Obama: Wall Street complacency warning

by Jim Puzzanghera and Walter Hamilton

President Obama, in a speech today on the anniversary of the start of the financial crisis, said "the storms of the past two years are beginning to break," but warned Wall Street that "normalcy cannot lead to complacency."

Obama said some in the financial industry already are forgetting the lessons of the crisis, which was triggered when legendary investment bank Lehman Bros. collapsed into bankruptcy a year ago today. That failure helped create a market panic that turned the recession that began in late 2007 into the worse economic downturn since the Great Depression.

"Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them. They do so not just at their own peril, but at our nation's," Obama said in the prepared text of his midday speech at Federal Hall in New York City.

"So I want them to hear my words: We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall."

Obama touted the recent signs that the recession might be ending, saying his administration built on the emergency actions of the Bush administration and Congress last fall to help turn around the crisis. And he noted that after sending billions of taxpayer dollars into the financial system, "we are finally beginning to see money flowing back to the taxpayers" in the form of $70 billion in bailout money repaid by several large banks, at a 17% profit to the government.

But in sharply worded comments, Obama said all that work would be wasted if Congress does not pass his overhaul of financial regulations to prevent a repeat of the crisis.

"That's why we need strong rules of the road to guard against the kind of systemic risks we have seen. And we have a responsibility to write and enforce these rules to protect consumers of financial products, taxpayers and our economy as a whole," Obama said.

"Yes, they must be developed in a way that does not stifle innovation and enterprise. And we want to work with the financial industry to achieve that end. But the old ways that led to this crisis cannot stand. And to the extent that some have so readily returned to them underscores the need for change and change now. History cannot be allowed to repeat itself."

Obama pressed Congress to approve the regulatory overhaul this year, but also said Americans, including those who work on Wall Street, must change the behavior that helped caused the crisis.

"It was a failure of responsibility that allowed Washington to become a place where problems -- including structural problems in our financial system -- were ignored rather than solved," Obama said. "It was a failure of responsibility that led homebuyers and derivative traders alike to take reckless risks they couldn't afford. It was a collective failure of responsibility in Washington, on Wall Street and across America that led to the near-collapse of our financial system one year ago."

Among those attending the Wall Street speech were Obama's top economic advisors, including Treasury Secretary Timothy F. Geithner and White House Council of Economic Advisors Chairwoman Christina Romer. Rep. Barney Frank, (D-Mass.), who as chairman of the House Financial Services Committee will play a major role in trying to get regulatory overhaul legislation through Congress, also was scheduled to attend.

The audience also included about 130 Wall Street executives and consumer advocates. Among those expected to attend were former Treasury Secretary Roger Altman, now chief executive of Evercore Partners, and executives from bailout recipients Bank of America, Goldman Sachs and Morgan Stanley.