Obama Calls for More Regulation of Financial System

Democratic presidential candidate Barack Obama called for greater government regulation of the U.S. financial system Thursday and proposed a new $30 billion economic stimulus plan to help homeowners.

AP Barack Obama

Obama said an era of financial deregulation has created conditions that led to the housing and credit crisis that has pushed the U.S. economy to the brink of a recession.

"It is time for the federal government to revamp the regulatory framework dealing with our financial markets," the Illinois senator said in a wide-ranging speech on the economy.

"Our capital markets have helped us build the strongest economy in the world," Obama said. "They are a source of competitive advantage for our country. But they cannot succeed without the public's trust."

Obama, who would be the first black U.S. president, and New York Sen. Hillary Clinton are in a heated battle for the Democratic nomination to face likely Republican nominee John McCain in the November presidential election.

Obama was introduced by New York Mayor Michael Bloomberg, who flirted with his own presidential bid and pointedly noted that he had not endorsed a presidential candidate.

Obama said there were good arguments in the 1990s for changing government rules to cope with technological change and globalization in financial markets.

But instead of establishing a new regulatory framework, the government simply dismantled the old one, encouraging a "winner-take-all, anything-goes environment that helped foster devastating dislocations in our economy," he said.

He outlined six "core principles for reform" that he would pursue if elected, led by this one: "If you can borrow from the government, you should be subject to government oversight and supervision."

In a month when the U.S. Federal Reserve helped shore up the ailing financial system and financed the takeover of a major Wall Street investment firm, Obama said it was time to help the most vulnerable Americans.

He proposed a $30 billion stimulus plan that would provide relief to areas hardest hit by the housing crisis, and an extension of unemployment insurance for those out of work.

"If we can extend a hand to banks on Wall Street when they get into trouble, we can extend a hand to Americans who are struggling through no fault of their own," Obama said to applause.

Clinton, McCain Weigh In

Clinton, who would be the first woman president, called last week for a $30 billion emergency housing fund to help ease the housing crisis. An estimated 4 million American homeowners are in danger of losing their houses.

A two-year, $168 billion stimulus aimed at propping up the U.S. economy is about to take effect, with $152 billion to be doled out this year.

Arizona Sen. McCain in a statement reiterated that he wanted reforms aimed at "improving transparency and accountability in our capital markets -- both of which were lacking in the lead-up to the current situation."

"However, what is not necessary is a multibillion dollar bailout for big banks and speculators, as Sen. Clinton and Obama have proposed. There is a tendency for liberals to seek big government programs that sock it to American taxpayers while failing to solve the very real problems we face," he said.

Traveling in North Carolina, Clinton proposed a $12.5 billion package to provide job training for displaced workers. The package would include $2 billion a year over five years to create universally available job retraining services for the unemployed and $500 million a year for on-the-job training and worker education.

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