Obama to Defend Bailouts, a Year After Lehman Collapse
WASHINGTON - A year after Lehman Brothers imploded and unleashed global financial contagion, President Barack Obama will on Monday argue that his policies are rescuing a US financial system that was near collapse.
In a major Wall Street speech just blocks from the New York Stock Exchange, Obama will outline the steps he took after entering the White House at a time of investor panic, and say his administration staved off a second Great Depression.
Aides said he then will refocus attention and issue a call for action on financial, regulatory and structural problems still dogging the slowly reviving economy, which he believes will underpin long-term recovery.
"We are making a clear transition from rescue as the priority of public policy to sustained recovery," said Lawrence Summers, director of Obama's National Economic Council.
"We have moved back from the brink of financial catastrophe to a set of very important problems that need to be managed."
The speech, scheduled for 12:10 pm (1610 GMT), comes a week before Obama hosts the next Group of 20 summit in Pittsburgh, where global economic powers will try to agree a strategy to head off future crises.
In recent weeks, as economic indicators have suggested glimmers of hope, the White House has pointed to evidence Obama's approach is reaping dividends, last week arguing that his huge, politically risky 787-billion-dollar stimulus plan had created or saved up to 1.1 million jobs.
This followed a flurry of polls showing that most Americans believe conversely that the stimulus plan is having no impact.
Obama staunchly defended his stimulus in an interview which aired Sunday on CBS show "60 Minutes."
"The reason we did so was that every credible Democratic and Republican economist at the time when we came in said, 'If we don't have a stimulus of some sort, then this is potentially going to get a lot worse,'" Obama said.
"When I walked in, the banking system, the financial system was under the verge of collapse."
Officials now predict a possible return to positive economic growth in the third quarter this year, a moment that will mark a political milestone for the administration.
"When the president was elected and in transition, the issue... was whether recession would become depression," said Summers.
"Today, the question is when the recession phase will end? That is not in our judgment an accident."
As well as his huge stimulus, Obama invested hundreds of billions of dollars bailing out the indebted financial sector, unveiled mortgage rescue plans and took steps to loosen the flow of credit.
Though the White House argues its policies are working, officials admit there is much economic pain to come -- and predict that even in recovery, unemployment will hit 10 percent.
Meanwhile, The New York Times argued in an editorial that the important work of regulatory reform remained undone.
"The administration has proposed legislation that would bring most of the financial system under a regulatory umbrella, and impose higher capital requirements to cushion against losses," the newspaper noted. "But in specific areas, like consumer protection, Obama officials will have to fight to ensure that lawmakers do not water down the administrations intent."
The administration's next big challenge will come in managing the transition out of the industrial and financial sectors and purging what Obama has branded a "culture of irresponsibility" on Wall Street.
Obama, said one administration official, will "urge the financial community to take responsibility, not only to support reforming the regulatory system but also to avoid a return to the practices on Wall Street that led us to the financial crisis, and to recognize their obligation to help produce a wider recovery on behalf of the American people."
His address will come exactly a year after the shocking collapse of banking giant Lehman Brothers, which was followed by a severe credit crisis, government interventions to help secure markets, and downturns that pushed some of the biggest economies in the world into recession.