Weekly Address: President Obama Urges Action on Financial Reform

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It would provide greater scrutiny of large financial firms to prevent any one company from threatening the entire financial system – and it 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 finally 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.”

Finally, 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.  Because this financial crisis wasn’t just the result of decisions made by large financial firms; it was also the result of decisions made by ordinary Americans to open credit cards and take on mortgages.  And while there were many who took out loans they knew they couldn’t afford, there were also millions of people who signed contracts they didn’t fully understand offered by lenders who didn’t always tell the truth.

This is in part because the job of protecting consumers is spread across seven different federal agencies, none of which has the interests of ordinary Americans as its principal concern.  This diffusion of responsibility has made it easier for credit card companies to lure customers with attractive offers then punish them in the fine print; for payday lenders and others who charge outrageous interest to operate without much oversight; and for mortgage brokers to entice homebuyers with low initial rates only to trap them with ballooning payments down the 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.  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. 

Unsurprisingly, this proposal has been a source of contention with financial firms who like things just the way they are.  In fact, the Republican leader in the House reportedly met with a top executive of one of America’s largest banks and made thwarting reform a key part of his party’s pitch for campaign contributions.  And this week, the allies of banks and consumer finance companies launched a multimillion dollar ad campaign to fight against the proposal.  You might call this ‘air support’ for the army of lobbyists already arm twisting members of the committee to reject these reforms and block this consumer agency.  Perhaps that’s why, after months of working with Democrats, Republicans walked away from this proposal.  I regret that and urge them to reconsider.

The fact is, it’s now been well over a year since the near collapse of the entire financial system – a crisis that helped wipe out more than 8 million jobs and that continues to exact a terrible toll throughout our economy.  Yet today the very same system that allowed this turmoil remains in place.  No one disputes that.  No one denies that reform is needed.  So the question we have to answer is very simple: will we learn from this crisis, or will we condemn ourselves to repeat it?  That’s what’s at stake.

I urge those in the Senate who support these reforms to remain strong, to resist the pressure from those who would preserve the status quo, to stand up for their constituents and our country.   And I promise to use every tool at my disposal to see these reforms enacted: to ensure that the bill I sign into law reflects not the special interests of Wall Street, but the best interests of the American people.

Thank you.