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Bankers at Davos criticise Obama's State of the Union speech

Text by News Wires

Latest update : 2010-01-28

Bankers at the World Economic Forum in Davos have reacted negatively to Barack Obama's State of the Union speech, in which he called for tighter financial regulation. They called it "populist" and "worrisome", to pick just two of the attacks.

REUTERS - Wall Street executives hit back on Thursday at U.S. President Barack Obama's plan to curb big banks, questioning whether proposals reaffirmed in his State of the Union address would ever become law.

Obama pushed job creation to the top of his agenda in his annual speech to Congress and vowed not to abandon his struggling healthcare overhaul after the loss of a key Senate seat in Massachusetts raised doubts about his leadership.

He renewed criticism of "bad behavior" and recklessness on Wall Street that triggered the deepest economic crisis since the 1930s and demanded that Congress pass robust laws on financial regulation despite financial sector lobbying.

Howard Lutnick, chief executive of private investment bank Cantor Fitzgerald, told Reuters at the World Economic Forum that Obama was waging "a populist battle against the banks".

"It's fun to bash the banks if you are not making ground in healthcare," he said in the Swiss ski resort of Davos .

Obama jolted markets on Jan. 21 with proposals to force commercial banks to cut ties with hedge funds and private equity funds and to stop proprietary trading. He also said he wanted the financial sector to pay for a massive taxpayer bailout.

On Wednesday, business leaders at the annual Davos meeting warned Western governments that an uncoordinated, heavy-handed crackdown on the financial industry could crimp a fragile recovery from the worst recession since World War Two.

In his State of the Union message, Obama pledged to slap tough new regulations on Wall Street but said: "Look, I am not interested in punishing banks, I'm interested in protecting our economy."

Will it become law?

Asked whether he was concerned by the plans, Lutnick said: "Like all regulation, it is worrisome because you don't know if it is a tank that fires in all directions."

"It is just very popular to beat on the banks but to forget that the banks are the key driver of the economy, they provide the liquidity and the financing for people to grow their business, and if you relentlessly pick on them they are going to be constrained in their thinking," he said.

John Studzinski, global head of the advisory group at private equity firm Blackstone Group, questioned whether Obama's proposals would be carried through into legislation.

"The devil is in the detail," he told Reuters. "We have not heard any details yet. A lot of this has to do with execution.

"The market is probably relieved that he didn't come out with some other nuclear attack on Wall Street. There is going to be a continuing diatribe on Wall Street but at the end of the day while it makes good headlines I am not sure the average American cares about Wall Street, they care about their own jobs and their own dignity," he said in an interview.

Still smarting from a drop in his popularity and the loss by his Democratic Party of the late Ted Kennedy's Senate seat, Obama vowed to put the fight against double-digit unemployment at the top of his agenda amid signs that a stuttering recovery could bring the Democrats more losses in mid-term congressional elections in November.

He promised to repel finance industry lobbyists who he said were seeking to water down or kill the proposed legislation.

"We cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back," he said.

In a keynote Davos speech on Wednesday, French President Nicolas Sarkozy delivered a tirade against the excesses of financial speculation, deregulation, the bonus culture and accounting tricks which he said had driven the world economy to the edge of the abyss a year ago.

Only concerted government action had saved the world from financial meltdown, he said, and the first glimmers of recovery should not be a signal to let up on regulatory reforms.

"We can only save capitalism by refounding and moralising it," Sarkozy said in a keynote address, warning central banks against an abrupt withdrawal of monetary stimulus measures that might trigger a collapse of the world economy.

Sarkozy endorsed Obama's proposed curbs on Wall Street but stressed the need for a global consensus on financial regulation in the Group of 20 major economies.

Date created : 2010-01-28