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President Obama calls for better regulatory oversight on the anniversary of the Lehman Brothers collapse.
President Obama took his economic plan straight to the bank, traveling to Wall Street to call for broad new regulatory powers that he said could help prevent the financial system from another near meltdown.
"We are proposing the most ambitious overhaul of the financial regulatory system since the Geat Depression," Obama said in a 30-minute address at the Federal Hall in Lower Manhattan. The speech came on the one-year anniversary of the collapse of Lehman Brothers.
Among Obama's proposals is creation of the Consumer Financial Protection Agency. Obama said much of the economic collapse was caused by consuumers signing contracts and mortgages they did not understand, and he said the new agency will help ensure that consumers get clear and concise info without hidden fees and penalties in mortgages, credit cards and consumer loans.
"It was a collective failure that allowed homebuyers and mortgage writers to take risks that they shouldn't have," Obama said.
The president also called for empowering regulators to take a more comprehensive role in overseeing the financial system, instead of a broad range of agencies watching over components of the system. He said big firms with the power to damage the entire financial system by taking on irresponsible risk neededcloser oversight.
Finally, Obama called for new cooperation between nations to coordinate an approach to spur global demand and to address the underlying problems that caused the global recession.
Lehman's failure last year became the largest bankruptcy in the country’s history, and triggered the most acute phase of the global financial crisis as banks stopped lending to each other and consumers. Obama said the Treasury Department's rescue plan saved the economy from falling off the cliff, and said banks have repaid $70 billion of the bailout, even earning taxpayers a 17% return on their money.
Still, he said, "eight months later, the work of recovery continues.
"The full recovery of the financial system will take a great deal more time and work," but we are getting back to normal," Obama said.
The new rules and regulatory schemes must not stifle innovation and enterprise, yet must discourage the kind of risk that put the world economy in jeopardy.
"We will not go back to the days of reckless behavior and excess which was at the heart of this crisis," Obama said.
"people cannot take risks without regard to consequences, and expect taxpayers will be there to break their fall."