Washington: The Obama administration is fighting back against banking industry efforts to weaken the US President’s plan to revamp financial regulations.
White House officials say they are frustrated that major financial firms are fighting Barack Obama on the regulatory overhaul after taxpayer bailouts helped firms restore profits and near-record compensation for executives. Their anger is directed even at companies such as JPMorgan Chase and Co. and Goldman Sachs that have paid back their government assistance and reported a surge in third quarter earnings this week.
“We are disappointed by the lobbying of anyone in the financial industry against regulatory reform, considering the obvious need for change on that front,” Valerie Jarrett, a senior adviser to Obama, said.
The issue, say administration officials, is the industry is on sound footing because of government help and lobbying against regulatory plans goes against the US’ long-term interest. In interviews, speeches and statements, they highlight what they say is a disconnect between Wall Street and the rest of the country: while some banks report pay plans and profits at pre-crisis levels, the unemployment rate rose to 9.8% last month and home foreclosures jumped 29.2% from a year earlier.
The tougher message is being repeated from the president down. Now is the time for firm rules of the road so that banks can’t game the system and the financial crisis on Wall Street doesn’t end up hurting folks on Main Street, Obama said on 15 October at a Democratic Party fund-raiser in San Francisco.
Director of Obama’s National Economic Council Lawrence Summers reinforced the theme on Friday in New York. “There is no financial institution that exists today that is not the direct or indirect beneficiary of massive taxpayer support for the financial system,” he said.
Obama is renewing his push to redo financial industry regulations by the end of the year. Many of his proposals, particularly the creation of a consumer financial protection agency, are facing stiff industry opposition. Groups led by the Financial Services Roundtable and American Bankers Association, both based in Washington, urged Congress in July to scrap the consumer agency, saying creation of a new regulator would cut consumer access to credit.
Goldman Sachs chairman and chief executive officer (CEO) Lloyd Blankfein said he didn’t expect a “backlash” when he accepted the government funds. “Had I know it was as pregnant with this kind of potential for backlash then of course I would not have liked it,” Blankfein said on Friday in New York.
A spokesman for JPMorgan referred to comments chairman and CEO Jamie Dimon made in his letter to shareholders, in which he said that the extent of the problems made it clear that “rules and regulations must be completely overhauled.”
Ian Katz and Jesse Westbrook in Washington and Joshua Fineman, Elizabeth Hester and Brad Keoun in New York contributed to this story.