Dow now at 10,387, down 215 points.
WASHINGTON (AP) — President Barack Obama stepped up his campaign
against Wall Street on Thursday with a far-reaching proposal for
tougher regulation of the biggest banks.
“We have to get this done,” Obama said at the White House. “If
these folks want a fight, it’s a fight I’m ready to have.”
It was a stern, populist lecture from the president to Wall Street
for what he perceives as its abandonment of Main Street. Obama said
the government should have the power to limit the size and
complexity of large financial institutions as well as their ability
to make high-risk trades.
He said it wasn’t appropriate that banks have been able to run
these trading operations with the protections afforded to regular
banking services.
“We have to enact commonsense reforms that will protect American
taxpayers and the American economy from future crises,” Obama said.
“For, while the financial system is far stronger today than it was
one year ago, it’s still operating under the same rules that led to
its near-collapse.”
Joining Obama for the announcement were former Federal Reserve
Chairman Paul Volcker, who heads the president’s Economic Recovery
Advisory Board, and William Donaldson, chairman of the Securities
and Exchange Commission under President George W. Bush. Volcker and
Donaldson have advocated stronger restrictions on banks.
Overhauling financial rules is the one issue on Obama’s legislative
agenda that appears still alive after Democrats’ devastating loss
Tuesday in the Massachusetts Senate race. The White House is
renewing Obama’s demand for an independent consumer financial
protection agency as part of any overhaul. That’s one of the major
sticking points in the Senate; the House has passed its version
already.
The new proposal from Obama intends to limit speculation by
commercial banks and to keep financial institutions from growing so
big that they pose a risk to the economic system.
“When you see more and more of the financial sector basically
churning transactions and engaging in reckless speculation and
obscuring underlying risks in a way that makes a few people obscene
amounts of money but doesn’t add value to the economy — and in fact
puts the entire economy at enormous risk — then something’s got to
change,” Obama said in an interview released Thursday by Time
magazine.
Obama has branded bank executives as “fat cats” and proposed a fee
on large banks to cover shortfalls in the government’s $700 billion
financial rescue fund.
Expanding on earlier measures, Obama endorsed Volcker’s proposal to
restrict proprietary trading by commercial banks. That would
separate commercial banks from investment banks, a line blurred a
decade ago by the repeal of the Depression-era Glass-Steagall
Act.
This restriction would affect some of the biggest banks, including
Bank of America Corp., Goldman Sachs and Citigroup Inc.
“The better answer is to modernize the regulatory framework and not
take the industry and the economy back to the 1930s,” said Scott
Talbott, chief lobbyist for the Financial Services Roundtable, an
industry group that represents large Wall Street institutions.
Goldman Sachs Group Inc. said Thursday it earned $4.79 billion in
the fourth quarter as its trading business again outdistanced the
rest of the industry. The company rewarded its employees with $16.2
billion in salaries and bonuses for 2009, 47 percent more than the
previous year but still lower than many had expected.
There was a new urgency in the Senate to respond to the voter anger
at Wall Street and bank bailouts that helped propel Republican
Scott Brown to victory in Massachusetts for the seat long held by
Democeatic Sen. Edward M. Kennedy, who died in August.
Brown’s victory gave Republicans 41 votes, enough to mount
successful filibusters and prevent Democratic legislation on health
care or climate change from getting final votes.
But financial regulations could survive.
Administration officials believe that while Republicans may seek to
block other aspects of the president’s agenda, Senate GOP leader
Mitch McConnell of Kentucky is considering making financial
regulations an exception.
