Read Full Article: http://www.reuters.com

Obama tries to reinvigorate Wall Street reform

By Caren Bohan

WASHINGTON (Reuters) – President Barack Obama will try on Monday to revive a stalled push for stricter oversight of Wall Street, using the anniversary of Lehman Brothers’ collapse to argue for sweeping regulatory changes.

Obama’s wide-ranging economic address in New York will also discuss plans to unwind the government’s involvement in the financial sector and call upon Wall Street firms to take responsibility and avoid reckless behavior. He is to speak at 12:10 p.m. EDT.

Gaps in the regulation of U.S. banks and capital markets have been blamed for the subprime mortgage crisis and global financial chaos triggered after Lehman filed for bankruptcy on September 15, 2008.

Obama and other backers of a financial overhaul say new rules are crucial to heading off another catastrophe.

But as Obama prepares to deliver the speech at the historic Federal Hall in the heart of Wall Street, the regulatory reform effort has hit resistance in Congress, casting doubt on Obama’s goal of enacting the legislation by year end.

… Continued

FED MAY GET GREATER POWERS

Obama would give the Federal Reserve new powers to monitor big financial firms that could pose a “systemic risk” to the economy. He would also set up a process for the federal government to seize and liquidate troubled financial firms and create a new consumer watchdog agency for products like mortgages, car loans and credit cards.

Advocates for financial change would like to see the president take a more hands-on role in the legislation.

“It’s up to the administration and the congressional leadership to breathe some life into what’s left of the reform concept,” former Fed Vice Chairman Alan Blinder wrote in a column in the New York Times. Blinder said the reform effort’s pulse now seemed “faint.”

Senior White House adviser Lawrence Summers told reporters Obama was committed to doing what it takes to help the legislation advance. But it will likely take more than a high-profile speech to get Washington to agree on a plan.

Blinder and other supporters of tighter rules worry lawmakers may find it more politically expedient to pass a “reform lite” package of measures that would fail to safeguard against another crisis.

While lawmakers tussle over the shape of reforms, there are also differences within the administration. The turf battles prompted Geithner in a meeting last month to scold regulators and urge them to get behind Obama’s plan.

Lehman was once the fourth-largest U.S. investment bank and its bankruptcy filing was the largest in U.S. history.

The firm’s demise and the near-collapse of insurance giant American International Group Inc sent shockwaves throughout the global financial system.

Obama has long favored tighter oversight of U.S. financial markets and made regulatory reform one of the platforms of his presidential candidacy.

White House aides are mindful of the risk that the zeal to revamp regulations may wane as the economy improves and memories recede of last fall’s financial turmoil.

“I think it is just crucial not to lose this window,” White House economist Christina Romer said.

(Writing by Caren Bohan; additional reporting by Jeff Mason; editing by Todd Eastham)