Almost a year after the opening salvo of the financial crisis was fired with the shocking collapse of the banking giant Lehman Brothers, US President Barack Obama is set to deliver a major economic speech on Monday in the heart of New York’s Wall Street financial district.
Obama's much-anticipated economic address is widely viewed as an attempt by the US president to try to reignite support for his proposed overhaul of financial regulations. Most financial analysts expect Obama to discuss plans to unwind the government's involvement in the financial sector and call upon Wall Street firms to avoid reckless behaviour.
The speech, which will be delivered at Federal Hall in downtown Manhattan, where the first US president George Washington was inaugurated, is set to be a call for action on financial reform, according to White House aides.
The shocking collapse of the 158-year-old financial giant unfolded over the Sept. 13-14 weekend a year ago, as high-stakes talks to try to save Lehman Brothers floundered and finally collapsed at around 1:15 am on Monday, September 15.
Lehman’s bankruptcy filing last year came after last-ditch efforts to try to find a buyer failed, followed by the absence of a last-minute government rescue.
Hours later, viewers across the world watched as stunned, saddened Lehman employees carried boxes of their belongings out of the firm’s New York and London offices in what came to represent the human fallout of the global financial crisis.
‘The whole game changed overnight’
A year later, amid early signs of an economic recovery, financial experts are still debating the implications of the Lehman collapse and the lessons learned – as well as the ones ignored.
“There’s a feeling after a year, a consensus emerging if you like, that Lehman failed in order for the rest of the financial system to survive,” said FRANCE 24’s New York correspondent Nathan King. “Lehman failed because they couldn’t find a buyer, but also because there was this feeling that the government couldn’t or there wasn’t the appetite for a rescue. But what followed was cataclysmic.”
Lehman’s demise saw the markets nosedive, triggering a chain reaction that appeared to shake capitalism to its core.
Faced with the prospect of a looming Depression, the US government not only moved to shore up other financial institutions such as insurance giant AIG, it also enabled Congress to pass a $700 billion rescue package.
In short, as King puts it, “the whole game changed overnight”.
‘Business as usual’ prospect raises eyebrows ahead of G20 summit
Obama’s speech comes ahead of the Sept. 24-25 G20 summit in Pittsburgh, where the US president will host leaders of major developed countries including Britain, Japan, France and Germany as well as emerging economies such as China, India and Brazil.
In recent months there have been growing international calls for the US government to do more to reform the still vulnerable financial system amid fears that giant banks, propped up by rescue packages, are likely to get back to business as usual.
Earlier this year, there was widespread public outrage when AIG, which was bailed out with $180 billion in taxpayer money, paid $165 million in bonuses. The disclosure prompted Obama to declare that that out-sized bonuses were "just not acceptable".
But that did not stop Goldman Sachs from setting aside $11.3 billion in the first half of the year toward employee bonuses.
“What we’re seeing is a return of risk appetite, which is not necessarily bad. But a lot of this risk is based on free money from the Federal Reserve by the American taxpayer,” said King. “So there is this feeling that, perhaps if the government does not act quickly, the lessons of this crisis won’t be learned.”