President Barack Obama brought his case for financial reform to New York on Thursday.
In a speech at Cooper Union, Obama says it was a "failure of responsibility" that led to the financial crisis of 2008, adding that "a free market was never meant to be a free license to take whatever you can get."
The president warned that the financial shocks of the last two years will return if reforms are not put in place soon. He called on the financial leaders to tone down what he called "furious efforts" by an army of lobbyists to derail or water down financial reform. Republicans have said the bill, which could come up for a vote next week, would lead to more bank bailouts in the future. Obama said that was not true.
Those present at today's speech included Goldman Sachs CEO Lloyd Blankfein and top executives from JP Morgan Chase, Morgan Stanley, and Bank of America. Gov. David Paterson and Mayor Michael Bloomberg, who have defended Wall Street and warned about the possible hazards of financial reform, were also in attendance.
Bloomberg says he agrees with the president that the nation's financial sector needs reform. He supports the president’s call for a unified consumer protection agency and stronger consumer protection laws for the financial services industry, but he says the provisions in the president's proposal to restrict the size and activities of the nation's biggest banks would drive those businesses overseas to nations with weaker regulations. He says he's also concerned about undermining the Federal Reserve's role as an independent regulator.
“Making the president of the New York Federal Reserve a presidential appointee rather than an appointee of the Fed's Board of Governors would politicize the job,” Bloomberg says.
Kathryn Wylde, president of the Partnership for New York City , a business group, says the banking community is concerned most about one element of the bill that Obama has endorsed in the current financial reform legislation: the Volcker rule, which would limit the size of banks.
“The Volcker rule, while named after a very prominent and respected New Yorker, is something that would diminish big institutions, take away major lines of business and would make us much less competitive in the world markets,” Wylde says.
She says big institutions are what make New York City and Wall Street such prominent players internationally and that bank size is not a threat to the nation's financial system -- lack of adequate capital is, along with an over-reliance on borrowing and a lack of proper disclosure.