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Obama's Misdirected Attack on Wall Street

NEW YORK (TheStreet) -- President Obama's second trip to the Wall Street area over the past year evokes a little bit of classic American literature -- perhaps appropriately so.

Obama
President Obama

"I believe that on the first night I went to Gatsby's house I was one of the few guests who had actually been invited," says Nick, the narrator in The Great Gatsby, F. Scott Fitzgerald's tale of wealth and its pitfalls. "People were not invited -- they went there."

Obama is bringing the battle to New York thursday, heading to a college in Manhattan outside the financial district to garner public support for a rigorous overhaul of the way the financial sector is regulated. Unsurprisingly, Wall Street isn't exactly rolling out the red carpet.

The emerging laws -- still winding their way through Congress -- are sure to be tough on the financial sector. The bill will target large, money-center firms that are considered "too big to fail." It proposes a tidy resolution process in case they do, and forces them to pay a fee to enjoy the benefits of such a status.

Other measures are set to throw a regulatory net on the "shadow financial system" -- financial firms and products that now evade the burden of oversight. The bill is also poised to crack down on compensation practices that have become a political lightning rod.

Obama's team initially proposed the reform package shortly after his inauguration. On his last visit to the area, he came directly to Wall Street's door to tell the banks he meant business. Now, he's taking his message to voters, and with good reason.

The progress of Obama's proposal has been painfully slow, marred by partisan bickering and delayed by Republican intractability, even on measures the party had initially suggested. As the debate carries on, six of the country's largest banks -- JPMorgan Chase (JPM), Bank of America (BAC), Citigroup (C), Wells Fargo (WFC), Goldman Sachs (GS) and Morgan Stanley (MS) -- reported $18.9 billion worth of net income over the past two weeks. Most relied heavily on capital markets activity -- rather than struggling consumer businesses -- to boost the bottom line. They also took advantage of low funding costs, thanks to the Federal Reserve's 0%-0.25% interest rate policy.

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