Business Times - 27 Apr 2010
Again, Obama shows that he prefers evolutionary change
By LEON HADAR
DURING a much anticipated speech in New York last week, US President Barack Obama made a push for Wall Street reform just as the US Senate was preparing to debate legislation on overhauling the financial regulatory system.
Against the backdrop of the recent fraud charges by the Securities and Exchange Commission (SEC) against financial giant Goldman Sachs, some pundits expected Mr Obama to deliver a hard-hitting populist message against Wall Street, blaming the financial industry for the Great Recession, and calling on an angry American public to support the White House and the Democrats in their efforts to impose tough regulations on the greedy bankers.
Listening to President Obama in the audience estimated to be 700 at Cooper Union in lower Manhattan (a venue just a short ride from Wall Street) were America's top financial leaders, including much-disparaged Goldman Sachs chief Lloyd Blankfein and bank president Gary Cohn, who were sitting just a few metres from the speaker. Other Wall Street figures such as Robert Diamond of Barclays and Paul Calello of Credit Suisse were also present.
But Mr Obama didn't sound at all like a fiery populist who was anxious to pick a fight with the bankers. This must have disappointed progressive critics of Wall Street in his own Democratic Party while it must have eased the concerns among members of the financial industry and their allies on Capitol Hill.
Instead, he seemed to be appealing for their support. 'I am here today because I want to urge you to join us instead of fighting us in this effort,' he said. 'I am here because I believe that these reforms are, in the end, not only in the best interest of our country, but in the best interest of our financial sector.'
The Democratic president has never challenged the free-market principles that continue to guide the American economy and has many friends and political allies in Wall Street, which remains an important source of financial contributions to the Democratic Party.
Hence Mr Obama insisted that his criticism was aimed at only a few bankers and that the proposed set of reforms of financial regulation would benefit both Wall Street and Main Street in the long run.
'Some - and let me be clear, not all, but some - on Wall Street forgot that behind every dollar traded or leveraged, there's a family looking to buy a house, or pay for an education, open a business, save for retirement. What happens on Wall Street has real consequences across the country - across our economy,' Mr Obama said.
The president's other audience was back in Washington, where efforts were continuing to come up with a compromise bill on financial regulatory reform that, unlike the healthcare reform legislation, enjoys broad public support.
A recent Pew poll shows that 61 per cent of Americans want financial reform. Financial firms are so unpopular with Americans and with elected representatives in Washington that even the most conservative Republican would find it difficult to fight the bill proposed by the Democrats.
The legislation introduces limits on the risks that banks take; reforms for executive compensation; new transparency rules for derivatives and other complicated financial instruments; a new consumer protection agency; and more incentives for giving shareholders more power in the financial system.
And the bill proposes the creation of a fund with money collected from banks to help dismantle large institutions on the brink of collapse without the need to resort to federal bailouts. 'The goal is to make certain that taxpayers are never again on the hook because a firm is deemed too big to fail,' President Obama said.
As he charged in his speech, the financial industry's lobbyists were out to block the legislation. 'I'm sure that some of these lobbyists worked for you, and they're doing what they are being paid to do,' Mr Obama told the audience. 'But I'm here today specifically, when I speak to the titans of industry here, because I want to urge you to join us, instead of fighting us in this effort,' he added.
President Obama and the Democrats recognise that the power of these lobbyists was limited and that the Republicans were not in a position to torpedo the proposed legislation. Several Republican senators have already indicated that they would support some version of the current Democratic bill, which will provide the Democrats with more than the 60 votes they need in the Senate to pass the bill.
It's going to be the kind of change favoured by President Obama - that will be supported by almost everyone on Capitol Hill and in Wall Street and Main Street.
Indeed, his address in New York demonstrated once again that whether by conviction or by temperament, Mr Obama is not a bomb thrower. When it comes to either Washington or Wall Street, he is basically a proponent of evolutionary change - as opposed to radical reform.
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