U.S. president Barack Obama stressed that his administration remains committed to regulatory reform in the financial industry, and that the apparent passing of the crisis does not dampen that need.

Obama’s remarks came as the U.S Treasury Department issued a report today detailing the progress of the U.S. government’s financial stabilization and rehabilitation policies, declaring that it is moving towards an exit strategy. “We are now in a position to adjust our strategy as we move from crisis response to recovery, from rescuing the economy to repairing and rebuilding the foundation for future growth,” said Treasury Secretary, Tim Geithner.

“The critical imperative we face as a country is making sure that the same vulnerabilities in our system which gave rise to this recession are not allowed to trigger another. To do that, we must pass comprehensive regulatory reform legislation by the end of the year,” he added.

This stance was echoed by president Obama in his remarks to Federal Hall in New York today. “Normalcy cannot lead to complacency,” he said. “Unfortunately, there are some in the financial industry who are misreading this moment. Instead of learning the lessons of Lehman and the crisis from which we’re still recovering, they’re choosing to ignore those lessons.”

“I’m convinced they do so not just at their own peril, but at our nation’s. So I want everybody here to hear my words: We will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall,” he said.

Obama called for reform to guard against systemic risks and to protect consumers, taxpayers, and to the economy as a whole. “These rules must be developed in a way that doesn’t stifle innovation and enterprise. And I want to say very clearly here today, we want to work with the financial industry to achieve that end. But the old ways that led to this crisis cannot stand,” he said.

He pointed to the creation of a new consumer protection agency, giving the Federal Reserve responsibility for regulating large, systemically important firms, a more powerful failure resolution authority, and globally coordinated regulatory reforms on issues such as bank capital requirements.

“There are those who would suggest that we must choose between markets unfettered by even the most modest of regulations, and markets weighed down by onerous regulations that suppress the spirit of enterprise and innovation. If there is one lesson we can learn from last year, it is that this is a false choice,” he said. “Common-sense rules of the road don’t hinder the market, they make the market stronger. Indeed, they are essential to ensuring that our markets function fairly and freely.”

The push for reform from Obama came as the Treasury issued a report indicating that its stabilization plan, and the fiscal stimulus, has helped to shore up financial markets and the economy. It is now moving into a new phase of stabilization, reducing the government’s role in the financial sector.

However, it cautions that the process of terminating crisis-related programs “must be done in a measured way that does not derail the nascent economic recovery. Unemployment remains elevated, output has fallen significantly, foreclosures continue to rise, and credit to households and businesses remains constrained.” Moreover, it adds that the normalization of financial markets “is partial and fragile”, and that, “Key parts of the financial system are still substantially impaired and the system as a whole remains somewhat fragile.”

The report stresses that the government must continue to provide support “where it is still needed to rehabilitate disrupted markets that provide critical credit to households and businesses. It would be a mistake to withdraw abruptly from programs supporting these channels for new credit before a self-sustaining economic recovery has taken hold.”

“Programs that are still making a material contribution to confidence in financial markets should also be sustained. Even if utilization of a program is low, its existence alone can help stabilize markets to the extent that market participants know it is available if conditions worsen,” it says. “

@page_break@“Although we are rolling back emergency support programs that are no longer needed, significant parts of the financial system remain impaired. Unanticipated events could intensify pressure on the financial system. In this context, it is prudent to maintain capacity to address unforeseen developments. By bolstering confidence, having such capacity may actually reduce the need to use it,” it adds.

IE