|Obama spoke of the need to reform regulatory practives to better protect US citizens [EPA]
Here in Washington, the economic news is grim. A new government report says the number of people in the United States living in poverty increased by more than two million last year, to 39.8 million.
The official poverty rate jumped to an 11-year high, while household incomes fell across the board. Unemployment is currently at 9.7 per cent and increasing month by month.
Larry Summers, senior adviser to Barack Obama, the US president, says joblessness will likely remain high for years to come.
This is the legacy of failed laissez-faire, anti-regulation, risk-encouraging economic policies established under George Bush, the former president.
And it is before this backdrop that Obama went to New York on Monday, to give a major speech on Wall Street calling for reform of the financial system on the unpleasant anniversary of the collapse of Lehman Brothers, a US investment bank.
Obama spent considerable time congratulating himself for measures he has already taken, and indeed he deserves credit for quick action to stave off a second Great Depression.
Swift passage of the $787 billion stimulus package applied an essential tourniquet to stop the haemorrhaging of jobs and bankruptcies.
"Every credible economist, Democratic and Republican, said at the time we took office if we don't do something this could be a lot worse," Obama told the American TV programme '60 Minutes' on Sunday.
Since January, he has stabilised the financial market. Credit is flowing again, car sales are rising and housing prices have settled somewhat.
"It was a failure of responsibility that allowed Washington to become a place where problems – including structural problems in our financial system – were ignored rather than solved"
Barack Obama, US president
"We can be confident that the storms of the past two years are beginning to break," Obama told his audience on Wall Street.
Members of the opposition Republican party had voted unanimously against the stimulus.
These days, many Republican politicians have taken up the refrain that "the stimulus isn’t working - it's a failure".
On the contrary, almost all economists agree the stimulus is responsible for staving off a catastrophe and is an essential driver of a return to growth.
The decision to save General Motors and Chrysler - another move that evoked howls of protest from the right of the political spectrum - prevented a cascading collapse of what is left of the US manufacturing industry.
If the car companies had shut down, as Republican politicians did their best to make happen, the unemployment rate would today be far above 10 per cent.
Their actions indicate Republicans and conservatives are hoping, praying, and actively working to ensure that the economy does not recover and instead becomes worse.
Protracted high unemployment will hurt Obama and the Democrats in the 2010 election. So it is quite clear that the opposition party's interest is in wrecking the economy even further. They did a pretty good job when in power.
But while much has been done to save jobs in the midst of the worst recession in generations, little has changed in the reckless, risk-taking culture of Wall Street, the source of financial contagion that sickened the world.
Obama is proposing the most ambitious overhaul of the financial system since the 1930s to promote transparency and accountability.
To prevent big financial firms from deceiving and taking advantage of consumers, he wants to set up a financial consumer protection agency.
This agency would crack down on practices that get ordinary people into extraordinary financial trouble: for example, when credit card companies or mortgage lenders entice customers with extra-low 'teaser' interest rates, which then balloon to extortionate levels once the customer is locked into a contract.
Prior to the crisis, financial firms like hedge funds and the notorious insurance company AIG took advantage of gaps, loopholes and lacunae in the outdated system of government oversight to engage in wildly risky behaviour involving exotic financial instruments, such as credit default swaps.
Obama wants to rearrange the regulatory architecture, giving more power to the Federal Reserve and other agencies, and establishing clear lines of authority. He would require banks to keep more capital on hand to withstand panics.
Obama did not refrain from criticising the fecklessness of the Bush administration in allowing Wall Street to run wild.
"It was a failure of responsibility that allowed Washington to become a place where problems – including structural problems in our financial system – were ignored rather than solved," he said.
Obama wants to create a system whereby large financial firms teetering on the edge of insolvency can be dismantled or revived without threatening systemic failure and without requiring a big injection of taxpayer funds.
|Recklessness in the finance markets has resulted in people losing their homes [EPA]
And he said other nations must work together closely to promote reforms.
In addition to these practical steps, Obama had a moralising message for Wall Street bankers, brokers and arbitrageurs.
"I want them to hear my words," Obama said. "We will not go back to the days of reckless behaviour and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall."
Obama's points were, as usual, eloquently presented. But he did not explicitly call for caps on bonuses and salaries for top bankers and executives. Without such restrictions, I am dubious about whether Wall Street high-rollers will do more than just shrug off the presidential lecture on responsibility.
The banking and brokerage lobbies are already pushing back against reform with public campaigns warning that more regulations will restrict consumer choice and choke off economic growth.
Those arguments will find a receptive audience in congress, which relies on rich campaign contributions from the banking, insurance and financial industries.
And that's the real root of the economic excesses and inequities in the global financial system - the undue influence of corporate money in politics and public policy. Obama said nothing about that.