WASHINGTON – The U.S. is destined to endure a new economic crisis that sticks taxpayers with the bill unless Congress tightens oversight of the financial industry, President Barack Obama said Saturday.
The overhaul is the next major piece of legislation that Obama wants to sign into law this year, but solid GOP opposition in the Senate is jeopardizing that goal.
"Every day we don't act, the same system that led to bailouts remains in place, with the exact same loopholes and the exact same liabilities," Obama said in his weekly radio and Internet address. "And if we don't change what led to the crisis, we'll doom ourselves to repeat it.
"Opposing reform will leave taxpayers on the hook if a crisis like this ever happens again," the president said.
A proposal that Senate Democrats are readying for debate creates a mechanism for liquidating large financial companies to avoid a meltdown.
For the first time, the government would regulate derivatives, those financial instruments whose value depends on an underlying asset, such as mortgages or stocks. Derivatives can help hedge risks. But derivatives can produce steep losses, or huge profits, if the value of their underlying asset sinks.
The proposal also would create a council to detect threats to the financial system and set up a consumer protection agency to police people's dealings with financial institutions.
On Friday, Obama promised to veto the bill if it doesn't regulate the market for derivatives, which contributed to the nation's economic problems after their value plummeted during the housing crisis.
But Democrats haven't agreed on how far such regulation should go, and all Senate Republicans are united against the bill. That opposition complicates Democratic efforts to get the 60 votes necessary to overcome likely GOP procedural roadblocks.
Republicans contend that a provision creating a $50 billion fund for dismantling banks considered "too big to fail" would continue government bailouts of Wall Street. Obama administration officials say such a fund is unnecessary and they want Senate Democrats to remove it.
