about the $700 billion passed by the Bush administration in the fall of 2008 -– and the country's ensuing recession -– could drive voter sentiment.