Obama Criticizes Wall Street "Complacency"

President Uses Anniversary of Key Wall Street Collapse to Argue for Financial Regulations

(CBS/AP)  Updated 3:07 p.m. ET

President Barack Obama sternly warned Wall Street Monday against returning to the sort of reckless and unchecked behavior that threatened the U.S. with a second Great Depression like that of the 1930s.

Even as he noted the U.S. economy and financial system were pulling out of a downward spiral, Obama warned financial titans on the first anniversary of the Lehman Brothers collapse that they could not count on any more bailouts.

He credited his administration and the $787 billion stimulus package rammed through Congress in the first days of his taking office for pulling the country back from the brink.

"We can be confident that the storms of the past two years are beginning to break," he said.

And even as the economy begins a "return to normalcy," Obama said, "normalcy cannot lead to complacency."

Nevertheless, Obama said, "Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them."

His tough message warned the financial community to "hear my words: We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses."

"Many of the firms that are now returning to prosperity owe a debt to the American people," the president said. "They were not the cause of this crisis, and yet American taxpayers, through their government, had to take extraordinary action to stabilize the financial industry...It is neither right nor responsible after you've recovered with the help of your government to shirk your obligation to the goal of wider recovery, a more stable system, and a more broadly shared prosperity."

READ MORE: Full Text Of Obama's Address
Little has been done in terms of reform since last year's meltdown. The big banks whose near collapse prompted infusions of government cash are bigger than ever and corporate executives are again receiving lavish compensation packages, reports CBS News chief White House correspondent Chip Reid.

Goldman Sachs in fact spent $6.6 billion in the second quarter on pay and benefits - that's 34 percent more than two years ago.

Obama spoke at Federal Hall in the heart of Wall Street before an audience that included members of the financial community, lawmakers, and top administration officials. Afterwards, he joined former President Bill Clinton for lunch at a New York restaurant as the White House announced Obama would address the annual meeting of the Clinton Global Initiative Sept. 22 while in New York for the United Nations General Assembly meeting.

In marking his determination to prevent a repeat of the crisis that nearly brought down the global financial system last fall, Obama said he was attacking the problem on several broad fronts, including asking Congress to approve new rules to protect consumers and a new Consumer Financial Protection Agency to enforce those rules. He also called for the closure of regulator loopholes and overlap that "were at the heart of the crisis" because they left key officials without "the authority to take action."

READ MORE: Obama’s Financial Reform: All Talk, No Action

At the Pittsburgh G-20 economic meeting later this month, the U.S. will focus on ways "to spur global demand but also to address the underlying problems that caused such a deep and lasting global recession," Obama said.

Obama and others seeking ways to better monitor the financial system and to police the products banks sell to consumers have been opposed by lobbyists, lawmakers and turf-protecting regulators. Mergers and sales of banks have consolidated lending power in even fewer hands. And those large firms still bet far more than the capital they have on hand.

Yet regulations have not moved. Much of the legislative motivation in Washington has been consumed by the contentious debate over changes to the health care system. Government intervention into private automakers such as General Motors have left lawmakers skittish to move further into corporate board rooms. And it's not as if another collapse is obviously imminent.

Unplugged: Obama Has Not Emphasized Financial Reform
In Congress, Republican Sen. Judd Gregg said the administration deserves "considerable credit" for acting to stabilize the financial system, but he warned that Congress should not overreact in approving new regulations.

"We must be wary of the reality that, in an attempt to address yesterday's failures, Congress will put in place regulatory schemes which will fundamentally undermine risk taking, capital formation and entrepreneurship," Gregg said.

Five of the biggest banks - Goldman Sachs, JPMorgan Chase, Wells Fargo, Citigroup and Bank of America - posted second-quarter profits totaling $13 billion. That's more than double what they made in the second quarter of 2008 and nearly two-thirds as much as the $20.7 billion they earned in the second quarter of 2007 - when the economy was considered strong.

CBS News Director of Surveys: Americans Wary of Bailouts
The failure of Lehman Brothers - the biggest bankruptcy in U.S. history - and the panicky sales of Bear Stearns to JPMorgan Chase and Merrill Lynch to Bank of America transformed Wall Street and gave fewer competitors increased market power.

