President Obama met with top financial regulators Monday and later praised their efforts to protect consumers, make the financial system safer and stronger, and prevent the recklessness that led to the economic collapse at the outset of his presidency.
The session in the Roosevelt Room at the White House was designed to rebut critics who say the financial reform legislation
known as Dodd-Frank has been bogged down in lengthy rule-making processes where big banks are able to delay or water down key provisions including those on swaps, executive compensation, limits on the size of commodity positions and conflicts of interest at firms that effectively bet against their clients.
The president has also come under fire from Democratic presidential hopeful Sen. Bernie Sanders (I-Vt.), who has called for
breaking up the biggest banks, prosecuting top executives and restoring the Depression-era Glass-Steagall Act that divided
traditional and investment banking.
Other proposals have come from Federal Reserve Bank of Minneapolis president Neel Kashkari, who last month called for breaking up the nation's biggest banks and who said that "now is the right time for Congress to consider going further than Dodd-Frank with bold, transformational solutions."
"As we work to recover from this crisis, we've also worked to prevent this crisis from happening again. The laws that we've
passed have worked," Obama said to reporters at the end of the meeting. Flanked by Federal Reserve Chairman Janet Yellen
and Richard Cordray, head of the Consumer Financial Protection Bureau, Obama said, "It is popular in the media, and political discourse
both on the left and on the right to suggest that the crisis happened and nothing changed. That is not true."
But many critics of financial reform say that while some things have happened - notably increased capital requirements at
major banks - many other changes are languishing.
"On the one hand I think objectively a lot has been done," said Dennis M. Kelleher, chief executive of Better Markets, a liberal
leaning non-profit group. But, he said, "what we have is a bunch of rules tied up at the agencies by a war of attrition by
Wall Street and its lobbyists."
"There are a bunch of areas where not all the Dodd-Frank rules have been implemented and that's incredibly important," said
Lisa Donner, executive director of Americans for Financial Reform, a liberal coalition of community, consumer, labor and other groups.
Obama acknowledged that work remains on shadow banking, executive compensation and cyber security.
But he said if there has been a holdup in issuing regulations, it is the fault of lawmakers. "If there is a significant challenge
in terms of regulating Wall Street and regulating our financial sector it is primarily coming from certain members of Congress
who are consistently pressuring independent regulators to back off," he said.
Donner said several key issues remain unresolved. One is section 956, which says that regulators should write a rule preventing executives of large financial institutions from being paid in ways that encourage excessive risk taking. It was originally proposed in 2011 but has not been reproposed even though last year Obama called for its completion.
Under section 621, the Securities and Exchange Commission has not finalized a rule that would bar a firm from packaging securities to sell to clients and
then, on its own trading account, bet that those securities would collapse in value.
And the Commodity Futures Trading Commission has not yet issued a final rule setting new limits on the size of a position
that a firm can take before endangering its financial well-being in the event that the investment turns out badly.
"This is one more reminder that it is crucial that people who lead these agencies are people strongly committed to reform
and who will be as aggressive as they need to be despite pressure from the other side to slow down or weaken rules," said
An earlier version of story said that the Securities and Exchange Commission was responsible for writing a rule about executive compensation under section 956 of the Dodd-Frank legislation. The SEC is only one of six regulatory agencies involved in writing that rule including the Federal Reserve, the Federal Deposit Insurance Corp., Office of the Comptroller of the Currency, National Credit Union Administration, and the Federal Housing Finance Agency.