October 23, 2010 / 10:13 AM / 7 years ago

Mortgage woes show Wall St reform crucial: Obama

<p>A foreclosed home is shown in Chicago June 29, 2010. REUTERS/John Gress</p>

WASHINGTON (Reuters) - President Barack Obama said the home foreclosure crisis underscored the importance of his Wall Street reforms, and he blasted Republicans on Saturday for “beating the drum” to roll back the regulatory overhaul.

“Recently, we’ve seen problems in foreclosure proceedings -- mistakes that have led to disruptions in the housing markets. This is only one more piece of evidence as to why Wall Street reform is so necessary,” Obama said in his weekly radio address, 10 days before November 2 congressional elections in which his fellow Democrats are expected to sustain sharp losses.

The address marked Obama’s most extensive comments on the foreclosure mess since revelations first surfaced of faulty paperwork.

He has been trying to walk a delicate line on the foreclosure issue. The White House believes the problems highlight a contrast with Republicans opponents of the landmark Wall Street reform package the Democratic Congress passed in July.

But Obama has stopped short of backing calls for a nationwide moratorium on home foreclosures -- something the White House fears could worsen the housing crisis.

The financial reform law was aimed at preventing a repeat of the 2007-2008 financial meltdown that set off the worst U.S. recession in generations.

Though analysts see little chance the financial reform law would be fully rolled back, opponents are targeting specific provisions, such as funding for a new consumer watchdog.

Obama said the new watchdog, known as the Consumer Financial Protection Bureau, “will have the authority to guard against unfair practices in mortgage transactions and foreclosures.”


<p>President Barack Obama speaks during a campaign rally in Las Vegas, Nevada, October 22, 2010. REUTERS/Kevin Lamarque</p>

Repeating a theme of recent campaign speeches for Democratic candidates, Obama said Republicans’ opposition to regulatory reform showed they work for special interest groups, not middle-class Americans.

Wall Street reform is one of Obama’s more popular legislative accomplishments, given Americans’ anger over financial sector profits and bonuses while the country wrestles with 9.6 percent unemployment and other effects of a weak economy.

“This was a bill designed to rein in the secret deals and reckless gambling that nearly brought down the financial system,” Obama said.

<p>President Barack Obama shakes hands at a campaign rally in Minneapolis, Minnesota October 23, 2010. Obama is at the end of a four-day, five-state swing to support Democrats in the upcoming election. REUTERS/Kevin Lamarque</p>

“Some in the financial industry were eager to protect a status quo that basically allowed them to play by their own rules. And these interests held common cause with Republican leaders in Washington who were looking to score a political victory in an election year,” he said.

“Top Republicans in Congress are now beating the drum to repeal all of these reforms and consumer protections,” Obama said.

Allegations of faulty foreclosure paperwork and demands banks buy back billions of dollars in mortgages sold to investors have raised fears financial firms face a new wave of difficulties similar to the 2007-2008 crisis.

Critics say the failure to fix the housing finance system in general, and mortgage giants Fannie Mae and Freddie Mac in particular, is a gaping hole in the Wall Street reform law.

Republicans say they don’t oppose financial regulation but say the bill should have been structured differently.

“Everyone wants to hold Wall Street accountable and make sure that the irresponsibility that led to the terrifying crisis of 2008 never, ever happens again, but the law that Washington Democrats passed doesn’t do that,” said Michael Steel, spokesman for House of Representatives Republican leader John Boehner.

Editing by Jerry Norton and Stacey Joyce

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