US President Barack Obama today reiterated his call for comprehensive reforms to the financial system, including a new consumer protection agency that would advocate all financial products and services affecting consumers.
In his weekly radio address to the nation, Obama asked the US Senate to remain strong and resist the pressure of those who wish to preserve the status quo.
"As I have urged over the past year, we need commonsense rules that will our allow markets to function fairly and freely while reining in the worst practices of the financial industry. That's the central lesson of this crisis. And we fail to heed that lesson at our peril," he said.
Obama said it was the country's financial system that started the economic crisis.
"Large banks engaged in reckless financial speculation without regard for the consequences and without tough oversight. Financial firms invented and sold complicated products to escape scrutiny and conceal enormous risks... Some engaged in rampant exploitation of consumers to turn a quick profit no matter who was hurt in the process," he said.
Pointing out that he has long been a vigorous defender of free markets, the President said he believes that the US needs a strong and vibrant financial sector.
"But what we have seen over the past two years is that without reasonable and clear rules to check abuse and protect families, markets don't function freely. In the absence of such rules, our financial markets spun out of control, credit markets froze, and our economy nearly plummeted into a second Great Depression," he said.
"That’s why financial reform is so necessary.
And after months of bipartisan work, Senator Chris Dodd and his committee have offered a strong foundation for reform, in line with the proposal I previously laid out, and in line with the reform bill passed by the House," Obama said.
Obama said it would provide greater scrutiny of large financial firms to prevent any one company from threatening the entire financial system and would update the rules so that complicated financial products like derivatives are no longer bought and sold without oversight.
It would prevent banks from engaging in risky dealings through their own hedge funds while giving shareholders a say on executive salaries and bonuses.
And through new tools to break up failing financial firms, it would help ensure that taxpayers are never again forced to bail out a big bank because it is "too big to fail," he argued.
Obama said these reforms include a new Consumer Financial Protection Agency to prevent predatory loan practices and other abuses to ensure that consumers get clear information about loans and other financial products before they sign on the dotted line.
"For these banking reforms to be complete – for these reforms to meet the measure of the crisis we've just been through – we need a consumer agency to advocate for ordinary Americans and help enforce the rules that protect them," he said.
"That’s why I won’t accept any attempts to undermine the independence of this agency. And I won’t accept efforts to create loopholes for the most egregious abusers of consumers, from payday lenders to auto finance companies to credit card companies," Obama said.
