[JURIST] US President Barack Obama [official website] on Thursday called for new financial regulations [text], outlining the major components of his proposal. Answering critics who claim that the reforms will increase bailouts, Obama compared the concept behind the proposed financial reforms to the Federal Deposit Insurance Corporation (FDIC)[official website], a government program he says protects confidence in the banking system and protects consumers while eliminating the need for ad hoc bailouts when banks become insolvent. According to Obama, the reform will contain four central elements: the Volcker Rule to limit the size of banks and the risks allowable, transparency to expose the underlying risk in complex financial instruments, consumer protections to combat predatory lending, and increases in shareholder power to give investors input on executive salaries and bonuses. Obama argued that new financial reforms are vital to the future of the US economy:
In the end, our system only works – our markets are only free – when there are basic safeguards that prevent abuse, that check excesses, that ensure that it is more profitable to play by the rules than to game the system. And that is what the reforms we've been proposing are designed to achieve – no more, no less.
Republican lawmakers, including House minority leader John Boehner (R-OH) have voiced opposition [IBD op-ed] to Obama's plan.
Democrats on the Senate Banking Committee [official website] on Monday introduced the Restoring American Financial Stability Act of 2010 [text, PDF], aimed at increasing financial regulation in the wake of the recent financial crisis. This bill is the second financial reform bill to be proposed by the Senate Banking Committee following the 2008 financial crisis. The 2009 bill [text, PDF; JURIST report] was met with resistance and resulted in the committee's development of the new bill. In December, the US House of Representatives approved a similar bill [JURIST report]. The US House Financial Services Committee [official website] had approved a bill to create a consumer financial protection agency in October, after originally delaying [JURIST reports] it at the behest of financial industry leaders in July. The creation of the agency is a key step in achieving the Obama administration's stated goal of tightening financial industry regulations. In June, the administration proposed a broad series of regulatory reforms [press release; JURIST report] aimed at restoring confidence in the US financial system.