Obama Urges Wall Street To Support Overhaul

President Obama made his pitch for rewriting financial rules Thursday in the nation's financial capital. He told an audience in lower Manhattan that without new curbs on reckless financial behavior, the U.S. is at risk of another economic meltdown.

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President Obama took his case for new financial regulations today to the epicenter of the financial meltdown. Speaking in New York, Mr. Obama laid out the choice now facing Wall Street executives: embrace stricter regulations or run the risk of another vicious recession.

NPR's Scott Horsley reports.

SCOTT HORSLEY: President Obama delivered his New York speech in a familiar setting, Lower Manhattan's Cooper Union. That's where he warned of the need for new financial regulations as a candidate for the White House, six months before the collapse of Lehman Brothers.

President BARACK OBAMA: Good to be back in Lower Manhattan, a few blocks from Wall Street.

HORSLEY: There was nervous laughter from the audience, where a number of Wall Street executives were sitting, including the CEO of Goldman Sachs, whose firm was accused last week of securities fraud by the SEC. Mr. Obama said those bankers probably employ many of the lobbyists he believes are trying to water down the government's regulatory proposal. He urged the bankers to take a different approach.

Pres. OBAMA: I'm here today specifically, when I speak to the titans of industry, 'cause I want to urge you to join us instead of fighting us in this effort.

HORSLEY: The president says that regulatory effort would do a number of things, protect consumers from misleading credit offers, give shareholders more control of executive compensation and allow the government to dismantle big, failing companies like AIG before they jeopardize the whole financial system.

Pres. OBAMA: The goal is to make certain that taxpayers are never again on the hook because a firm is deemed too big to fail.

HORSLEY: It's that last item that's generated much of the recent controversy in the Senate, with some Republicans arguing that a $50 billion dismantling fund paid for by big banks would amount to a permanent taxpayer bailout. Mr. Obama echoed independent observers who take issue with that Republican claim.

Pres. OBAMA: What's not legitimate is to suggest that somehow the legislation being proposed is going to encourage future taxpayer bailouts, as some have claimed. That makes for a good soundbite, but it's not factually accurate. It is not true.

HORSLEY: Republicans appear to be backing away from that argument and the White House has signaled it's willing to drop the fund if it remains a stumbling block. Mr. Obama notes there was actually a hint of bipartisanship yesterday when a Senate committee passed a bill designed to bring some daylight into the opaque world of derivatives trading.

Pres. OBAMA: I was encouraged to see a Republican senator join with Democrats this week in moving forward on this issue. That's a good sign.

(Soundbite of applause)

HORSLEY: The top Democrat and Republican on the Senate Banking Committee are still trying to work out a bipartisan agreement on the broader overhaul. But with or without Republican support, Senate Majority Leader Harry Reid plans to hold a vote on the overhaul Monday, effectively daring Republicans to stage a filibuster.

Senator HARRY REID (Democrat, Nevada): If they are willing to go forward with reform, that's what we'll do. But I'm not going to waste any more time of the American people until they come up with some agreement. There are ways of doing this, but the games of stalling are over.

HORSLEY: When candidate Obama spoke here at Cooper Union two years ago, he was still introducing himself. He stressed to businesspeople that he's a big believer in the free market, even as he called for tougher regulation of the financial sector. Two years later, President Obama is still arguing that free enterprise need not be an unfettered free-for-all.

Pres. OBAMA: In the end, our system only works, our markets are only free when there are basic safeguards that prevent abuse, that check excesses, that ensure that it is more profitable to play by the rules than to game the system. And that is what the reforms we've been proposing are designed to achieve.

HORSLEY: The president could hardly have known when he issued his warning two years ago how severe the financial meltdown would be. Today, as he repeated that warning, he said the U.S. must learn from the crisis or else be doomed to repeat it.

Scott Horsley, NPR News, New York.

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