WASHINGTON — Democratic presidential candidate Barack Obama on Thursday proposed expanding government regulation of financial institutions and spending $30 billion on a new stimulus package to ease consumers' economic pain.
"Let me be clear," Obama said in a speech at New York City's historic Cooper Union building. "The American economy does not stand still, and neither should the rules that govern it."
In the morning address, the text of which was made available in Washington, Obama argued that "the evolution of industries often warrants regulatory reform — to foster competition, lower prices or replace outdated oversight structures."
His address is the latest in a string of proposals from the three major presidential candidates. Hillary Clinton, Obama's rival for the Democratic nomination, and John McCain also have offered economic relief plans.
Clinton offered a new economic plan of her own Thursday, a $2.5 billion job-retraining blueprint that included expanding aid to workers who are trying to improve their job skills and grants to help them find new lines of work.
Obama's followed a call Wednesday by Treasury Secretary Henry Paulson for greater oversight of investment banks and other loosely regulated financial institutions.This week's economic speeches by the presidential candidates come as Democrats in control of Congress ready legislation to help ease the housing crisis. Some Democrats also are pushing a measure to create a new financial regulator to guard against a domino-like failure of the banking system.
Obama tried to put some distance between himself and Clinton, noting early in his address that "Under Republican and Democratic administrations, we failed to guard against practices that all too often rewarded financial manipulation" instead of sound business practices.
Clinton's husband headed the only Democratic administration in the last 27 years. It was a not-so-subtle slap at Bill Clinton's treasury secretary, Robert Rubin, a former chairman of investment bank Goldman Sachs who's now advising Hillary Clinton. Today, Rubin is the chairman of the executive committee of Citigroup, the nation's largest bank but an embattled one that recently was forced to seek a cash infusion from Middle East investors to shore up its balance sheet.
Within an hour of its release, the details of Obama's plan gave way to election-year politicking.
"No amount of rhetoric can hide Senator Obama's clear record of embracing the liberal tax-and-spend, big government policies that hit hardworking American families at a time when they're most vulnerable, and are most certain to move American backward," McCain spokesman Tucker Bounds said.
Clinton was equally hostile.
"At a time of crisis in our financial markets, Senator Obama announced a series of broad, vague principles, while offering no new concrete solutions to provide Americans with greater confidence in the market or keep them in their homes," said Neera Tanden, Clinton's campaign policy director.
In his lengthy economic address, Obama drew contrasts with McCain.
"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's camp fired back. "To describe John McCain's position as do nothing and stand back and watch . . . is politics of the worst sort," said Carly Fiorina, a top McCain economic adviser, adding, "Government should be the actor of last resort, not first resort."
The Obama prescription for the economy is centered largely on regulatory change.
"If you borrow from the government," he said, "you should be subject to government oversight and supervision." This echoed comments Wednesday from the treasury secretary.
At the very least, Obama argued, "These new regulations should include liquidity and capital requirements."
He also called for "general reform of the requirements to which all regulated financial institutions are subjected. Capital requirements should be strengthened."
He vowed to "streamline a framework of overlapping and competing regulatory agencies." One of the reasons for today's housing crisis is that while there are at least nine federal agencies with some oversight responsibility for mortgages and the housing market, there was no lead agency. All agencies understood that a problem was unfolding but none was equipped to take a systemwide approach.
Other promises would involve cracking down on renegade traders and investors by creating "a process that identifies systemic risks to the financial system," and regulating institutions "for what they do, not what they are."
The current regulatory framework, Obama said, is the creation of a different era. For instance, he said, "It makes no sense for the Fed to tighten mortgage guidelines for banks when two-thirds of subprime mortgages don't originate from banks."
His $30 billion plan — the same amount that Clinton proposed earlier this week to help distressed homeowners — wasn't spelled out precisely.
Obama said that it "will reach the most vulnerable Americans, including immediate relief to areas hardest hit by the housing crisis," as well as a "significant extension of unemployment insurance."
Like Clinton, he didn't specify how he'd pay for it.
McCain hasn't offered much specific new spending but he promises to eliminate taxes without saying how he'd make up the lost revenue. He'd maintain President Bush's tax cuts — set to expire in 2010 — which would be a drain on revenues. He'd also eliminate the costly Alternative Minimum Tax, which is threatening millions of Americans. That would put an even bigger hit on federal coffers, up to $2 trillion over 10 years.
McCain made a pledge of "no new taxes," but has since softened that declaration.
New York Mayor Michael Bloomberg, who last year was seen as a possible third-party presidential candidate, introduced Obama on Thursday. Bloomberg, a lifelong Democrat until he ran for mayor as a Republican in 2001, is in his second term as mayor. He made no endorsement Thursday.
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