WASHINGTON — President Obama made a brief but impassioned plea for the passage of regulatory reform and enactment of a new bank tax during his State of the Union address late Wednesday, but made it clear he would reject any overhaul that was too weak.
Unlike most such addresses, which barely touch on financial services issues, the president sought to put them front in center during his speech, referencing them several times.
Saying that it was "time to get serious about fixing the problems that are hampering" the country's growth, Obama's first priority was "serious financial reform."
"Look, I am not interested in punishing banks, I'm interested in protecting our economy," Obama said. "A strong, healthy financial market makes it possible for businesses to access credit and create new jobs. It channels the savings of families into investments that raise incomes. But that can only happen if we guard against the same recklessness that nearly brought down our entire economy."
Continuing the populist rhetoric against big banks of the past several weeks, Obama referenced his proposals to tax large institutions and restrain their growth.
"We can't allow financial institutions, including those that take your deposits, to take risks that threaten the whole economy," he said.
While praising the House for passing a reform bill, Obama said that bank lobbyists were "already trying to kill it," and issued a warning that if final legislation was too weak, he would veto it.
"We cannot let them win this fight," Obama said. "If the bill that ends up on my desk does not meet the test of real reform, I will send it back."
The message was apparently intended for Senate lawmakers, who are still debating a reform bill. Senate Banking Committee members have been meeting in bipartisan work groups to try and find consensus on legislation. But some Democrats and consumer groups are worried they may give too much ground to Republicans and end up with a weak bill.
Still, Obama avoided most specifics of what should be in the legislation, including a call for a new consumer protection agency. That proposal has proven to be one of the most controversial elements of a reform bill, and is adamantly opposed by Republicans. By avoiding mentioning it, Obama could be giving Democrats leeway to compromise on that issue.
Obama did offer several plugs for his proposed 15 basis point tax on big banks, including one that came early in his speech.
Referencing the Troubled Asset Relief Program and other government assistance to financial institutions, Obama said that "if there's one thing that has unified Democrats and Republicans, it's that we all hated the bank bailout."
"I hated it. You hated it. It was about as popular as a root canal," he said.
But he said many of the bailout programs were necessary to save the economy, and said a bank tax would go a long way to recouping some of the cost.
"The markets are now stabilized, and we have recovered most of the money we spent on the banks," he said. "To recover the rest, I have proposed a fee on the biggest banks. I know Wall Street isn't keen on this idea, but if these firms can afford to hand out big bonuses again, they can afford a modest fee to pay back the taxpayers who rescued them in their time of need."
Obama offered only one new financial services program during the address, saying he would use $30 billion in Tarp funds to help "community banks give small businesses the credit they need to stay afloat." More details on the plan will likely be forthcoming in the budget, which is expected to be released next week.
Toward the end of the speech, Obama offered one more shot at banks, blaming them in part for the cynicism of many Americans.
"Each time a CEO rewards himself for failure, or a banker puts the rest of us at risk for his own selfish gain, people's doubts grow," he said. "Each time lobbyists game the system or politicians tear each other down instead of lifting this country up, we lose faith."