President Barack Obama took his case for financial regulatory reform today to Wall Street itself, or at least a few blocks away from it.

"For those of you in the financial industry, I urge you to join me not only because it's in the interest of your industry, but because it's in the interest of your country," Obama said.

At a speech at Cooper Union, the president called on Wall Street firms “to join us, instead of fighting us” in the effort “to enact a set of updated, commonsense rules to ensure accountability on Wall Street and to protect consumers in our financial system.”

Obama delivered the speech--at the site of his campaign address on financial reform two years ago--as legislation enacting his proposals appears close to becoming reality. Yesterday the Senate Agriculture Committee approved a bill that would regulate over-the-counter derivatives. One Republican joined Democrats on the committee in voting for this legislation, and the ranking Republican on the Senate Banking Committee sounded optimistic about reaching an agreement with his Democratic counterpart on the overall regulatory reform package.

“These are reforms that would put an end to taxpayer bailouts; that would bring complex financial dealings out of the shadows; that would protect consumers; and that would give shareholders more power in the financial system,” Obama said.

The president blamed the financial crisis that devastated the economy in late 2008 on “a failure of responsibility -- from Wall Street to Washington.” He said he believed “in a strong financial sector,” but “a free market was never meant to be a free license to take whatever you can get, however you can get it. That is what happened too often in the years leading up to the crisis.”

Obama said financial regulatory reform is “an essential part” of “a new foundation for economic growth in the 21st century.”

“Without it, our house will continue to sit on shifting sands, leaving our families, businesses and the global economy vulnerable to future crises,” he said.

Austan Goolsbee, a member of the president’s council of economic advisers, told reporters after the speech, “Today, (President Obama) called on financial institutions to work with him and not against reforming the system, which we all recognize must be reformed."

Goolsbee said lobbying levels were, “not acceptable. We have to move beyond that.” He noted that there “are now up to five lobbyists per member of Congress on this. We have to end that.”

The financial reform bill that already has passed the House and the one pending in the Senate would create a process that would “contain the failure” of large interconnected firm like Lehman Brothers, Obama said.

“I’ve insisted that the financial industry -- and not taxpayers -- shoulder the costs” if this happens, he said. “The goal is to make certain that taxpayers are never again on the hook because a firm is deemed ‘too big to fail.’”

Republican claims that the legislation would institutionalize taxpayer-funded bailouts are “not factually accurate,” he said.

Nonetheless, Republicans blocked floor debate from beginning on the bill in the Senate Thursday afternoon. Sen. Minority Leader Mitch McConnell objected when Sen. Majority Leader Harry Reid tried to bring the bill to the floor.

Reid wants to hold a test vote on the bill Monday, but needs some Republican support to get the 60 votes he needs to fend off a GOP filibuster. And Republicans are calling for enough delay to reach compromises.

"I wouldn't want to rush it and make a lot of mistakes," Sen. Richard Shelby if Alabama, who has been leading Republicans in negotiations over the bill.

Thursday morning, the president also renewed calls for banning banks that benefit from federal support such as deposit insurance from engaging in speculative trading. He said there is a legitimate role for derivatives, financial instruments that many businesses use to hedge risks, but said they should be “traded in the open, in full view of businesses, investors and those charged with oversight.”

Obama also once again made the case for creating an independent Consumer Financial Protection Agency, a proposal that many business groups contend would add an unnecessary layer of regulation on financial institutions and burden nonfinancial firms that allow their customers to pay their bills in installments.

The president dismissed these complaints.

“Unless your business model depends on bilking people, there is little to fear from these new rules,” he said.

Financial regulatory reform also would give shareholders “new power in the financial system,” Obama said, including more say in executive compensation and corporate board elections.

As was the case with health care reform, Obama said opposition to these proposals is being fueled by special interests.

“We’ve seen battalions of financial industry lobbyists descending on Capitol Hill, as firms spend millions to influence the outcome of this debate,” he said. “We’ve seen misleading arguments and attacks designed not to improve the bill, but to weaken or kill it. And we’ve seen a bipartisan process buckle under the weight of these withering forces, even as we have produced a proposal that is by all accounts a commonsense, reasonable, non-ideological approach to target the root problems that led to the turmoil in our financial sector.

“We can and must put this kind of cynical politics aside,” he said. "That's why I'm here today."

Goolsbee suggested after the speech that the reforms were likely to become law sooner rather than later.

“We have come to the final chapter on that bill, which will end too big to fail and bail outs and provide stronger independent consumer protection and will make sure derivatives come out of the shadows and are under regulatory oversight ... And will put in the Volcker rule (limiting deposit taking banks from engaging riskier practices suchg as proprietary trading, or trading for their own accounts),” he said.

During his speech, Obama pointed out that this isn't the first time the banking system has been reformed, or that reform has caused concern for bankers.

He pointed out that in 1933, the creation of the Federal Deposit Insurance Corporation drew wide-eyed panic from banking houses on Wall Street.

"Ultimately, there is no dividing line between Main Street and Wall Steet," he said. "We will rise or fall together."

---

Kent Hoover is the Washington bureau chief for bizjournals.