President Barack Obama is making his first public effort to push his administration's financial regulatory reform plan -- which will be debated in Congress this fall -- by delivering a speech on Wall Street (posted after the jump). Some feisty highlights:
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.
... Now there will be those who defend the status quo. There will be those who argue we should do less or nothing at all. But to them I’d say only this: do you believe that the absence of sound regulation one year ago was good for the financial system? Do you believe the resulting decline in markets and wealth and employment was good for the economy? Or the American people?
... There are those who would suggest that we must choose between markets unfettered by even the most modest of regulations – and markets weighed down by onerous regulations that suppress the spirit of enterprise and innovation. But if there is one lesson we can learn from the last year, it is that this is a false choice. Common-sense rules of the road do not hinder the markets but make them stronger. Indeed, they are essential to ensuring that our markets function, and function fairly and freely.
I'm happy to see the president take a strong line against the status quo and include a robust defense of the Consumer Financial Protection Agency. On the other hand, I'm not sure how effective the administration's efforts to frame the reforms as part of unwinding the expensive bailout efforts are right now, in this speech or in their spin to reporters. Consider this New York Times article on the topic, which could lead people to conflate the unpopular bailouts with regulatory efforts that should be popular, and oppose both as bad government intervention in the economy. There should be a much starker line drawn between the rescue efforts and the new reform plans that aim to prevent taxpayers from picking up the tab on banks' mistakes.
I have to listen to a speech by Gary Gensler, the administration's derivatives regulator, right now, but there will be more analysis of this speech later in the day, especially Obama's now-typical outreach to the opposing side -- in this case, bankers and Republicans -- and his call for financial sector players to act voluntarily in the public interest immediately rather than waiting for reform to pass. Are we seeing health care tactics all over again?
-- Tim Fernholz
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