As of June 30, three banks - JPMorgan Chase, Wells Fargo and Bank of America - held $2.3 trillion in domestic deposits, or $3 out of every $10 in deposit in the United States. Three years ago those three institutions held about 20 percent of the industry total.

Obama has sought tougher capital requirements for banks, arguing that banks' buying of exotic financial products without keeping enough cash on reserve was a key cause of the crisis. Treasury Secretary Timothy Geithner has urged the Group of 20 nations to agree on new capital levels by the end of 2010 and put them in place two years later.

The administration also has proposed increased transparency of markets in which banks trade the most complex - and potentially risky - financial products. Obama's broad plan also would give the Fed new oversight powers and impose conditions designed to discourage companies from getting too big.

Sen. Chris Dodd, the Democratic chairman of the Senate Banking Committee, is leading the push for those new rules and his aides hope to have legislation together before the year's end. Already they have conducted hearings on the source of the problem and how best to prevent another.

But a key component of the Obama plan - creating an agency to oversee marketing financial products to consumers - faces a tough road to become a law. Industry lobbying against it and other proposed financial rules has been fierce and the president's fellow Democrats have been slow to take up the cause.

[noloyalisti]

We are in a class war in this country. The top 2% who were propped up mostly by Reagan and Bushes but also with Clinton's help, are out to subvert the rest of us.

If we let the right wing corporate Supreme Court uphold Corporate Personhood, we WILL have fascism and this financial situation will get much, much worse for us. This is Wall Street's dream come true.

[chonder2]

The next step after healthcare reform with a public option and financial regulation that protects the American people...Campaign finance reform or a representative system that gives each voter equal"face time"as the corporations have now.

[Stevenapoli7]

Cmon Mr. President. Regulate the exotic instruments already; instead of asking for pretty please.

[jagorma]

CBS silent on ACORN corruption. ?Wonder why?.

[auntc3]

No more bonuses....there should be laws to govern bonuses.

[maxcoffee-2009]

I wnat to know what will happen if the President tells americans to get the H1n1 vaccination. Do you think that the Republicans would freak out and prevent thier children from getting one? Or protest getting flu vaccinations because it is Socialist?

[rational_1]

You won't hear it from this Mickey Mouse news organization but the Senate just voted to cut off ACORN housing funds after the three videotaped instances of pimp/hooker ACORN facilitations came to light (not on this website of course). Why is this none of this even mentioned on CBS News? Instead they have a story about a bear learning to swim in a pool. Pathetic.

[kevjustice]

The mob that had that rally against Obama will have alot of laundry to do because of the dust the mob kicked up. I mean that will be alot of white hoods to wash.

[spaceatoms]

Its this type of talk that got Obama elected as an official; having said that, its just talk and as much as its a needed pep talk, I don't know if its going to go very far. Its just too much to ask a society to rebound in a year, sorry, but it would have been better to have stocks settle for a few years maybe 10 and put the emphasis on work and not the quick and easy way out. Now, if the stocks go back up, its actually going to be worse, because there is no substance and it will be just as before and this is what the President is talking about.

[notsouthern]

Republicon deregulation of the financial industry caused the Great Depression. The Republicon Congress in the mid 1990's deregulated the financial industry again with the blessings of Centrist Bill Clinton. Republicons and Hillary's husband can shoulder 98% of the blame for today's failed banks. One thing that we can all count on from Republicons and the moderately stupid is that they never learn from their failed past, thus they are bound to repeat their mistakes. Today's Paulson, Bernacke, Obama bailouts have thus far netted the American taxpayer a 17.5% return. The only reason that Republicons exist today is because they have a base of emotionally unstable and dumbassed fools.

[chonder2]

meg-Once you've seen one NASCAR fan you've seen them all!!

[woeisme1]

Just kick them.

[solidoak]

Kick them all out.

[TheVarsityClub]

Blaah, Blaah, Blaah,.....FDR set up the SEC to make sure that the behavior of the 1920's never happened again and it happened again. The reality is, lawmakers and big business do not want play by a set of rules that protect the everyday citizen and taxpayer.

[spokeperson]

Obama warned against returning to reckless behavior that nearly collapsed the economy.

