President Barack Obama and Treasury Secretary Timothy Geithner plan on Wednesday to lay out broad principles for Wall Street regulatory reform aimed at preventing a repeat of the current financial crisis, an administration official said.
Obama will say later in the day after a high-level White House meeting that “painful experience” showed the rules needed to be quickly modernized, according to advance excerpts of his remarks provided to Reuters.
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The president, who took office on Jan. 20, weighed in on oversight of the ailing financial sector the day after his first address to Congress, in which he sought to rally public support for his economic remedies.
Obama and other leaders of the Group of 20 major developed and emerging economies will meet in London in April to discuss ways to improve the global financial system. Ahead of the gathering, Obama wants to signal that the United States has no intention of dragging its feet on the effort.
The G20 — comprised of the United States and major European economies as well as fast-growing economies like China — is looking at how to reshape the financial regulatory system that was largely shaped toward the end of World War Two at the 1944 Bretton Woods conference.
U.S. stocks fell on Wednesday as investors found little new in Obama’s Tuesday speech on how he planned to stabilize the rapidly declining U.S. economy. Turmoil throughout the banking and financial system caused by the subprime mortgage crisis is at the core of the recession that has spread worldwide.
There is wide agreement among financial market experts — both in the United States and around the world — that the rules governing financial institutions are in dire need of modernization.
Some experts believe that moving ahead quickly on the regulatory overhaul will help repair the shattered financial system by restoring trust. But other analysts say that tackling that effort while the markets are still in crisis might complicate matters.
“We can no longer sustain 21st century markets with 20th century regulations,” Obama will declare in his remarks at 3:45 p.m. EST.
“Strong financial markets require clear rules of the road, not to hinder financial institutions, but to protect consumers and investors,” he will say.
New York Senator Charles Schumer, a member of the Democratic leadership, said the Treasury Department is working with lawmakers to overhaul financial regulations.
The aim is to have a framework for such legislation by April 2 when Obama goes to the G20.
Schumer said the United States wants G20 leaders to know what the United States is planning, at least in general terms, to avert possible conflicts with efforts overseas.
“In the financial world, if we were to legislate and Europe would do something totally different it might undercut everything we do,” Schumer told reporters on Capitol Hill.
Well before the mid-September collapse of Lehman Brothers led to a meltdown in the financial markets, Obama had urged a wide-ranging overhaul of the patchwork system of Wall Street regulatory agencies. He said the weak and outdated system would leave Wall Street vulnerable in a crisis.
Obama gave a speech on the subject at NASDAQ in September 2007 and in another speech in March 2008, he outlined principles of his vision for updating the financial rules.
Obama will say on Wednesday that he is ready to work on a bipartisan basis on Wall Street reform and hopes to lawmakers can start crafting legislation in the coming weeks.
“The president and Treasury secretary share the belief that we can’t truly fix this crisis and make sure it never happens again unless we embark on comprehensive regulatory reform,” the administration official said.
“This afternoon they will lay out their broad principles for regulatory reform legislation that they plan to work with Congress on in the coming weeks leading up to the G20 (summit in London in April),” the official said.
Obama will say it is crucial for the Federal Reserve to “actively monitor” institutions it oversees, and the United States must challenge other countries to modernize their rules to prevent crises from spilling across borders.
“We must recognize that the challenges we face are not just American challenges, they are global challenges,” he will say.