Obama sees 'glimmers of hope' - and new rules for Wall Street
As he addressed the nation from the campus of Georgetown University, Mr. Obama said the combination of initiatives by his administration -- including the passage of his Recovery Act, implementation of the bank recapitalization program, consumers taking advantage of incentives in the housing bill, his management of the auto industry crisis and agreements he worked on with leaders at the recent G20 Economic Summit in Europe -- have combined to slow the nation's economic decline and get credit markets moving again.
"By no means are we out of the woods just yet," Mr. Obama said. "But from where we stand, for the first time, we are beginning to see glimmers of hope."
Mr. Obama returned to the optimistic and inspirational tone from his campaign as he laid out a "new foundation for growth and prosperity" that he said would be built on "five pillars that will grow our economy and make this new century another American century."
The "five pillars" for growth he laid out include new rules for Wall Street; investments in education that will increase the skill and competitiveness of the workforce; investments in renewable energy and technology that will create new jobs and industries; investments in health care that will cut costs for families and businesses; and savings in the federal budget that will decrease the debt for future generations.
It is the first pillar -- the new rules for Wall Street -- that are likely to generate the greatest debate. Mr. Obama's remarks leave him open to critics who fear the President may be anti-Wall Street. During his speech, he tied the subprime mortgage mess and the subsequent credit crunch to Wall Street's reckless behavior in an unchecked pursuit of profits.
"It is time to lay down tough new rules of the road for Wall Street to ensure that we never find ourselves here again," Mr. Obama said. "Rules that punish short-cuts and abuse. Rules that tie someone's pay to their actual job performance. Rules that protect typical American families when they buy a home, get a credit card or invest in a 401(k). We have already begun to work with Congress to shape this new regulatory framework -- and I expect a bill to arrive on my desk for signature before the year is out."
Mr. Obama also asked for more sweeping authority to intervene in financial institutions like AIG before they are on the verge of collapse, similar to bankruptcy courts, "so that we can restructure these businesses in an orderly way that does not induce panic."
Some on Wall Street appeared to panic at that suggestion. Shortly after the President's speech, the Dow Jones Industrial average was down more than 70 points, dropping from 7978 to 7900, before recovering somewhat in the late afternoon.
Watch how markets react as Congress debates possible regulatory changes for the financial services industry in weeks to come.