During his speech in New York today, April 22, President Obama pushed Wall Street to support the financial services reform package. Obama said that “I am here because I believe that these reforms are, in the end, not only in the best interest of our country, but in the best interest of our financial sector.” Obama went on to say that “We need to enact updated, common sense reforms to ensure accountability on Wall Street.”
Obama noted that a year ago, the nation was losing 750,000 jobs per month, but today, he said, “we are adding jobs…and the economy is growing fast.” The U.S. has experienced the “fastest turnaround in growth in three decades, but there’s more work to do,” he said, adding that the nation “cannot have the same weaknesses as before.”.One of the most significant contributors to the financial crisis, he said, was “born of the failure of responsibility–from Wall Street all the way to Washington–that brought down many of the world’s largest financial firms and nearly dragged our economy into a second Great Depression.”
Obama then laid out four areas that financial reform would tackle. First, Senator Christopher Dodd’s (D-Connecticut’s) financial services reform bill, Obama said, would “create what we did not have before, and that is a way to protect the financial system and the broader economy and American taxpayers in the event that a large financial firm begins to fail.” The bill would also enact what’s known as the Volcker Rule, he said, which “places some limits on the size of banks and the kinds of risks that banking institutions can take.”
Second, reform “would bring new transparency to many financial markets,” Obama said. Third, this reform plan, he continued, “would enact the strongest consumer financial protections ever….With a dedicated agency setting ground rules and looking out for ordinary people in our financial system, we will empower consumers with clear and concise information when they’re making financial decisions.” And fourth, these Wall Street reforms “will give shareholders new power in the financial system. They will get what we call a say on pay, a voice with respect to the salaries and bonuses awarded to top executives. And the SEC will have the authority to give shareholders more say in corporate elections, so that investors and pension holders have a stronger role in determining who manages the company in which they’ve placed their savings,” Obama said.
Dodd’s financial services reform bill may likely be debated on the full Senate floor early next week. The Congressional Budget Office (CBO) released on April 21 its estimates on how enacting Dodd’s Restoring American Financial Stability Act (S.3217) would impact the Federal budget. CBO estimates that enacting S. 3217 would increase revenues by $32.4 billion over the 2011-2015 period and by $75.4 billion over the 2011-2020 period and increase direct spending by $25.8 billion and $54.4 billion, respectively, over the same periods. In total, CBO says it “estimates those changes would decrease budget deficits by $6.6 billion over the 2011-2015 period and by $21.0 billion over the 2011-2020 period.” In addition, “CBO estimates that implementing the bill would increase spending subject to appropriation by $4.6 billion over the 2011-2015 period and $13.2 billion over the 2011-2020 period. Because enacting the legislation would affect direct spending and revenues, pay-as-you-go procedures apply.”
The Senate Agriculture Committee voted yesterday, April 21, to approve derivatives reform legislation. U.S. Treasury Secretary Timothy Geithner said in a statement that the bipartisan bill passed by the Agriculture Committee “will bring derivatives trading out of the dark, provide strong oversight of market participants, and combat fraud, abuse and manipulation.” The Agriculture bill is expected to be melded into Dodd’s reform package, which passed the Senate Banking Committee in March.