Obama urging financial overhaul

US President Barack Obama is calling on Congress to approve an overhaul of the US regulatory regime.

In a speech to mark one year since the collapse of Lehman Brothers bank, he will mount a vigorous defence of his administration’s economic policies.

The US president will focus on “the need to take the next series of steps” in regulatory reform, White House spokesman Robert Gibbs said.

Mr Obama’s team have argued that they staved off a second Great Depression.

Mr Obama is giving the speech in New York, at Federal Hall on Wall Street, where George Washington was inaugurated as the first US president.

‘Money talks’

The White House would give the central bank, the Federal Reserve, new powers over huge financial firms and the ability to seize banks whose collapse could threaten the economy.

Those and other rules that have been proposed have been tied up in Congress, which has been bogged down with Mr Obama’s divisive healthcare reform proposals.

Mr Obama also wants a new watchdog, the Consumer Financial Protection Agency, for products like mortgages, car loans and credit cards and the Federal Trade Commission will gain new powers to protect consumers.

That, and more powers for the Securities and Exchange Commission, has also faced opposition from the banking industry.

“I’m very pessimistic that we will do enough,” said Nobel award-winning economist Joseph Stiglitz, speaking to BBC business editor Robert Peston on Newsnight.

“If you listen to the discussion, you see the push-back from the financial sector,” he added. “In American democracy, money talks. We have five lobbyists for every Congressman in the financial industry.”

Verge of collapse

The White House has said its massive $787bn (£472bn) stimulus package, known as the American Recovery and Reinvestment Act, passed earlier this year, has created up to 1.1m jobs and boosted economic activity.

“When I walked in, the banking system, the financial system was under the verge of collapse,” Mr Obama said on Sunday in an interview on the 60 Minutes television show.

“The reason we did so was that every credible Democratic and Republican economist at the time when we came in said if we don’t have a stimulus of some sort, then this is potentially going to get a lot worse,” he said.

The White House has said it boosted US GDP by 2-3% between April and June.