Despite continued populist fury directed at Wall Street a year after the market meltdown, President Obama is fighting a strong headwind as he pushes for tougher regulation of the financial services industry.
Lawmakers of both parties on Capitol Hill are raising questions about parts of Mr. Obama’s far-reaching reform agenda, which also faces fierce and well-financed resistance from many of the major private-sector banking and investment lobbies.
Mr. Obama traveled to Wall Street on Monday to deliver a tempered scolding to corporate executives. He said they have a moral obligation to support the reforms he has proposed for greater oversight and restrictions on certain business practices.
“It is neither right nor responsible after you’ve recovered with the help of your government to shirk your obligation to the goal of wider recovery,” Mr. Obama said, speaking to financial industry executives at historic Federal Hall in Lower Manhattan.
The president made his speech on the first anniversary of the collapse of Lehman Brothers, a pivotal moment in the spiraling descent of the nation’s economy last year. During the darkest three months of the panic, the president said, “$5 trillion of American’s household wealth evaporated.”
Mr. Obama is proposing a range of regulatory measures, including greater authority to the Federal Reserve to police investment firms, a new oversight board to monitor the nation’s largest financial companies, and the creation of a consumer financial protection agency to crack down on abuses by credit card and mortgage lenders.
But with health care reform already overloading the legislative circuits, Republicans are in no hurry to advance the White House’s reform plan for Wall Street.
“President Obama supports changes that push us in the wrong direction,” said Rep. Tom Price of Georgia, chairman of the conservative Republican Study Committee.
Mr. Price called the administration’s approach “an open-ended, big-government response to a problem best solved by appropriately targeted, common-sense measures consistent with American success.”
House Minority Whip Eric Cantor, Virginia Republican, said Mr. Obama has perpetuated a “culture of bailouts” for Wall Street and has mishandled the $700 billion Troubled Asset Relief Program (TARP), which was instituted last autumn under the Bush administration to rescue troubled financial institutions.
Democrats have been far more supportive but are not entirely on board.
House Financial Services Committee Chairman Barney Frank, Massachusetts Democrat, has vowed to move Mr. Obama’s regulatory agenda through the House, but not without changes.
Mr. Frank, who was with Mr. Obama for Monday’s Wall Street speech, said in an interview with Bloomberg Television that he does not back a proposal by Mr. Obama to give the Federal Reserve sweeping oversight of the nation’s largest financial firms. Mr. Frank said Congress would authorize a council of regulators to monitor players considered “too big to fail.”
Mr. Frank also predicted that Congress would approve Mr. Obama’s idea for a consumer financial protection agency, despite private-sector reservations about the idea.
Members of the financial services industry applauded the president’s speech - at least publicly.
The Securities Industry and Financial Markets Association, a leading securities industry trade group, endorsed Mr. Obama’s call to take responsibility in reforming the industry.
“We are determined to be a constructive player in the ongoing policy debates,” said the group’s president and chief executive, T. Timothy Ryan Jr.
The Financial Services Forum, which represents the country’s largest banks and insurers, said the president’s proposal “is a goal shared by the forum.”
“Congress must not allow this unique opportunity to pass without achieving meaningful and comprehensive supervisory reform,” forum President Rob Nichols said Monday.
But behind the scenes, a number of financial industry groups are lobbying against the president’s reforms, arguing that they would handcuff Wall Street and hurt the nation’s economy.
The U.S. Chamber of Commerce last week also launched a multimillion-dollar advertising campaign against the consumer financial protection agency, calling it “a massive new bureaucracy with sweeping powers that will deprive consumers of affordability and choice.”
Rep. Spencer Bachus of Alabama, the top Republican on the House Financial Services Committee, warned that the agency would ration credit and allow fewer financial choices for consumers.
“The solutions being offered [by the administration] would in many respects make matters worse,” said Mr. Bachus, who was incorrectly referred to as “Sheldon Bachus” in Mr. Obama’s remarks.
The administration had hoped for an easy campaign to push reforms through Congress, particularly after public outrage aimed at Wall Street erupted in March over news that American International Group Inc. had awarded executives more than $160 million in bonuses after the troubled company received billions of dollars of taxpayer aid.
But the administration’s controversial health care reform efforts, its struggle to push the $787 billion economic stimulus package and stalled attempts to pass enact laws curbing greenhouse gas emissions have weakened the president’s political capital and emboldened Republican opponents, said a senior House GOP aide.
“All of those things push financial regulation to the side,” said the aide, who spoke on the condition of anonymity because he wasn’t authorized to speak. “This is the just the result of the president trying to do too much this year. I think that’s where the problem is.”
The aide said Congress is unlikely to pass significant legislation this year.
A newly released Associated Press poll has found that seven out of 10 Americans still think the federal government has not instituted the safeguards needed to prevent another financial meltdown. An even higher number - 80 percent - rate the condition of the economy as poor.
Financial institutions bore the brunt of the criticism in the poll, with 79 percent of those surveyed saying the banks and lenders that made risky loans deserve much of the blame.
Mr. Obama attempted to channel that outrage during his 30-minute speech Monday, saying that even as the economy begins a “return to normalcy,” there are some on Wall Street who are returning to the same risky behavior that brought on the crisis in the first place.
“There are some in the financial industry who are misreading this moment,” Mr. Obama said. Those involved “do so not just at their own peril, but at the nation’s.”
“We will not go back to the days of reckless behavior,” he said.