President Barack Obama Monday said the need for hundreds of billions of dollars in financial industry bailouts was easing as the global economy recovers, but continued to push for a drastic overhaul of financial regulation in the US.
One year after the collapse of investment banking giant Lehman Brothers Holdings, a bankruptcy that sent Wall Street into a tailspin, Obama was looking to regain momentum for his proposals to prevent such a crisis from ever happening again.
In a speech at the historic Federal Hall on Wall Street in New York, Obama said there were signs the US economy had turned a corner, and said the government was beginning to extricate itself from a series of dramatic interventions in financial markets.
"Although I will never be satisfied while people are out of work and our financial system is weakened, we can be confident that the storms of the past two years are beginning to break," Obama said.
"In fact, while there continues to be a need for government involvement to stabilize the financial system, that necessity is waning," he said. "The growing stability resulting from these interventions means we are beginning to return to normalcy."
The Treasury Department has invested hundreds of billions of dollars in US banks over the past year to keep them afloat, while the Federal Reserve has used a variety of tools to free up bank lending, which essentially froze in the wake of Lehman's collapse.
Obama criticized some on Wall Street for still failing to heed the lessons of the financial crisis, which sparked the worst US recession since the Great Depression of the 1930s.
"Normalcy cannot lead to complacency," Obama said. "I want everybody here to hear my words: We will not go back to the days of reckless behaviour and unchecked excess that was at the heart of the crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses."
That characterization is denied by the financial industry. Charles Dallara, managing director of the International Institute of Finance, the global financial lobby, said the industry had come a long way in altering its practices since the crisis erupted last year.
"Substantial change has taken place and is taking place," Dallara told reporters ahead of Obama's speech. But he also called for bringing "balance to the regulatory reform here, not so-called strong regulatory reform."
Obama laid out his plans for more powers for the Federal Reserve, the creation of a new regulator to protect consumers from shady financial practices, and new authority to manage the bankruptcy of major banks that are critical to the health of the wider industry.
The overhaul is currently making its way through Congress. Obama wants major reforms passed by the end of the year.