Obama makes a strong case for financial reform

By Anne E. Kornblut and Michael D. Shear
Washington Post Staff Writer
Friday, April 23, 2010; A01

NEW YORK -- President Obama's assertive stride into the debate on financial regulatory reform stands in marked contrast to the messy health-care battle that consumed most of the past year. It also represents a crucial part of a political strategy that -- at least so far -- appears to be moving a bill through Congress more easily.

Obama flew to New York on Thursday to deliver a stern address to an audience that included prominent financial executives, telling them that greater government oversight is in the best interest of the industry -- and the country. "Unless your business model relies on bilking people, there's little to fear from these new rules," he said at Cooper Union college, near the Wall Street epicenter.

The speech marked the culmination of a month-long acceleration of Obama's involvement with the issue, White House and Treasury Department officials said. And it will be followed by more: Next week, he will embark on a new phase of his "Wall Street to Main Street" tour, begun last winter, by traveling to Iowa, Missouri and Illinois.

With senators coming together on regulatory legislation, Obama on Thursday seemed to relish pointing out the political struggle so far, saying that squadrons of lobbyists had been deployed to try to stop the bill. "I am sure that some of these lobbyists work for some of you," the president told the Wall Street crowd, which sat in silence. "I want to urge you to join us, instead of fighting us."

And, turning his attention to political leaders, he said: "We've seen misleading arguments and attacks that are designed not to improve the bill but to weaken or to kill it. We've seen a bipartisan process buckle under the weight of these withering forces, even as we've produced a proposal that by all accounts is a common-sense, reasonable, non-ideological approach to target the root problems that led to the turmoil in our financial sector and ultimately in our entire economy."

The 700-member audience Obama addressed included dozens of financial and political titans -- ranging from embattled Goldman Sachs chief executive Lloyd C. Blankfein to New York Mayor Michael R. Bloomberg (I) to the Rev. Al Sharpton -- and was enthusiastic at moments, despite his firm tone. White House officials had said the president was there to prod Wall Street to cooperate, not to lecture. Executives from Barclays, Credit Suisse, Morgan Stanley, J.P. Morgan Chase and Bank of America also attended, according to the White House.

Obama's focus on financial regulation comes after Treasury Secretary Timothy F. Geithner and a team of administration aides spent more than a year laying groundwork, working quietly even as others in the White House were distracted by the fight over health-care legislation, officials said. They met weekly, on Monday or Tuesday afternoons, in the White House legislative affairs office to propose financial reforms and consider the best way to achieve them.

The tone of those talks changed March 24, aides said, when Obama brought Senate banking Chairman Christopher J. Dodd (D-Conn.) and his counterpart in the House, Rep. Barney Frank (D-Mass.), to the Oval Office after the health-care bill was signed. That was a signal, they said, that the president wanted to begin the final push.

Since then, his role has consisted of two parts, they said: making the public case that financial reform is necessary, and privately lobbying lawmakers to pass a far-reaching bill.

Obama has used his weekly radio and Internet address to criticize Republican opposition, threatened to veto legislation that does not meet his goals, and sat down with congressional leaders of both parties.

In a CNBC interview Wednesday, he discussed in detail the complex issue of regulating derivatives, an indication that he has become involved in the discussions.

"We are doing the kind of blitz that you saw at the end of health care on regulation reform," a senior White House adviser said.

Still, White House officials rejected the idea that the legislation's rapid progress is the result of lessons learned from the health-care debate, which critics accused the administration of letting drag on for too long. Instead, they say, the dynamics of the issues have always been different, with bipartisan negotiations on financial regulations making progress over an extended period.

Even so, it is no coincidence that the White House has spent little time trying to woo individual senators with sweetheart deals such as the ones that became controversial during the health-care negotiations.

Republicans in the Senate, who spent last week characterizing the legislation as a "bailout" for big banks, accuse Obama and Senate Majority Leader Harry M. Reid (D-Nev.) of trying to push an unsatisfactory bill through Congress and of walking away from bipartisan talks.

"His rhetoric got really sharp and really mean" in the past two weeks, one top GOP aide said of Obama. "That's what changed."

In his remarks, Obama, speaking about the connection between Wall Street and ordinary citizens, recalled a speech he gave two years earlier at the same spot. "I believe in a strong financial sector that helps people to raise capital and get loans and invest their savings. That's part of what has made America what it is," he said.

"But a free market was never meant to be a free license to take whatever you can get, however you can get it," he said. "That's what happened too often in the years leading up to this crisis. Some -- and let me be clear, not all -- on Wall Street forgot that behind every dollar traded or leveraged, there is a family looking to buy a house, pay for an education, open a business, save for retirement. What happens on Wall Street has real consequences across our country, across our economy."

"I thought it was an improved tone," Steve Bartlett, president of the Financial Services Roundtable, which represents some of the nation's largest financial firms, said of the speech. "By and large, it was a tone that talked about policy instead of ad hominem attacks."

Bartlett said his organization supports about 80 percent of the provisions in the financial overhaul legislation currently before the Senate. He also said that the nation's big financial firms share the aims that Obama laid out in his speech for a safer, more transparent financial system.

"We agree with every one of his goals," Bartlett said. "Some of them, we disagree on how to get there."

Staff writer Brady Dennis contributed to this report.

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