No more bailouts, Obama warns Wall Street

[Northern Boy]

CBC News
Barack Obama spoke to a Wall Street audience on Monday, the anniversary of the collapse of investment bank Lehman Brothers Inc., lauding his administration's moves to prevent future financial calamities while warning that further bailouts are unlikely.

"I certainly did not run for president to bail out banks or intervene in the capital markets," Obama told an audience of bankers at the Federal Hall in New York City.

Since Lehman Bros. declared bankruptcy on Sept. 15, 2008, setting off the worst financial crisis since the Great Depression, the U.S. government has spent $787 billion bailing out struggling industries, and has taken equity stakes in companies as diverse as insurer AIG Inc. and automaker General Motors Corp.

According to government data, some 31,476 economic stimulus projects are also underway, worth some $103 billion.

"While there continues to be a need for government involvement to stabilize the financial system, that necessity is waning," Obama said.

In addition to drawing attention to the new regulatory agencies proposed by his administration, Obama urged Wall Street to do a better job policing itself.

"Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall," he said.

New consumer agency

Among his proposed legislation, Obama trumpeted his recently created Consumer Financial Protection Agency with being the best weapon to protect American buyers.

The agency will enforce new regulations designed at making credit agreements more transparent and ensure rates are fair without stifling consumer choice, he said.

His administration has also proposed the creation of an oversight council to bring together regulators from across markets to share information, to identify gaps in regulation, and tackle issues that don't fit neatly into any single organization's purview.

Trade issues cited

The U.S. president also spoke on international trade issues, suggesting the issue will be a key item on the agenda for G20 finance ministers when they meet in Pittsburgh later in September.

"Abuses in financial markets anywhere can have an impact everywhere," he said. "As the United States is aggressively reforming our regulatory system, we will be working to ensure that the rest of the world does the same."

He vowed that the United States will work diligently to expand free trade agreements, and implement existing agreements.

A recent U.S. decision to impose trade penalties on Chinese tires infuriated Beijing, which condemned the move as protectionist and said it violated global trade rules.

In addition to trade discussions, stronger regulation of financial markets is likely to be on the agenda at the G20 summit. French President Nicolas Sarkozy has threatened to walk out if summit participants don't reach a deal to rein in bankers' bonuses.

Despite public pronouncements, Congress has yet to approve most of the Obama administration's legistlation on financial market reform.

Washington has been gripped by the contentious debate over changes to the health-care system. Public outrage over those reforms have left some legislators wary of moving further into corporate board rooms - and the short-term incentive to do so has waned as most major banks have returned to profitability.

Obama's speech served to remind financiers and legislators in attendance that more work is to be done if the United States is to pull itself out of recession.

"The growing stability resulting from these interventions means we are beginning to return to normalcy. But - normalcy cannot lead to complacency," he warned.

With files from The Associated Press

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