Obama says Wall Street stable, but warns against return to old ways

Obama says Wall Street stable, but warns against return to old ways Washington  - US President Barack Obama on Wednesday said the US financial system has stabilized, but warned Wall Street not to return to the risky practices that brought it to the brink of collapse last year.

"One of the success stories of the past six months is that we really have seen a stabilization of the financial system," Obama said at a White House press conference. "People are no longer talking about the financial system falling off a cliff."

But with many US banks reporting surprising quarterly profits last week, Obama said he was concerned the Wall Street "culture" that provoked the global financial crisis was still in place.

"It's a good thing if (banks) are profitable again," Obama said. "But what we haven't seen I think is the kind of change in behaviour and practices that ensure that we don't find ourselves in the same fix again."

Obama did not give specifics about what practices banks were now repeating. But he touted his proposed overhaul of the financial regulatory system as the only means to keep US banks from continuing the mistakes of the past.

US banks have been blamed for taking careless risks in the housing market over the past decade. Many offered loans to homeowners that could not afford them, while not maintaining enough reserves to guard against a housing market crash that began in 2006.

There has also been public outrage over millions of dollars in bonuses paid to executives at banks that were forced to turn to a government bail-out in October to survive the financial crisis. Many banks have now paid those loans back.

Obama said he hoped to give shareholders a greater say in the salaries and bonuses of executives. He also suggested he could back a plan to charge banks a fee for making riskier loans - a means of protecting taxpayers from footing the bill.

"If we don't pass financial regulatory reform, banks are going to go back to the same things that they were doing before," Obama said.

The Treasury Department earlier Wednesday sent the bulk of its proposal for regulatory reform to Congress. The administration wants to create a "council" of regulators to monitor risks to the entire financial system.

Obama also hopes to get new powers to step into major banks before they collapse and give the US central bank more authority to keep tabs on the country's largest financial institutions. (dpa)