Sept. 15 (Bloomberg) -- President Barack Obama said job losses are “bottoming out” and the U.S. economy looks to be growing again even as he warned against cutting off government aid “so soon that the recovery doesn’t take flight.”
Obama, speaking to Bloomberg News one year after the bankruptcy of Lehman Brothers Holdings Inc. crippled the economy, voiced confidence that his plan to overhaul regulation to forestall another crisis would pass Congress this year.
He vowed “to do everything I can” to fight banking industry efforts to kill his proposal for a financial products safety agency and stuck by his call to make the Federal Reserve responsible for ensuring the stability of the overall system.
“I’m very optimistic about us getting a set of rules in place that prevent the kind of crisis that we’re seeing from happening again,” Obama said in a White House interview yesterday.
He opposed setting limits on pay to financial industry executives, even in the face of public outrage over some of the multimillion-dollar bonuses and salaries Wall Street companies are still handing out.
“Why is it that we’re going to cap executive compensation for Wall Street bankers but not Silicon Valley entrepreneurs or NFL football players?” he said.
On trade, Obama brushed aside concerns that his Sept. 11 imposition of 35 percent tariffs on $1.8 billion in imported tires from China would trigger a cycle of retaliation.
“We’re not going to see a trade war,” he said. “There are some tensions around this, no doubt about it. But my message is very simple: We have rules on the books.”
Growth in Exports
The president ticked off a number of signs the economy is on the mend, including stronger exports and a pickup in manufacturing. Payroll cuts have also tapered off, he said, adding that “we could start seeing some positive job growth.”
Since the recession began in December 2007, the U.S. has lost 6.9 million jobs. Payroll cuts peaked at 741,000 in January and have since subsided, with 216,000 job losses in August, according to the Labor Department.
The 48-year-old president said the economy was still fragile and cautioned against prematurely removing government programs aimed at supporting financial markets and boosting demand.
“I don’t think we’re out of the woods yet,” he said. “What we have to be careful about is taking the crutches away from the patient too early.” He said that was the mistake the U.S. made during the Great Depression.
No Second Stimulus
Still, Obama told CNBC television in a separate interview that he had a “strong inclination” against a second stimulus package on top of the $787 billion program passed by Congress in February.
The world’s largest economy contracted 1 percent from April through June, according to the Commerce Department. The drop was the fourth in a row, making it the longest contraction since quarterly records began in 1947.
On health care, Obama was less forthcoming, especially about how to pay for his initiatives. Although he reiterated that two-thirds of the estimated $900 billion cost would come from eliminating waste, fraud and abuse within the system, he wouldn’t commit to sending Congress a bill laying out how to achieve this. He said he would let the Senate Finance Committee “work its way through” the cost-savings process.
He also declined to specify what additional revenue measures might be needed other than his earlier endorsement of a fee on insurers for the most-expensive policies. He did pledge “to use my office and my own time and energy anywhere that’s appropriate” to enact the legislation.
‘Common-Sense Rules’
The president’s comments followed an earlier speech in New York where he pushed for a new regime of “common-sense” regulations to avoid another market meltdown. Speaking at Federal Hall on Wall Street, Obama chastised the industry for still engaging in “reckless behavior,” “quick kills,” and “bloated bonuses.”
He declined during the interview to identify any of the abusers, saying the tendency to “take exorbitant risks that were unsustainable for the system” was widespread.
“And that’s the culture I think that we’ve got to reverse, not to squelch innovation or creativity, but to make sure that we don’t get into what’s called a moral hazard problem, where people assume that government’s there as a backstop,” Obama said.
Wall Street Compensation
Obama said what’s needed is a change in Wall Street compensation so long-term performance rather than short-term profit is rewarded.
“Those principles are ones that I want enshrined in Wall Street’s practices,” he said. “But this has been a country where, as a general proposition, we don’t go around saying, ‘You can’t pay people whatever the market will bear in the private sector.’”
Obama’s plan for a consumer financial protection agency has run into opposition from the banking industry and Republicans, who say such a body would limit consumer choice and access to credit.
While not promising to veto a bill that lacked such an agency, Obama pledged that he would work to stop opponents from defeating it.
“I don’t think they’re going to succeed in killing it, and I’m going to do everything I can to stop them from killing it,” he said. “We need a consumer financial protection agency that consolidates the tasks of all these different agencies right now.”
Rewarding Good Practices
“That will help the American consumer and ultimately will allow, you know, good, solid business practices to be rewarded in ways that right now they’re not always rewarded,” Obama said.
Obama defended his proposal to make the Fed the regulator of systemic risks -- a plan that has drawn skepticism from Democrats including House Financial Services Committee Chairman Barney Frank and Senate Banking Committee Chairman Christopher Dodd, who are reluctant to expand the central bank’s power. They back Federal Deposit Insurance Corp. chief Sheila Bair’s preference for a regulatory council to monitor firms for risk.
“What you ultimately have to have is one person or one institution or entity that is making clear decisions at the end of the day, that the buck has to stop with somebody,” Obama said. “And I think that the Fed is best equipped to do this.”
‘Best Representative’
Obama also said he won’t be going to Denmark next month to make a final pitch for Chicago’s bid for the 2016 Summer Olympic Games because of the demands of the health-care and financial-regulation deliberations.
He said that while he’s “deeply invested” in winning the Olympics for his hometown, “I’m in the middle of some very important decisions.”
The administration announced last week that first lady Michelle Obama will travel to Copenhagen for the Oct. 2 meeting of the International Olympic Committee where the host city will be chosen. Chicago is competing against Madrid, Rio de Janeiro and Tokyo.
“Michelle’s our best representative,” Obama said.
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