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| Obama calls for new financial regulations |
| Bloomberg / Washington Sep 15, 2009, 00:57 IST |
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‘Need for global coordination on financial oversight’.
President Barack Obama, speaking a year after Lehman Brothers Holdings Inc’s collapse, warned against complacency as the financial crisis ebbs and said the US must have a new regime of “common-sense” regulations to avoid another market meltdown.
Obama used the backdrop of Wall Street to renew his push for revamping market regulations. The president urged the financial community to support that goal and he emphasised the need for global coordination on financial oversight.
“There are some in the financial industry who are misreading this moment,” Obama said in the text of his remarks at Federal Hall in New York City. “Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them.”
Lehman’s bankruptcy helped trigger a global financial crisis that led to more than $1.6 trillion in losses and writedowns by financial institutions and unprecedented government interventions in banking, insurance and auto industries.
In response to the financial crisis, the Obama administration proposed on June 17 changes to US financial regulations, including oversight of the systemic risks that large financial institutions pose to the economy, new ways for the government to dismantle failed companies and a regulator to oversee financial products for consumers.
Government involvement
“While there continues to be a need for government involvement to stabilise the financial system, that necessity is waning,” Obama said, adding that “normalcy cannot lead to complacency.”
The president said the administration will work with the financial industry to develop new rules and regulations that will “promote transparency and accountability” without stifling growth and innovation.
“But the old ways that led to this crisis cannot stand,” he said. “And to the extent that some have so readily returned to them underscores the need for change and change now.”
The administration’s focus on health-care legislation has overshadowed work being done to craft a new set of financial regulations that the president called for earlier his year.
The Senate Banking and the House Financial Services committees are drafting the legislation. The House in July approved a measure aimed at limiting incentives in executive pay that spur excessive risk taking.
Congressional action
The House committee’s chairman, Massachusetts Democrat Barney Frank, and Senate Banking Chairman Christopher Dodd, a Democrat from Connecticut, and other architects of the legislation have backed away from a provision in Obama’s proposal that would give the Federal Reserve authority to monitor the systemic risk from all large companies whose failure could threaten the stability of the financial system. Instead, support is building for a council of regulators that would share that authority.
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