PUEBLO, Colo. (Reuters) - U.S. Democratic presidential candidate Barack Obama told Reuters in an interview on Monday a broad overhaul of Wall Street rules was essential to restore shattered confidence in financial markets and said he would move quickly if he won the White House in the November 4 election.
Following is the text of the interview.
QUESTION: You outlined six principles for modernizing the financial markets in your March Cooper Union speech and I‘m wondering if you want to amend or add to any of these ideas in light of what’s recently happened in the markets.
OBAMA: ”I think the ideas are sound. I tried not to prescribe in excruciating detail how to structure them but the basic principles of transparency, of making sure that we don’t structure it in which it’s heads I win, tails you lose for taxpayers; consolidating our regulatory framework so that we don’t have all these overlapping agencies, none of whom seem to have sufficient power to do what needs to be done; making sure that we have created the market framework and the regulatory framework that’s appropriate for all these new financial instruments that are out there. That goes to the essence of what’s happening now.
“After World War II, when banks were the primary source of finance, we put in place things like the FDIC that not only provided depositors confidence but also said, ‘Banks, you’ve got to meet certain thresholds that prevent you from taking exorbitant risks.’ Banks now are just a fraction of the capital that is flowing worldwide and through Wall Street - and we don’t have any comparable instruments. So if you talk to the regulators right now or (U.S. Treasury Secretary Henry) Paulson or (Federal Reserve Chairman Ben) Bernanke, one of their challenges is they’re making it up as they go along. Each problem ends up requiring a patchwork solution.”
QUESTION: If you win the White House, how quickly would you move on pushing a proposal?
OBAMA: ”I think we have to move on it very quickly because my suspicion is the deteriorating confidence in the credit markets, in the financial markets, is not going to immediately bounce back. You start getting a vicious circle where, because the capital markets are spooked and experiencing huge losses, they contract credit. Businesses start having trouble hiring or investing in new plants and equipment. The economy experiences a recession, which leads to further losses, which makes Wall Street more nervous. So I think we’re going to have to move quickly. Not only do we have to create the new regulatory structures, but we’re also going to have to see whether the housing market has, in fact, bottomed out. If the housing market continues to decline even after investors and lenders have absorbed significant losses and we’ve seen so many foreclosures, then we may have to take some additional steps but it’s premature to get into exactly what those steps would be.
“My hope is that the financial markets stabilize enough over the next several weeks, that we can get through the election, get into a new administration and a new Congress and we can present a comprehensive plan that is not born out of panic but that’s born out of the needs of a globalized economy.”
QUESTION: (Republican presidential candidate) Sen. McCain today is also talking about overhauling and modernizing the patchwork of financial regulation. How do you think your approach would differ from his?
OBAMA: “I haven’t seen his (plan). The advantage I think that voters have when it comes to my plans they’ve been out there for over a year. This is not something I said in response to today’s crisis. I have been hammering on the need for us to have better regulatory measures for a long time and it’s something that’s consistent with my overall view that if you’ve got a Wall Street that is acting irresponsibly and you’ve got a Washington that is captive to special interests, then it’s very hard to create the kinds of safeguards that are going to protect taxpayers and workers.”
QUESTION: Should you win the White House, one of the most important decisions that you’ll make - as far as Wall Street is concerned - is your selection of a Treasury secretary ...
OBAMA: “You won’t get a peep out of me.”
QUESTION: I won’t press too hard on the names because I‘m pretty sure you won’t tell me ...
OBAMA: “You’re right.”
QUESTION: But can you talk at all about the process you would undertake to select someone and what kind of qualifications you would look for?
OBAMA: ”I have a group of economic advisers right now, people like (former Federal Reserve chairman) Paul Volcker, (former Treasury secretaries) Bob Rubin, Larry Summers and others. Many of those folks would not serve as Treasury secretary. They’ve done their service. They want to move on. But having a group that has worked at the highest levels of finance, who understand both the private sector but also understand the levers that are available to government in dealing with these issues, who are familiar with managing financial crises, those advisers I think will help vet and guide my selection.
“In addition to having somebody with extraordinary credentials who knows the marketplace, knows the players and knows government, I‘m also interested in having somebody who recognizes that our long-term economic challenges cannot be met if the benefits of a growing economy are only going to the top. The economy does not grow that way. The economy grows because the guy or gal or who are going to work every day, trying to put their kids through school, trying to pay for their retirement, that they feel like they’ve got a shot, that the economy is working for them. And when it does, then it works for everybody. And I want a Treasury secretary who understands that we’ve got to strengthen the middle class and understands what they’re going through.”
Reporting by Caren Bohan; Editing by Patricia Wilson