Obama to Address Wall Street One Year After Lehman Collapse
President Obama will address Wall Street today at 12:10 p.m. from Federal Hall, in sight of the New York Stock Exchange and the spot on which George Washington was inaugurated at the first U.S. president.
The address comes one year after the massive, scale-tipping collapse of Lehman Brothers, an event that analysts and historians are still hashing out. Lehman did not cause the Great Recession, which began in December 2007, but its failure was the straw on the camel's back that crashed the financial markets, which ended up erasing a good 40 percent from the investments and 401(k)s of millions of Americans.
With the address, Obama is expected to press for financial regulatory reform, the aim of which is to prevent another financial bubble of the sort that caused Lehman to go under. The Post's Brady Dennis outlined the status of such reform this morning, which you can read by clicking here.
Fed Chairman Ben Bernanke and former Treasury secretary Hank Paulson are steadfast in their belief that neither had the authority, through their agencies, to prevent Lehman's collapse and that neither could find a suitable buyer.
They have argued -- as will Obama today -- for a new federal government wind-down authority that would enable the Fed or Treasury to dismantle troubled financial institutions in an orderly way.
Or, as Rep. Barney Frank (D-Mass.), chairman of the House Financial Services committee, said this morning on CNBC, "We need to know how to put [investment] banks to sleep without turmoil."
The FDIC has this authority to take over and wind down failed traditional banks, but nothing similar exists for big financial houses.
However, Bernanke and Paulson have their critics, those who say they hewed too much to the letter of the law in letting Lehman fail and were not proactive enough in seeking new solutions.
Economist and Fed historian Allan Meltzer told me recently that if Bernanke and Paulson had gone to Congress to ask for the special authority to save Lehman, no member of Congress would have refused.
Former Lehman exec Lawrence McDonald, who has written a book on his firm's collapse, said on CNBC moments ago that about half of Lehman's former employees have landed jobs, while many of the other half have found themselves in dire straits.
In his speech today, Obama is expected to outline several proposals:
-- He will hope to win support for financial regulatory reform.
-- He will make the case to give the Fed the authority to be a systemic-risk regulator, which would give it even greater powers over the economy than it has now.
-- He will ask for an FDIC-like wind-down authority for the government to prevent collapses like that of Lehman.
-- He will ask for a consumer protection agency.
-- He will ask for a derivatives clearinghouse to shed some light on the sometimes-mysterious devices.
-- Frank Ahrens
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September 14, 2009; 11:23 AM ET
Categories: The Ticker | Tags: Barney Frank, Ben Bernanke, FDIC, Hank Paulson, Lehman Brothers, Obama
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