Obama makes a pitch for stronger bank regulations

President Obama made a case for tougher regulation of the nation’s large banks Thursday while dismissing Republican charges that he is creating conditions for unending taxpayer bailouts.

In remarks released by the White House before the president’s speech at Cooper Union, Obama tied the nation’s severe recession and job losses to loose oversight of Wall Street.

“It is essential that we learn from the lessons of this crisis, so we don’t doom ourselves to repeat it,” Obama said. “And make no mistake, that is exactly what will happen if we allow this moment to pass – and that’s an outcome that is unacceptable to me and it’s unacceptable to you, the American people.”

Obama spoke as the Senate moved closer to passing a bill meant to subject financial firms to tighter scrutiny and empower regulators to seize control of struggling financial institutions whose failure would jeopardize the economy.

On Capitol Hill, Senate Democrats and Republicans said they are near agreement on enough elements of the legislation that they could bring the bill to the floor next week. But even as bipartisan talks progressed behind the scenes, Democrats pressed their political advantage with sharp attacks on the GOP.

Throwing down a gauntlet, Senate Majority Leader Harry Reid (D-Nev.) said he would likely force a vote Monday on bringing the bill to the floor, whether or not a compromise with Republicans has been reached – essentially daring Republicans to vote against beginning the debate, a step that would require a 60-majority to take.

“We are very happy to bring it to the floor,” said Sen. Charles E. Schumer (D-N.Y.), adding that he found it hard to believe that Republicans would “all vote no, blocking financial reform. My guess is they won’t.”

Even as partisan tensions seemed to ease in negotiations over the bill, Democratic leaders held a press conference to reiterate complaints that Republicans were lying about the bill in their attacks. “They’ve decided that the best way to stop us from cleaning up Wall Street is by polluting the debate,” said Reid, citing claims by Senate Republican Leader Mitch McConnell (R-Ky.) that the bill would perpetuate government bailouts.

Schumer said the press conference reflected a tactical lesson learned from the healthcare debate – that Democrats have to move aggressively to respond to GOP claims that they believe are misleading, such as the GOP’s argument that the healthcare bill was a government takeover.

In an earlier speech on the Senate floor, McConnell said his critique pointed to loopholes that undercut the Democrats’ claim that the bill would end government bailouts of institutions considered too big to fail.

“That’s really what this debate is about: It’s about proving to my constituents and to the rest of the country that we actually do what we say we’re going to do around here,” McConnell said, “because if you haven’t noticed, there’s a serious trust deficit out there.”

After the completion of a healthcare overhaul, financial regulation has emerged as Obama’s top domestic goal.

Obama chose for the location the same Cooper Union campus in New York where, as a presidential candidate in March 2008, he condemned risky financial practices and a government mentality that was “scornful … toward oversight and enforcement.”

His speech Thursday echoed the earlier address with its warning that a selfish pursuit of profit carries huge risks for the economy.

“I believe in the power of the free market,” Obama said Thursday. “I believe in a strong financial sector that helps people to raise capital and get loans and invest their savings. But a free market was never meant to be a free license to take whatever you can get, however you can get it.

“That is what happened too often in the years leading up to the crisis,” he said. “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.”

Obama spoke to an audience of about 700. Guests included New York Gov. David Paterson, New York City Mayor Michael Bloomberg and Paul Volcker, the former Federal Reserve chairman.

Obama singled out Volcker in his speech – “the tall guy sitting in the front row” -- and voiced support for a provision in the bill known as the “Volcker Rule” aimed at limiting the size of banks and the kinds of risks they can take.

“This will not only safeguard our system against crises, this will also make our system stronger and more competitive by instilling confidence here at home and across the globe,” the president said.

Obama addressed the audience as if it were stocked with Wall Street executives and lobbyists. But he was appearing before a friendly crowd. When he mentioned Wall Street at one point, some in the audience booed.

Although Obama appeared as a candidate in The Great Hall of Cooper Union, a debating venue since 1858, the hall has provided a stage for only two sitting presidents, Bill Clinton in 1993 and Obama Thursday.

Though Republican opposition to the effort seems to be softening, Obama used the speech to beat back an oft-repeated GOP argument that the bill would give rise to more unpopular bailouts.

“What’s not legitimate is to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts, as some have claimed,” Obama said. “That makes for a good sound bite, but it’s not factually accurate. It is not true.

“In fact,” he said, “the system as it stands … is what led to a series of massive, costly taxpayer bailouts. And it’s only with reform that we can avoid a similar outcome in the future. In other words, a vote for reform is a vote to put a stop to taxpayer-funded bailouts. That’s the truth. End of story. And nobody should be fooled in this debate.”

peter.nicholas@tribune.com