WASHINGTON (Reuters) – The Obama administration is launching a broad push for action on financial regulatory reform, returning to a key legislative priority even as the debate over healthcare consumes the U.S. Congress.
President Barack Obama's speech in New York on Monday, a year after the collapse of Lehman Brothers led to a worldwide financial crisis, will push for further measures to safeguard the financial system, officials said.
The president has put most of his domestic policy focus on the healthcare debate in recent months, drawing criticism from some who believed the regulatory reforms he proposed earlier this year were being shunted to the background.
Administration officials sought to counter that impression and indicated the Lehman anniversary would mark a roll-out of a new push to achieve reform this year.
"We believe that this is the year, after what has happened, to overhaul the system of financial regulation and put in place a structure that can respond to the contemporary challenges," Obama's top economic adviser, Larry Summers, told reporters.
The reform would "lay a basis for the kind of recovery and economic expansion that the president is seeking to create," Summers said, adding lawmakers could work on the measures simultaneously while hammering out a healthcare deal.
The ambitious plan to overhaul U.S. financial regulation is bogged down in Congress. Proposed changes call for tighter regulation of banks and capital markets to better protect consumers.
Obama will focus his speech on the need to strengthen the system to avoid another economic collapse, spokesman Robert Gibbs told reporters.
"The speech on Monday will focus on the need to take the next series of steps on financial regulatory reform to ensure what happened a year ago ... doesn't happen again and cause the type of havoc that we've seen in our economy," Gibbs said.
The collapse of Lehman last year accelerated Obama's race for the presidency against Republican Senator John McCain. The Democrat, who made financial regulatory reform a key platform of his candidacy, was seen as having a cool, pragmatic reaction to the country's economic woes.
Lehman, once the fourth-largest U.S. investment bank, filed for bankruptcy protection on September 15, 2008, in the largest U.S. bankruptcy filing in history.
WINDOW FOR REFORM
Joseph Brusuelas, an economist with Moody's Economy.com, said on Friday international regulatory reform needed to happen faster, saying a system had not been put into place to make sure banks were not too big to fail.
"The slow but steady progress made by the G20 regarding basic capital adequacy standards will hopefully bear fruit and prevent banks and nonbank institutions from engaging in international regulatory arbitrage," he wrote in a note to clients. "This needs to be done quickly."
Obama administration officials agree.
Summers said leaders of the G20 group of leading industrial and developing countries would discuss the issue of capital adequacy of financial firms at a summit in Pittsburgh later this month and he emphasized his view that financial institutions should not be able to choose their regulators or become too big to fail.
Christina Romer, who chairs the White House Council of Economic Advisers, said the administration saw regulatory reform as a top priority.
"I think it is just crucial not to lose this window," she told Reuters Television in an interview, noting the possibility an improving economy could blunt zeal for reform.
"Now that we are starting to see a renewed sense of confidence, we don't want to lose sight of what we've been through," she said.
Summers said Obama was concerned lobbyists could water down the reforms -- a risk he said applied to lots of legislation.
Summers also said the United States was shifting focus to sustained economic recovery rather than rescue and noted that unemployment levels -- which the administration expects to peak at 10 percent -- would remain "unacceptably high" for a number of years.