New York: President Barack Obama scolded Wall Street on Thursday for its “furious efforts” to fight tighter regulation, saying the United States was doomed to another financial crisis if reforms were not implemented
With confidence growing at the White House that Congress will approve restrictions on how big banks operate, Democratic Leader Harry Reid set a vote for Monday evening that could clear the way for a US Senate debate on the overhaul.
In a speech in New York attended by several Wall Street executives, Obama blamed the financial meltdown and the recession that followed on a “failure of responsibility” by both Washington and Wall Street.
His speech offered no new policy but tapped into public fury at big banks and pushed a Democratic regulatory reform bill that is gaining traction in the Senate after months of voluble opposition by the Republican minority.
“A free market was never meant to be a free license to take whatever you can get, however you can get it,” Obama said. “One of the most significant contributors to this recession was a financial crisis as dire as any we’ve known in generations.”
He said the legislation would significantly improve the current flawed regulatory structure, “despite the furious efforts of industry lobbyists” to try to weaken it.
Obama, who has in the past referred to Wall Street executives as “fat cats,” said some of the huge pay packages in the industry encouraged “perverse incentives to take reckless risks,” although he added that he does not begrudge anyone success “when that success is earned.”
The audience, many of them students and professors, applauded loudly at some of Obama’s tougher rhetoric.
He spoke at the historic Great Hall at Cooper Union college in Manhattan, the venue for several notable addresses. Abraham Lincoln once argued there against the expansion of slavery in a speech that helped his 1860 presidential victory.
Cooper Union was also the site of a speech Obama gave on financial reform during the 2008 presidential election campaign. Democrats hope cracking down on Wall Street will help them win voter support at congressional elections in November.
One of Obama’s aims in the speech was to put pressure on Republicans to support reform legislation amid signs several in the opposition party may be willing to back the bill.
The legislation got a boost from fraud charges brought against Wall Street powerhouse Goldman Sachs last week, and Treasury Secretary Timothy Geithner said he was “absolutely confident” that the reforms will happen.
Senate Democratic Leader Reid on Thursday set a 5:00pm, (2100 GMT) vote for Monday that could clear the way for the Senate to begin debating the bill.
In an effort to reach a bipartisan agreement, senators were continuing to negotiate on aspects of the legislation, which aims to curb Wall Street excesses and protect taxpayers from future bailouts.
“If you just listen to the tone of the last couple of days, it’s changed. I spent a huge amount of time with Republicans over the last few weeks ... and I think they really want to be for this,” Geithner told CBS’s “The Early Show.”
Wall Street is becoming increasingly resigned to Congress approving financial reform, which would hand Obama another win after his healthcare overhaul was passed in March, but Obama’s speech ruffled some in the financial world.
“To go to Wall Street and tell Wall Street that the populist rhetoric coming from the White House is not divisive, it is disingenuous,” said Marshall Front, chairman of investment counseling firm Front Barnett Associates.
Reinforcing Obama’s message to Wall Street, White House economic adviser Larry Summers said in an interview later with PBS that failure to reform financial regulations would impair business confidence in the financial system.
Obama addressed an audience of about 700 people, including financial industry leaders, members of the President’s Economic Recovery Advisory Board, local officials and Cooper Union students and faculty.
Goldman Sachs chief executive Lloyd Blankfein attended the speech, as did senior executives from other banks.
“Blankfein was in a good mood. He had a smile on his face and good humor,” said Richard Richman, a housing developer and property owner based in Connecticut, who was at the speech.
The White House has signaled increasing optimism over the reforms and is targeting moderate Republican senators.
Democrats hold a 59-41 vote majority over Republicans in the Senate -- one vote short of the number needed to overcome procedural hurdles to the bill’s passage.
House of Representatives Republican leader John Boehner, in an opinion piece in Investors Business Daily, labeled the measure a “job-killing initiative” and said it “would provide the nation’s largest financial firms with permanent bailouts.”
The financial reform bill authored by Democratic Senator Christopher Dodd would bring new oversight to hedge funds and derivatives while cracking down on risky bank trading and putting in place protections for consumers of financial products.
It would also establish a system for unwinding troubled financial companies to prevent a repeat of catastrophes such as the collapse of Lehman Brothers in 2008.
Among elements deemed by Obama to be essential in the reforms was the “Volcker Rule,” which would ban banks from engaging in proprietary trading, or trading for their own account. It is named after former Federal Reserve chairman Paul Volcker, an outside adviser to Obama who attended the speech.