CHICAGO - President-elect Barack Obama on Thursday named three veteran regulators to help clean up financial debacles that he said occurred because government overseers "dropped the ball."
Obama wouldn't weigh in on whether he would support a decision by Treasury Secretary Henry Paulson to tap the second US$350 billion installment of the US$700 billion financial bailout program. Major auto companies are pleading for emergency aid, which could come from that pot.
"I think it's important that the Treasury, the Fed and all of us do whatever's required to make sure that our financial system is stable and secure," Obama said. But he added: "We cannot afford a collapse of our financial system. Main Street can't afford it." He said he would evaluate any Paulson signals about what is necessary.
As Obama spoke at a Chicago news conference rounding out his economic team, the White House said it is considering "orderly" bankruptcy as a way of dealing with the desperately ailing U.S. auto industry. President George W. Bush, asked about an auto rescue plan during an appearance before a private group, said he hadn't decided what he would do but also spoke of the idea of bankruptcies organized by the federal government as a possible way to go.
Obama did not immediately comment on the idea.
More broadly, Obama blamed regulators for the financial debacle, saying they "dropped the ball" and that, along with congressional committees, "have been asleep at the switch."
Americans, as they watch their investments tank, are frustrated that "there's not a lot of adult supervision out there," Obama added.
As part of his plan to prevent future crises, Obama said he was naming Securities and Exchange Commission veteran Mary Schapiro as chairwoman of that agency, former Treasury official Gary Gensler to head the Commodity Futures Trading Commission, and law professor Daniel Tarullo to fill an empty Federal Reserve seat. All three will need to be confirmed by the Senate next year.
In making the announcements, Obama pointed to Wall Street money manager Bernard Madoff, under investigation in an alleged $50 billion fraud, and said the scandal underscored the need for tougher regulators. The scandal "has reminded us yet again of how badly reform is needed," he said.
The president-elect said his new team will help put in place new rules that will help "crack down on the culture of greed and scheming."
"There needs to be a shift in ethics on Wall Street," he said.
Schapiro, who would be Obama's top Wall Street regulator and investor protector, said that investor trust "is the lifeblood of financial markets." She called for tough enforcement action by incoming regulators.
If confirmed by the Senate:
- Schapiro, who served as an SEC commissioner in Republican and Democratic administrations and is currently the head of the Financial Industry Regulatory Authority, would take over an agency that faces growing criticism for its failure to protect investors and detect trouble brewing on Wall Street.
The SEC stands at what could be one of the most difficult times in its history, buffeted by criticism for failing to detect signs that major Wall Street banks were in trouble before the financial crisis erupted and for lax oversight and enforcement in other areas.
As the scandal involving Madoff continues to stun the financial world, revelations have surfaced that staff at the SEC repeatedly failed over the course of a decade to fully investigate credible allegations against him. SEC Chairman Christopher Cox on Tuesday ordered the agency's inspector general to investigate what went wrong.
- Gensler, a former Treasury official in the Clinton administration, would lead the Commodity Futures Trading Commission, which is an independent agency created by Congress to regulate trading in the commodity futures and option markets.
- Tarullo, a Georgetown law professor who also worked for President Bill Clinton, would fill an open seat on the Federal Reserve board in Washington.
His selection would allow Obama to begin to put his imprint on the Federal Reserve. All the present board members, including chairman Ben Bernanke, were hand picked by Bush. Tarullo would fill one of two vacant seats on the seven-member board. A third seat -- now held by Fed governor Randall Kroszner -- also will become available.
As a member of the Fed board, Tarullo would have an important voice in deciding policy to help jolt the economy back to life. He would vote on decisions about interest rates as well as ways to help break through the credit clog. He would also have a hand in shaping new regulations.
Obama's moves come amid incredible economic strife. The unemployment rate is at 6.7 percent, a 15-year high. The economy has lost nearly 2 million jobs since the recession started last December, and the recession is on track to be the longest since the Great Depression. Stock markets are sinking, the housing market is in disarray, and credit is hard to get.
The announcements came on Obama's fourth straight day of appearances to unveil top nominations.
Transition officials say they expect more nominations this week before Obama leaves on a holiday vacation to his native Hawaii.
Obama also intends to name Republican Rep. Ray LaHood of Illinois as transportation secretary, Democratic officials said. Obama has yet to announce choices for the Labor Department, senior intelligence positions or the Office of U.S. Trade Representative. Rep. Xavier Becerra, D-Calif., had been penciled in as trade representative, but he announced Tuesday that he intends to remain in the House.
In addition, numerous sub-Cabinet posts remain unfilled. Dr. Gail Russeau, a Chicago neurosurgeon, is a leading contender to become surgeon general, officials said.
