NEW YORK (TheStreet) -- President Obama took his message to Wall Street on Monday, telling banks that they can expect his regulatory reform proposals to pass and that they should cooperate with his objectives out of duty to taxpayers.
The audience responded warmly, but some attendees and locals are certainly gearing up for a fight.
"The reforms I have laid out will pass, and these rules will become law," Obama said Monday afternoon, at Federal Hall, just steps from the New York Stock Exchange.
The president's appearance comes nearly a year after regulators, some of whom remain in his administration, allowed Lehman Brothers to fail. Obama used the anniversary as an opportunity to push his agenda of hands-on regulation, with tighter capital rules, more prudent risk management, scaled-back executive pay and more transparency in the market for derivatives.
Obama also touched on the proposal that stands to get the most industry push-back, a consumer-protection agency that oversees the marketing and sales of financial products. He criticized banks for providing consumers with documents that are "designed to be unintelligible."
Wall Street has fought most of those ideas, adopted some of its own accord and found routes around others.
Banks already have begun adjusting pay packages to avoid scrutiny by, for instance, raising the base salary of executives rather than giving stock and performance-based awards, as bonuses have become a thorny issue. Now in cash-preservation mode, they are already gearing up for the implementation of stronger capital rules that the G-20 group of nations may adopt within a few years.
But while banks are cooperating out of necessity -- and are being sued or criticized for their marketing of all sorts of products, from mortgages and credit cards to money market funds and auction-rate securities -- they would rather handle the issues on their own. Industry groups are pushing back against the consumer protection agency idea, saying it unnecessarily duplicates the efforts of agencies that already exist, and makes it more expensive and tougher for firms to operate. Those groups represent banks that finance the campaigns of lawmakers on financial committees, meaning any proposal which passes likely will be watered down.
How times have changed.
The onlookers stood in near silence, as quiet as a gallery at a golf tournament. Two placards rose above their heads. One said, "Wall Street Reform First" and the other: "Laid Off Today ... 9:30 ... Hire Me."
"The task in hand now is saving the world from Wall Street; health care reform can wait," he said.
"Here is what I want to emphasize today: Normalcy cannot lead to complacency," Obama warned. He later added, "I want everybody here to hear my words: We will not go back to reckless behavior and unchecked excess ... Wall Street can't go back to taking risks without consequences and expect that taxpayers will be there to break their fall."
But when it comes to repairing the damage, past crises have shown that the market eventually finds a way around rules that are passed. Congress adapts to a new financial reality, a few steps behind.
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