In a speech delivered in New York on Monday, and coinciding with the first anniversary of the collapse of investment bank Lehman Brothers, President Obama said regulation was urgently needed and he cautioned financial industry representatives not to try to block it.
Obama also struck a warning tone when he exhorted bankers from using the recovery to engage in “reckless behavior” that could lead to another financial meltdown, saying taxpayers were getting tired of bailouts.
“It is neither right nor responsible after you’ve recovered with the help of your government to shirk your obligation to the goal of wider recovery, a more stable system and a more broadly shared prosperity,” Obama said, quoted by the Associated Press.
The president wants the financial sector reform bill ready by the end of the year, but industry groups as well as some Republicans have expressed worry about what regulation might bring.
“We must be wary of the reality that – in an attempt to address yesterday’s failures – Congress will put in place regulatory schemes which will fundamentally undermine risk taking,” says Senator Judd Gregg, a New Hampshire Republican.
The collapse of Lehman Brothers was the largest bankruptcy in U.S. history and sent shockwaves through the financial system. It subsequently transpired that a number of financial organizations, including Citibank, Merrill Lynch and AIG, were on the brink of bankruptcy due to their exposure to the subprime mortgage market.
Ultimately, several rounds of multimillion dollar bailouts saved them from following in Lehman’s footsteps, but did not prevent the economy from falling into a deep recession.