Obama proposes regulatory reform in response to financial crisis

Obama on financial crisis: Banks “took huge, reckless risks” and are “operating under the same rules.” In January 21 comments, Obama proposed financial regulatory reform and stated:

But even as we dig our way out of this deep hole, it's important that we not lose sight of what led us into this mess in the first place.

This economic crisis began as a financial crisis, when banks and financial institutions took huge, reckless risks in pursuit of quick profits and massive bonuses. When the dust settled, and this binge of irresponsibility was over, several of the world's oldest and largest financial institutions had collapsed, or were on the verge of doing so. Markets plummeted, credit dried up, and jobs were vanishing by the hundreds of thousands each month. We were on the precipice of a second Great Depression.

To avoid this calamity, the American people -- who were already struggling in their own right -- were forced to rescue financial firms facing crises largely of their own creation. And that rescue, undertaken by the previous administration, was deeply offensive but it was a necessary thing to do, and it succeeded in stabilizing the financial system and helping to avert that depression.

Since that time, over the past year, my administration has recovered most of what the federal government provided to banks. And last week, I proposed a fee to be paid by the largest financial firms in order to recover every last dime. But that's not all we have to do. We have to enact common-sense reforms that will protect American taxpayers -- and the American economy -- from future crises as well.

For while the financial system is far stronger today than it was one year ago, it's still operating under the same rules that led to its near collapse. These are rules that allowed firms to act contrary to the interests of customers; to conceal their exposure to debt through complex financial dealings; to benefit from taxpayer-insured deposits while making speculative investments; and to take on risks so vast that they posed threats to the entire system.

That's why we are seeking reforms to protect consumers; we intend to close loopholes that allowed big financial firms to trade risky financial products like credit defaults swaps and other derivatives without oversight; to identify system-wide risks that could cause a meltdown; to strengthen capital and liquidity requirements to make the system more stable; and to ensure that the failure of any large firm does not take the entire economy down with it. Never again will the American taxpayer be held hostage by a bank that is “too big to fail.”

Frank: "[I]t was their practices, the banks and other financial institutions being irresponsible with mortgages, that contributed to the problem." Discussing a separate proposal to levy a fee on large financial institutions, Barney Frank stated in January 15 CNBC interview, “By the way, there's one other category of spending that was a loss incurred by the TARP, and that's in mortgage efforts. And there it's entirely legitimate to make the banks pay because it was their practices, the banks and other financial institutions being irresponsible with mortgages that contributed to the problem. That's part of where the money will go.”

Conservatives accuse Obama administration of “raping,” “bash[ing],” declaring “war” on banks

Limbaugh: “He's not cracking down on the banks, folks. He's raping them.” During his radio show, Limbaugh asserted, “Obama is taking further aim at the economy. Mr. Depression.” Limbaugh added, "[H]e is now attacking the banks all over again, and he's doing it because the polling data he has suggests that the public is still mad at Wall Street, still mad at banks, still mad at all these bonuses." Limbaugh continued:

So it's pure class envy. It's an attempt to revive his poll numbers, and in the process, he is taking yet another swing at capitalism and is totally taking this country toward depression. He's not cracking down on the banks, folks. He's raping them. [The Rush Limbaugh Show, 01/22/10]

Cavuto: “What do you think of the president's war on banks?" During an interview with former House Speaker Dennis Hastert, Fox News host Neil Cavuto stated, “What do you think of the president's war on banks? I mean it's -- he seems like it's almost as much as he dislikes Fox, but what do you make of that and how far this is going? I'm not saying all these guys are saints, but it does seem to be a repeated villain attack. [Your World with Neil Cavuto, 01/21/10]

Varney: "[I]f you bash the banks, do you create jobs? ... Answer: probably not." Fox Business' Stuart Varney stated, “The basic question for the economy and for the stock market is, if you bash the banks, do you create jobs? Because that's the underlying problem for investors and for the economy alike. If you bash them, do you create jobs?” He answered his own question:

Answer: probably not, because banks in the future, with this kind of regulation and tax, sir, coming upon them, they're not going to make the same amount or number of loans as they did in the past.