President Barack Obama said Wednesday that financial regulatory overhaul legislation must put an end to the “too-big-to-fail” practice in which government bails out failing large banks and other major financial services companies.
Mr. Obama “would not accept a bill that did not pass that test,” according to a statement by Robert Gibbs, presidential press secretary, following a meeting Wednesday with Mr. Obama and Democratic and Republican congressional leaders on financial regulatory reform.
“I am actually confident that we can work out an effective bipartisan package that assures that we never have ‘too big to fail' again,” stopping taxpayer-financed rescues, Mr. Obama said at the meeting, according to a White House transcript.
“I think all of us recognize that we cannot have a circumstance in which a meltdown in the financial sector once again puts the entire economy in peril, and that if there's one lesson that we've learned it's that an unfettered market where people are taking huge risks and expecting taxpayers to bail them out when things go sour is simply not acceptable,” Mr. Obama said in the transcript.
“I am absolutely confident that the bill that emerges is going to be a bill that prevents bailouts,” he said. “That's the goal.”
Mr. Obama expressed confidence that the reform bill that ultimately passes Congress would “have a strong mechanism to regulate derivatives, something that we have not had, a derivatives market that is in the shadow economy but is enormously powerful, enormously risky — we want to get that into daylight so that regulators and ordinary Americans know what's going on when it comes to this huge segment of the financial system,” according to the transcript.
Mr. Gibbs said in his statement that Mr. Obama “specifically pushed attendees on derivatives and the recent effort by the financial industry to pressure the Senate to weaken oversight over the same financial products that led to the near collapse of AIG, warning that the problems of the future will rest on the steps we take to address derivatives now,” Mr. Gibbs said in his statement.
Mr. Obama “reminded attendees that we proposed a bill almost a year ago and almost two years have passed since the financial industry nearly hit rock bottom, and that Wall Street accountability is long overdue,” Mr. Gibbs said.
The bill, the Restoring American Financial Stability Act of 2010 is pending in the full Senate after it was approved March 22 by the Senate Committee on Banking, Housing and Urban Affairs. Sponsored by committee Chairman Christopher J. Dodd, D-Conn., the bill's key elements include ending government bailouts of banks and bringing more transparency to derivatives.
The House on Dec. 11 passed the Wall Street Reform and Consumer Protection Act, sponsored by Rep. Barney Frank, D-Mass., and chairman of the House Financial Services Committee. That bill is pending in the Senate Committee on Banking, Housing and Urban Affairs, to which it was referred Jan. 20.
Participants at the meeting with the president Wednesday included Vice President Joe Biden, Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi, House Majority Leader Steny Hoyer, Senate Minority Leader Mitch McConnell, House Minority Leader John Boehner, White House Chief of Staff Rahm Emanuel, and Director of the National Economic Council Lawrence Summers.