After a week of anger inflamed by the SEC's case against Goldman Sachs, President Obama is taking his message to Wall Street today on the need to limit risk, and not to expect a bailout from the U.S. taxpayer again. Obama is scheduled to deliver a speech late this morning at Cooper Union college, near Wall Street, the sight of the first speech he gave two years ago laying out his financial reform agenda.Obviously, Obama's visit is timed to support the push for overhaul of the financial regulatory system in Washington and to prevent the kind of risks that led to the financial crisis.
Yesterday, the Senate Agriculture Committee voted 13-to-8 to approve the bill sponsored by the Ag committee's chairwoman, Rep. Blanche Lincoln (D-Ark.), which contains tougher rules on derivatives trading. The bill would require derivatives to trade on exchanges and be cleared through third parties, as well as provide a method for unwinding too-big-to-fail banks without requiring taxpayer dollars. It also goes further than previous Democratic bills in requiring banks to spin off their derivatives trading operations, which is a bone of contention and could be dropped by the Democrats to gain Republican support for the larger bill, according to press reports.
In an exclusive interview with CNBC, yesterday, Obama argued that the financial industry needs new rules to curb Wall Street excess. The push for tougher rules gained momentum among Republicans when the Securities and Exchange Commission filed charges against Goldman Sachs for creating a synthetic derivative filled with toxic mortgages that were handpicked by John Paulsen, a large hedge fund customer, without telling the large European banks that had bought the C.D.O., who was involved in picking the underlying loans. But the view on the street is that the SEC's decision to pursue the case against Goldman Sachs may have been politically motivated as evidenced by the Commissioners' vote (3-2) along party lines. It's clear that the case has renewed and inflamed populist anger over the financial industry and put pressure on Republican to negotiate with the Democrats.
Obama told CNBC that the SEC did not give the White House a heads up that is was going to file civil charges against Goldman Sachs in connection with creating a mortgage derivative that was designed to fail to help
Obama said the SEC is a completely independent agency and didn't inform the administration that it was as going to bring charges against Goldman Sachs. He said he first learned the news about the SEC case against Goldman on CNBC.
Meanwhile, politicians are hitting the airwaves warning that demonizing Wall Street will come back to haunt New York City, which relies on banks for employment and tax revenues. Republican Congressman Peter King of Long Island said companies would leave New York City and move to states that are more favorable to financial firms. "By demonizing Wall Street by demonizing the banks, and talking about putting this could cause New Yorkers thousands and thousand of jobs and billons of dollars in tax revenues." "While many of us agree that new regulation is needed, making them the enemy is going to hurt many New Yorkers," added King told WCBSNews Radio88.
After a week of anger inflamed by the SEC's case against Goldman Sachs, President Obama is taking his message to Wall Street today on the need to limit risk and push for financial reform. Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio