WASHINGTON (CN) - Speaking a few blocks from Wall Street on Thursday, President Obama outlined his plan for financial reform and asked Wall Street lobbyists to call off their "furious efforts" to block passage of financial overhaul legislation.
"I want to urge you to join us, instead of fighting us in this effort," Obama said in his address at Cooper Union college in lower Manhattan, "because not only is it in the interest of your industry, but in the interest of your country."
"There is no dividing line between Main Street and Wall Street," Obama said. "We will rise or we will fall together."
Obama rejected claims made recently by Republican leaders that his plan facilitated rather than prevented future taxpayer bailouts as "not factually accurate." Democrats have accused Republicans of wanting to maintain the status quo on Wall Street. "A vote for reform is a vote to put a stop to taxpayer-funded bailouts. That's the truth," Obama said.
The president outlined his four-faceted approach to financial reform, which includes the ability to shut down large firms in trouble, a transparent derivatives market, added consumer protections and greater shareholder power.
Obama called for a way to wind down financial firms that "so no one company can bring down the economy." Currently, Obama said, there is no way to "contain the failure of a Lehman Brothers." Democrats have been touting the bill's ability to end the era of "too big to fail."
During a hearing earlier this week on the Lehman Brothers bankruptcy, Federal Reserve Chair Ben Bernanke prefaced Obama's push for greater regulatory powers. When asked what he would want to do in another Lehman Brothers situation, he said, "I want to be able to break it up and sell off pieces."
Obama's plan also calls for new transparency for financial markets, some of which were, leading up to the crisis, "so opaque that the people inside the firms did not understand them," Obama said. "The problem is, these markets operated in the shadow of our economy," Obama said.
The reference was to the derivatives market, which involves types of financial instruments whose values are dependent on the worth of underlying securities. Obama called for overhaul of a system so that "these types of transactions take place in the light of day."
On Wednesday, the Senate Agricultural Committee voted 13-8 to pass a measure that would require big banks to make derivatives trading more public. Obama said he was "encouraged" that Sen. Charles Grassley, R-Iowa, voted with 12 Democrats to pass the bill. "That's a good sign," he said.
Obama also said his plan includes the "strongest consumer protections ever." He said the economic collapse was caused not only by risky decisions made by Wall Street firms, but also by "decisions made across kitchen tables in America," as people took out mortgages and car loans they could not afford. In many cases, Obama said, American consumers were "duped" by fine print, and said his proposed legislation provides consumers with more information.
The president added that these protections would reform the way companies do business. "Instead of competing to offer confusing products, they will compete to offer better products," he said. "Unless your business consists of bilking people, there is little to fear from these new rules."
He explained that the overhaul gives shareholders a "say on pay," assigning them a voice on executive salaries and bonuses. He said the enormous bonuses paid to the heads of companies who made risky decisions that threatened the entire financial system "offends our fundamental values."
"Let's face it, we also need change in Washington," Obama said, blaming "battalions" of lobbyists on Capitol Hill for causing bipartisan cooperation on financial reform to "buckle."
The Senate will begin debate on the bill on Monday, according to Senate Majority Leader Harry Reid, D-Nev. Obama has stated that he wants to sign the bill by the second anniversary of the economic collapse. White House spokesman Robert Gibbs said the Senate is "on the cusp" of passing the legislation.
A similar bill passed the House in December.
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