President Obama introduces financial reform

June 17, 2009 8:20:41 PM PDT
There are sweeping new proposals for reforming the nation's financial system. President Obama outlined the overhaul, calling it an attempt to find a middle ground between the benefits and excesses of capitalism.

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The president is calling them the new rules of the road. It is a regulatory system that will save the financial industry from itself. The President began by saying he has faith in the free market.

"I believe that jobs are best created not by government but by businesses and entrepreneurs who are willing to take a risk on a good idea," said President Obama.

But he added the rules and regulations that were put into place during the Great Depression are no longer able to keep up with the speed scope and sophistication of the 21st Century global economy.

"With the reforms we are proposing today we seek to put in place rules that will allow our markets to promote innovation while discouraging abuse," said President Obama.

Among the changes is a new financial oversight council to monitor institutions considered too big to fail, new powers for the Federal Reserve to save firms before they collapse, and a new consumer financial protection agency focused on shielding borrowers from abusive business practices on credit cards and loans, including mortgages. Former U.C. Berkeley economist Christina Romer, Ph.D., heads the president's council of economic advisors.

"I think the key thing to say is that the status quo is not an option. One of the things that we've seen from the crisis that we've been going through is that there were gaps, there were failures in our regulatory system and we need to make it better," said Romer.

California Senator Dianne Feinstein (D) of California called it a giant step in the right direction, but House Minority Leader John Boehner (R) signaled Republican opposition.

"And I just think that the government involvement in the financial industry is going to be too big of a foot on an industry that's already having problems," said Rep. Boehner.

However, ABC 7 political analyst Bruce Cain, Ph.D., says Republicans will have a tough sell with an argument for less regulation.

"It is clear from the polls that people want some higher degree of regulation. What that translates into in terms of specific agencies or specific authority is much less clear," said Cain.

Professor Cain points out the details are complex and the banks and financial institutions will push back, just not in public.

"And the question is will Obama get enough support from the public to fight the details, not the concept, but the details of this regulatory plan that he set out," said Cain.

San Francisco-based Wells Fargo issued a statement describing current regulations as "...a patchwork of regulation that is simply outmoded and Wells Fargo has long advocated for reform."

And the president will almost certainly get reform, but as Bruce Cain cautioned watch for the details. They've yet to be hammered out.

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