This past Thursday, President Obama proposed an “interesting” strategy to try and get Wall Street on board with his and Congress’ financial regulatory overhaul. In an address at Cooper Union College in Manhattan, the President boldly claimed that he foresaw the crisis two years ago when he gave a speech at the same venue. He warned the crowd, largely from the economic sector, that they should heed his words this time around. Obama is trying to gain support for the financial regulation bill that passed the House and now is up for floor debate in the Senate. He did not say which version of the bill had his support, but that both would help regulate the inappropriate practices of Wall Street in past years.
This speech came after the Securities and Exchange Commission filed a civil suit against Goldman Sachs for practices during the subprime mortgage crisis. President Obama did not directly refer to the incident in his address and has stressed noninvolvement in the timing of the suit. He did tell those from Wall Street that “some forgot that behind every dollar traded or leveraged, there is a family looking to buy a house, pay for an education, open a business or save for retirement. What happens here has real consequences across our country.”! This demonizing of Wall Street may be helping to draw support from the average American but will in no way sway the hearts of the financial services sector.
The regulation proposed by Congress would be the first major economic overhaul since the Great Depression. Its goal is to prevent another crisis and it imposes some monumental new restrictions. The legislation would create a mechanism for liquidating large, interconnected financial firms and also adds in restrictions on the derivatives market. Either bill would create a council to detect threats to the broader financial system and protect consumers who could be taken advantage of in the market.
Whether you are a Republican or Democrat, for regulation or against it, all can agree this was not the way Obama should have gone about gaining Wall Street’s support. While encouraging bipartisan support and conversations, Obama further pushed the two sides apart. Playing the blame game is not “progress.” To find a solution to the problem at hand the experts should be consulted. Coincidently, the majority of these experts are employed by Wall Street.