- James I. Clark III
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One Year After Financial Meltdown, Obama Counsels Caution
On the first anniversary of the collapse of Lehman Brothers and the onset of the global financial crisis, President Barack Obama used a Wall Street speech to call for stringent new regulation of United States markets. After Lehman’s collapse, the American government infused billions of dollars into the financial system and took major stakes in Wall Street’s most famous names. Although this action stabilized the system, it could not forestall a shrinking economy or the highest unemployment rate in 26 years.
“We can be confident that the storms of the past two years are beginning to break,” he said. As the economy begins a “return to normalcy,” Obama said, “normalcy cannot lead to complacency.”
Lobbyists, lawmakers and even regulators so far have opposed proposals to more closely monitor the financial system. The five biggest banks – Goldman Sachs, JP Morgan, Wells Fargo, Citigroup and Bank of America – posted second-quarter 2009 profits totaling $13 billion. That is more than twice their profits in the second quarter of 2008 and nearly two-thirds as much as the $20.7 billion they earned in the same timeframe two years ago – a time when the economy was considered strong.
Connecticut Senator Christopher Dodd, chairman of the Senate Banking Committee, is the point man for formulating new rules. President Obama wants stricter capital requirements for banks to prevent them from purchasing exotic financial products without keeping adequate cash on hand. It was precisely this type of behavior that caused last year’s financial crisis.