Obama marks crisis by urging Wall Street to act before Congress

President Barack Obama marked the first anniversary of the financial crisis by urging Wall Street to embrace financial reform, root out reckless behavior and police itself ahead of formal action from Washington.

In a speech at Federal Hall on Wall Street, Obama promised that a regulatory overhaul would be passed by Congress and signed into law, but urged banks and financial institutions to make changes on their own.

Obama said Wall Street did not have to wait for Congress to pass a law to take responsibility, and that many firms owe their prosperity to taxpayers, whose generosity prevented a further collapse of the system and economy.

“You don’t have to wait to use plain language in your dealings with consumers. You don’t have to wait to put the 2009 bonuses of your senior executives up for a shareholder vote,” Obama said. “You don’t have to wait for a law to overhaul your pay system so that folks are rewarded for long-term performance instead of short-term gains.”

Obama said he expects Wall Street “to embrace serious financial reform, not fight it.”

Obama spoke nearly a year to the day after investment bank Lehman Brothers collapsed from bad debts. That triggered a collapse in stock markets, broader panic in credit markets and the near-ruin of many giant firms with ties to Lehman.

Later that fall, Congress approved a $700 billion bailout of the finance sector that was supported by Obama, then-President George W. Bush and the GOP candidate for president in 2008, Sen. John McCain (Ariz.).

Stock markets had a muted reaction to Obama’s speech, with the Dow Jones Industrial Average ending up more than 20 points. Also on Monday, a judge struck down a settlement Bank of America had with the government to pay $33 million in fines. The fines stem from Bank of America’s takeover of Merrill Lynch at the height of the crisis and shareholder communications about bonus payments for Merrill employees.

The decision renews debate over a deal struck during the crisis that was once hailed a success.

Obama vowed in the speech that he would sign a regulatory reform bill later this year. “History cannot be allowed to repeat itself,” Obama said.

Meeting that timetable could be difficult, as Obama’s regulatory proposals have run into obstacles on Capitol Hill.

A broad range of financial lobbying groups said they support the need to revamp regulations, but many oppose specific administration efforts. The most notable source of debate surrounds the administration’s plan to create a Consumer Financial Protection Agency.

The consumer agency has drawn opposition from banks, Republicans and even some existing regulators.

Key Democrats also differ on parts of the administration’s agenda. Obama’s call for a “systemic risk regulator” in the Federal Reserve has run into opposition from members who fear the Fed’s powers are already too great.

Nonetheless, Rep. Joseph Crowley (D-N.Y.) on Monday expressed confidence a bill would be approved by the House later this year. “I don’t think there’s any question we’ll get something done by the end of the year,” said Crowley, who leads the centrist New Democrat Coalition.

In his speech, Obama at times scolded financial companies, saying they are “choosing to ignore” lessons they should have learned from the Lehman collapse and the financial crisis.

“I’m convinced they do so not just at their own peril, but at our nation’s,” Obama said.

“So I want them to hear my words: We will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses.

“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.”

The president expressed hope that the worst of the financial crisis is behind the country because of steps taken by his and Bush’s administrations. He spoke of a return to normalcy and said he is “confident that the storms of the past two years are beginning to break.”

“While there continues to be a need for government involvement to stabilize the financial system, that necessity is waning,” Obama said. “After months in which public dollars were flowing into our financial system, we are finally beginning to see money flowing back to the taxpayers.”

At the same time, he added: “This doesn’t mean taxpayers will escape the worst financial crisis in decades entirely unscathed.”

Obama warned that the recovery still has a long way to go, but “growing stability resulting from these interventions means we are beginning to return to normalcy.”

“But what I want to emphasize is this: Normalcy cannot lead to complacency,” Obama said.

Ian Swanson and Silla Brush contributed to this article.

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