Obama calls for new regulations
Financial sector needs stability
WASHINGTON - President Obama said an overhaul of the US financial regulatory system is necessary to prevent another market crisis and provide investors and companies with "rules of the road."
The president said yesterday he's asked his economic team to develop recommendations for a new regulatory regime so his administration and Congress can craft legislation in the coming weeks. New rules should protect consumers and investors without hindering financial institutions, he said.
"While free markets are the key to our progress, they do not give us free license to take whatever we can get, however we can get it," Obama said.
Obama outlined several broad principles intended to guide the work after meeting with Treasury Secretary Timothy Geithner; House Financial Services Committee chairman Barney Frank, a Massachusetts Democrat; the committee's ranking Republican, Representative Spencer Bachus of Alabama; Senate Banking Committee chairman Christopher Dodd, a Connecticut Democrat; and the senior Republican on the panel, Senator Richard Shelby of Alabama.
Also yesterday, Federal Reserve chairman Ben Bernanke said while the US government may take "substantial" stakes in Citigroup Inc., and other banks, it doesn't plan a full-scale nationalization that wipes out stockholders' equity.
Nationalization is when the government "seizes" a company, "zeroes out the shareholders and begins to manage and run the bank, and we don't plan anything like that," Bernanke told lawmakers in Washington yesterday.
Bernanke, speaking at a House Financial Services Committee hearing, continued to draw a distinction between nationalization and a government minority interest with strict oversight and supervision. He also said some banks won't need new injections of government funds after regulators complete so-called stress tests to determine whether they can weather a deeper economic slump.
The overhaul of rules and regulations affecting financial markets has been an integral part of Obama's strategy for dealing with the deepest US economic crisis since the Great Depression.
He has set a goal of finishing a proposal before the Group of 20 industrialized and developing nations meet in April in London.