US President Barack Obama bluntly warned on Monday that some Wall Street bosses were ignoring lessons of the financial crisis, as he demanded a new age of prudence after years of unchecked excess.
“The old ways that led to this crisis cannot stand,” Obama said, in an outspoken address delivered in the shadow of US finance firms he blamed for unleashing global contagion. “History cannot be allowed to repeat itself.”
A year after Lehman Brothers failed, triggering the meltdown, Obama also called on Congress to act this year on regulatory reforms he hailed as the most sweeping bid to tame industry over-exuberance since the Great Depression.
While blaming much of the crisis on the US, Obama made clear a week ahead of the G20 summit in Pittsburgh that he would press global powers to do more to rein in financial industry abuses.
The president suggested the US economy was returning to growth, but warned that what he called the government’s “extraordinary interventions” should not be ended prematurely.
“All the indicators would tend to suggest that we’re starting to see growth,” Obama told Bloomberg Television. “What we have to be careful of is taking the crutches away from the patient too early.”
But his prime message after traveling to historic Federal Hall on Wall Street in New York was that, as the economy slowly mends, some key players in the US finance sector were willfully ignoring the lessons of the crisis.
“They do so not just at their own peril, but at our nation’s,” Obama said, noting that many big Wall Street banks and finance houses had received huge government bailouts at taxpayer expense.
“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,” he said.
While lambasting Wall Street, the president admitted that Washington — and in a wider sense the American people — were culpable for a crisis that sent unemployment up to nearly 10 percent at home and spread misery abroad.
“It was a collective failure of responsibility in Washington, on Wall Street and across America that led to the near-collapse of our financial system one year ago,” he said just blocks from the New York Stock Exchange.
He also urged bosses of top finance firms to make a symbolic downpayment in their effort to restore public trust, by taking a cautious tack on pending bonus pay awards.
Asked whether he would support another aid package following his massive US$787 billion plan passed by Congress in February, Obama told CNBC television he has a “strong inclination not to do it,” although he cautioned: “We’re not out of the woods yet.”
Duncan Niederauer, head of the stock exchange operator NYSE Euronext, reacted warmly to the speech, saying the “financial crisis created a once-in-a-generation opportunity to modernize our outdated financial regulatory system.”
But Eric Cantor, the Republican whip in the House of Representatives, said “smarter regulation,” and not necessarily more, was the answer to the financial crisis.
Obama argued that when his administration took office in January, it helped stave off an even worse crisis.
But he warned that “normalcy cannot lead to complacency,” vowing to press G20 powers to match his move to “aggressively reform” the financial system.
Obama fleshed out a previously announced strategy for reforming regulatory systems that is awaiting action in Congress, warning that a pre-crisis lack of “common-sense rules” had led the US economy to the brink.
His administration, he said, would further empower the Federal Reserve to regulate interconnected firms that pose a risk of systemic failure.
Top firms will be required to meet stronger capital and liquidity requirements and submit to greater restraints on “risky” behavior.
Obama proposed a new Consumer Protection Agency to enforce rules prohibiting predatory lending policies by credit firms and mortgage lenders.
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