December 7, 2008 / 8:18 PM / 10 years ago

Obama vows strong new financial regulations

CHICAGO (Reuters) - U.S. President-elect Barack Obama said on Sunday he would put strong financial regulation at the center of his economic recovery program to force more accountability on the banking industry.

US President-elect Barack Obama speaks as he presents his choices for his newly formed Economic Recovery Advisory Board during a news conference in Chicago November 26, 2008. REUTERS/John Gress

Obama again warned that the U.S. economic crisis, which saw the country lose more than half a million jobs in November alone, would worsen before it gets better.

He was speaking on a day in which he announced that retired Army chief of staff Gen. Eric Shinseki, who famously clashed with the Bush administration over the number of troops needed in Iraq, would be the next secretary of veteran affairs.

As secretary, one of Shinseki’s main tasks will be to ensure proper treatment for tens of thousands of soldiers wounded in the Iraq and Afghanistan wars, Obama said.

But the president-elect said he was also concerned about the plight of millions of Americans trying to make ends meet in the midst of a painful recession.

Speaking at a news conference in Chicago, he said he was confident that if the right steps were taken in the coming months to get the economy back on track, “we can emerge leaner, meaner and ultimately more competitive and more prosperous”.

Obama, who takes office on January 20, began outlining his economic recovery plan on Saturday, saying he aims to create at least 2.5 million new jobs by 2011 and launch the largest U.S. infrastructure investment since the 1950s.

On Sunday he did not put a price tag on the plan, which analysts say could cost at least $500 billion. But he acknowledged the costs would be substantial and would hike the budget deficit at least in the short term.

“We’ve got to provide a blood infusion to the patient right now to make sure the patient is stabilized,” Obama said in a taped appearance on NBC’s “Meet the Press” television show.

“We can’t worry short term about the deficit ... We’ve got to make sure the economic stimulus plan is large enough to get the economy moving,” he said.


A central element of his economic stimulus plan would be a strong set of financial regulations to encourage banks, rating agencies and mortgage brokers to act more responsibly and to ensure they were held accountable for their actions, he said.

“We’ve got to have transparency, openness, fair dealing in our financial markets and that’s an area where I think over the last eight years we’ve fallen short.”

Obama was disappointed that U.S. moves to avert a deeper crisis have so far done little to help average homeowners, and said he still regarded a possible moratorium on home foreclosures as an important policy tool.

Other options, such as encouraging banks to renegotiate mortgage terms with cash-strapped homeowners, could also help to strengthen the financial system, he said.

“Moving forward we have to have a housing component to any actions that we take. If we are only dealing with Wall Street and we’re not dealing with Main Street, then we’re only handling one half of the problem.”

He said that he supported efforts to help the struggling U.S. auto industry — the target of a $15 billion-$17 billion emergency bailout proposal negotiators hope to bring to Congress.

But he said federal help would hinge on the Big Three of General Motors Corp, Chrysler LLC and Ford Motor Co coming up with a sustainable business plan.

“I don’t think its an option to simply allow it to collapse. What we have to do is to provide them with assistance but that assistance is conditioned on them making significant adjustments. They are going to have to restructure and all of their stakeholders are going to have to restructure.”

Reporting by Andrew Quinn; editing by Cynthia Osterman

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