The fault lies with Oversight Committees in Congress--House Ways and Means Committees--as well as, other financial committees who were to be the checks and balances for the private sector. These Committees were to make sure any lending financial institution were operating and were complying to the laws in the Constitution!

Auditors (outside the bank) come into the banks--check the records--read the loan committee minutes--and see if the financial institution was solvent!

Then you have Bank examiners who come into the Bank (without warning) and checked if banks. Banks Examiners are very thorough--they check and re-check to determine if the Banks assets--and liabilities are in balanced and the Bank is solvent or insolvent!

The reckless behavior was OUT OF WASHINGTON--COMMITTEES OVER FANNIE MAE-FREDDIE MC--AIG and sub-committees to view financial records and BE THE CHECK and BALANCES TURNED THEIR HEADS--SAT ON THEIR CANS--AND IGNORED AND ALLOWED WALL STREET TO BE A RUNAWAY WALL STREET!

Banking Commissioners in every State--work right with outside auditors who view all the books--view all the negotiables--minutes of from the loan committees and their decisions--are reviewed very thoroughly.

If the Bank Examiners determine the bank is insolvent, they begin the process of handing the information over to the FDIC--and they proceed to liquidate the assets of the bank.

So--to have the Democratic Party has stated: "the economy crisis happened due to the fact the banks who had made bad loans and kept them hidden--is a farce!

All the different Committees---all the BANK EXAMINERS COME AT LEAST ONCE OR TWICE A YEAR--ALONG WITH THE OUTSIDE AUDITORS BY THE BANK TO SEE IF ANY MISHANDLING OF FUNDS--LOANS--WERE IN ERROR!

Federal Bank Examiners--Auditors retained by the banks--Senators and Representatives on oversight Committees couldn't find these bad loans that were hidden for years. To only have the bad loans come to light right before the debate of Obama and John McCain.

This is manipulation of our judicial system! If you recall, the URGENCY CAME ON THE HEELS OF THE FIRST DEBATE!

I have worked for a bank--who made bad loans--became insolvent--Bank Examiners turned the findings over to the FDIC!

I have worked with the FDIC--I have gone on bank closings--and do not buy the BULL out of Washington!

I also worked with the Bank Examiners since I was secretary to the Credit Administrator--and internal Audit Officer! The records that I had to give them--along with hours of tedious works.

I also know when the Bank Examiners notify the Banking Commissioner of the State and tells them this bank is insolvent--the Banking Commissioner takes possession--then FDIC takes over.

After the liquidation process of the bank, all lending officers--the President of the Bank--any Credit Administrator--internal Auditors WERE ALL FINED by the FDIC--and THE FINES WERE VERY STEEP FOR MAKING BAD LOANS!

[reality42]

Come On America you have Timmy the tax cheat running your money

[kevjustice]

Wall Street=greed=Republicans=economic collapse

[bubbadubba]

<<<Everyone knows that the last republican administration allowed the markets to crash. You can hem and haw all you want, but THAT is the TRUTH!>>>>

Not in reverse reality world of Republicans where the only truth is what they want it to be. If Old Trailer Park Joe Wilson (R) SC heard you say that he would say " YOU LIE !" which of course is what he screams when he doesn't want to hear the truth.

[Ceres6]

It is becoming more and more difficult to believe the promises of the Obama administration to protect the American consumer. They promised a stop to the obscene practice of giving mega bonuses to executives, and what is the reality, most of the executives are still getting them. Mr. Obama promised that credit card companies will stop their loan sharking practices against American consumers, and what is the reality, the interests and fees charged by them now are a lot higher than during the Bush administration. The huge premiums charged by insurance companies, not only in the health sector, remain unchanged. The fees charged by many utility companies are so ridiculous, and the little guy is powerless to confront them. And the list goes on and on. Finally, of the people in Wall Street that stole more than one trillion dollars, how many of them are in jail? So, I wonder what the present administration has really done in 9 months.

[lovegetpeace]

Hey fervan-2009,

These types of allegations and Character Assasinations never worked before Nov 4, 2008. Why are you expecting it to work this time around?

Have you given up on the President Obama is a Non-U.S. Citizen allegation?

[lovegetpeace]

Hey Amiga RowdyBrat,

Do you know where Republican ex-Senator Phil Gramm is hiding today?