From NBC/NJ's Aswini Anburajan
NEW YORK -- Obama called for an overhaul of the nation's regulatory system today, arguing that "what was bad for Main Street was bad for Wall Street," and that a "loss of the sense of shared prosperity" had caused the current economic crisis.
"Pain trickled up," Obama said of how the increased rate of home foreclosures among individual homeowners had caused a downturn in the market as a whole.
Providing a historical rationale for increased government oversight of financial markets, Obama argued that the American economy had prospered and sustained itself because government had "guided the market's invisible hand with a higher principle."
He called for six principles for greater regulation and modernization of the nation's economic institutions, including:
(1) Government oversight for any entity that borrows from the federal government;
(2) An overall reform of the regulations governing financial institutions;
(3) Streamlining the nation's regulatory institutions;
(4) Regulations should be applied to what an organization does rather than what it is (e.g. financial regulations regarding sub-prime loans only applied to banks, allowing mortgage brokers to issue these loans without oversight);
(5) The SEC actively investigating market manipulation;
(6) And the creation of a financial oversight commission that identifies risks to the nation's financial system.
In calling for the oversight, Obama made a populist appeal.
"If we can extend a hand to banks on Wall Street, we can extend a hand to Americans who are struggling," he said, referring to the Fed's recent bailout of Bear Stearns. He also said that ordinary Americans had experienced the effects of a recession for the past several years and said that this was the only period in American history where incomes had not grown along with corporate profits.
He was introduced by New York City Mayor Michael Bloomberg, who told the crowd that "the federal government had become a poster child of irresponsibility." Bloomberg claimed that the current crisis was "an enormous challenge of leadership" and then told the audience that the stage on which Obama would give his speech was the one on which "Lincoln provided a brilliant defense of his position on slavery."
In calling for a more active government role, Obama contrasted his approach with Republican nominee John McCain's.
"John McCain recently announced his own plan, and it amounts to little more than watching this crisis happen," Obama said. "While this is consistent with Senator McCain's determination to run for George Bush's third term, it won't help families who are suffering, and it won't help lift our economy out of recession."
McCain in turn released a written statement in which he said he was open "to considering any and all proposals" that tried to help those with foreclosed homes. Offering his own rationale for a governmental approach, he argued that aid should go to the "truly needy" to "prevent systemic economic risk" and enact reforms that increased transparency. Attacking his Democratic opponents, he also said, "[W]hat is not necessary is multi-billion dollar bailout for big banks and speculators, as Senators Clinton and Obama have proposed."
Obama said today he agreed with McCain that the government shouldn't reward irresponsible borrowers with a bailout but claimed that McCain was turning a blind eye to individual homeowners who had not tried to profit on the system. He again touted Sen. Chris Dodd's proposal, which would create a Housing Security Program to help with buyouts of existing mortgages, so those facing foreclosure could pay mortgages at more modified interest rates.
"It asks both sides to sacrifice, while preventing a long-term collapse that could have enormous ramifications for the most responsible lenders and borrowers, as well as the American people as a whole," Obama said of Dodd's plan today. "That is what Senator McCain ignores."
Tomorrow, Obama will take his economic message on the road beginning a six-day bus tour through Pennsylvania.