http://www.bloomberg.com/apps/news?pid=20601087&sid=aOdmmSL.Tu1MObama Vows Wall Street Risk Regulation, Sees 10% Unemployment
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By Rich Miller and Julianna Goldman
June 16 (Bloomberg) -- President Barack Obama chided Wall Street financiers for forgetting how close the U.S. economy came to collapsing and predicted that the nation’s unemployment rate would rise to 10 percent by the end of the year.
“Wall Street seems to maybe have a shorter memory about how close we were to the abyss than I would have expected,” Obama said, referring to criticism of the government’s growing role in the economy and markets.
“All we’re doing is cleaning up after the mess that was made.”In an interview with Bloomberg News on the eve of the release of his plans to revamp regulation of financial markets,
Obama voiced confidence the economy would recover soon while warning that robust growth was needed if the U.S. is to rein in its budget deficit without raising taxes on most Americans.“You’re starting to see the engines of the economy turn,” Obama said. Still, he said, “It’s going to take a long time” for a full-fledged recovery as households work off the debt accumulated during the real estate boom.
The jobless rate will continue to climb from its current 25-year high of 9.4 percent as employers are slow to take on new workers, the president said. “Jobs are a lagging indicator,” he said, while acknowledging he didn’t have “a crystal ball” to predict when the unemployment rate will start to decline.Praise for Bernanke
Obama, 47, gave high marks to Federal Reserve Chairman Ben S. Bernanke for his role in fighting the financial crisis. Bernanke “has done an extraordinary job under extraordinary circumstances,” the president said during the interview in the East Room of the White House. He declined to say whether he would nominate Bernanke for another four-year term when his tenure runs out in January.
While expressing confidence in the long-term prospects for the economy, the president stressed the necessity of making tough reforms, including overhauling the health-care system, to generate the strong growth needed to reduce the budget deficit.
He left open the possibility he would have to raise taxes on most Americans to decrease the deficit if growth were weak. He also indicated he might tax the most-expensive employer- provided benefits to help pay for his health-care overhaul. Both would reverse pledges he made during the campaign.
“If we are growing at a robust rate, then we can pay for the government that we need without having to raise taxes,” Obama said. “If we’ve got anemic growth, if we don’t have a strategy for recovery without bubbles, which is essentially what we’ve had over the last couple of recovery cycles, then we’re going to continue to have problems.”
Campaign Pledge
The president has repeatedly said he would keep his campaign pledge to cut taxes for 95 percent of working Americans while rolling back tax breaks for households making more than $250,000 a year.Obama also stood firmly during his campaign against taxing employer-provided health-care benefits, a proposal gaining traction among Senate Democrats to pay for a $1 trillion health-care overhaul.
He said he preferred other means of funding the legislation, including reducing itemized deductions for the wealthiest Americans and focusing on cutting health-care costs.
Still, he said, “Congress is having a vigorous debate on the Hill, and I don’t want to predetermine the best way to do this.”
Waiting on Congress
“I’ve already put forward what I think is the best way, but let me see what comes out of the Hill, and we’ll have that debate then,” Obama said.
The president tomorrow will unveil his proposal for revamping financial regulation, an effort likely to result in the most sweeping overhaul since the 1930s. Many of the changes must be approved by Congress, where jurisdictional and ideological clashes may alter the shape of final legislation. Obama wants to sign the law by year-end.
Crafted by Treasury Secretary Timothy Geithner and National Economic Council Director Lawrence Summers, Obama’s plan would put the Federal Reserve in charge of regulating companies whose collapse could damage the entire financial system. It would also create a new agency for overseeing consumer financial products, such as mortgages and credit cards.
“We now need some sensible rules of the road so that people aren’t taking exorbitant risks,” Obama said.
Relying on Market
The president also said he’d like the government, which lent billions of dollars to shore up banks, insurers and companies, to get out of the economy when it can.
“As soon as this economy has stabilized, we want the market to do what it does best, and that is produce jobs, invest,” he said.
The president brushed aside concerns that the recent rise in Treasury bond yields would stifle a budding economic recovery by pushing up borrowing costs for homebuyers. The 10- year Treasury note yield has increased 0.57 percentage point since May 14.
Obama said Treasury yields are rising because investors have grown “more confident that we may have avoided the very worst scenarios” for the economy and financial markets and are putting their money into investments with higher returns.
The Standard & Poor’s 500 Index has gained 15 percent since Obama’s Jan. 20 inauguration, compared with a decline of 9.6 percent in the first five months of George W. Bush’s administration and an increase of 3 percent under Bill Clinton. Corporate bonds have returned 11.5 percent, according to Merrill Lynch & Co. index data, and companies have sold about $680 billion of debt, a record pace, Bloomberg data show.
The president said his plan to re-regulate the financial system would include a “systemic regulator” to oversee the “entire financial system” and catch risky activity “before the crisis occurs.”
“Right now, you’ve got an entire shadow system of enormous risk,” Obama said.
To contact the reporters on this story: Rich Miller in Washington at rmiller28@bloomberg.net; Julianna Goldman in Washington at jgoldman6@bloomberg.net
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Some real good stuff in there. Read it all and take it all in, gentlemen. Lots of reversals and hanging on to campaign pledges long broken. It's almost funny when you read his bullshit and compare it to what he has been saying.
U.E. will go up to 10%....
He doesn't have a "crystal ball" to predict when unemployment will begin to fall. This is funny because he had a crystal ball when he had to sell us the Porkulus Bill......
