Financial institutions are going back to practices that got the country in trouble and, noting that behavior, President Obama is calling for new regulatory powers including a Consumer Financial Protection Agency.
In a speech on the anniversary of the collapse of Lehman Brothers, President Obama warned Wall Street that returning to its old greedy ways would pose a threat to the financial recovery and could jeopardize the nation’s fiscal future. While noting that the recovery is still a work in progress, he expressed confidence that the worst is over while, at the same time, chastising financial institutions for going back to practices that got the country in financial trouble to begin with.
Although the President didn’t mention any specifics in his speech, there are reports that Wall Street bankers are going back to practices like bundling risky mortgages into securities and peddling them to consumers who don’t understand the risks. In addition, compensation has risen along with profits, as bonuses at some firms are approaching pre-crisis levels. Some banks are even getting into the ultra-high-interest payday loan business. All of which, the President said, shows that some in the financial community have unlearned the lessons of the crisis.
The President said that financial industry’s behavior points up the need for new regulatory powers, including a Consumer Financial Protection Agency, to oversee the markets and make investment transactions more transparent and more understandable for the average investor. Obama also called for increasing the powers of regulatory agencies and barring companies from agency-shopping for the regulator of their choice. In addition, he reminded the Wall Street firms that are recovering that they owe that recovery to the nation’s taxpayers, who are still shouldering the burden of the financial fallout in lost jobs and foreclosed homes, and warned that further bail-outs won’t be available the next time around.