President Barack Obama’s failure to mention financial reform during Tuesday night’s State of the Union address is a disappointing setback that shows the White House has lost interest in the topic, advocates working to curb fraud on Wall Street told The Huffington Post.
"I was extremely disappointed by this sort of notion [that] we can just turn the page on the financial crisis," said Neil Barofsky, a former special inspector general for the Troubled Asset Relief Program who has been active in advocating for financial reform since leaving government service.
During Tuesday’s speech, the president made one direct reference to the financial crisis, saying during the first few minutes of his address, “Together, we have cleared away the rubble of crisis, and can say with renewed confidence that the state of our union is stronger.”
Obama noted that housing is healing, stocks are on the rise, "and consumers, patients, and homeowners enjoy stronger protections than ever before.”
Barofsky noted what was left out of the speech. "No mention of regulatory reform. No mention of the very significant work that still needs to be done under Dodd-Frank. No reference to the necessary things we need to do beyond Dodd-Frank to really fix the financial system," Barofsky said.
The continued political horse-trading over how to implement the Dodd-Frank financial reform law of 2010, the recently renewed push by congressional Republicans to weaken the Consumer Financial Protection Bureau, and the fact that the "too big to jail" issue has been highlighted recently led some to at least hope that Obama would broach the subject of financial reform.
None of those issues were directly touched upon during Tuesday's speech. The word “bank” only appeared in the speech in reference to “food banks.” “Financial institutions” were mentioned once, portrayed as victims of foreign computer hackers “seeking the ability to sabotage” them.
“I don’t think it’s the right thing to completely omit reform from the State of the Union,” said Lisa Gilbert, a director at pubic interest group Public Citizen. “[It] shows the topic has dropped in priorities, and that’s something we’re not happy about.”
This speech stands in stark contrast to one year ago, activists noted, when the president criticized “phony financial profits,” warned banks that “the rest of us are not bailing you out ever again” and asked for “a small fee on the largest financial institutions” to “give those banks that were rescued by taxpayers a chance to repay a deficit of trust.”
The president also used his 2012 speech as an opportunity to unveil an initiative within the Department of Justice -- a special investigative unit that Obama said would "hold accountable those who broke the law" in the lead up to the financial crisis.
“The president didn’t say anything about the promises he made in the last State of the Union,” Kevin Whelan, campaign director at anti-foreclosure and financial reform advocacy group Home Defenders League, said. “A year later, not only have no bankers been arrested, but no actions have been taken on the scale that is needed to bring relief to communities.”
In contrast to the financial reform advocates, some people in the financial services community were elated at the lack of attention Wall Street received in the speech. Politico's Ben White quoted an unidentified "top Wall Streeter" Wednesday saying that "the fact [Obama] didn't bash the financial sector is obviously notable and possibly suggests a more pragmatic second term approach.”
That dynamic bodes ill for the economy, Barofsky, the former TARP watchdog, said.
"The real risk is that [Wall Street lobbyists] are going to win this war in the trenches through regulatory rules," he said, calling that possibility "a sad and predictable outcome."
"It certainly augurs the fact that we aren’t going to have the type of reforms we need to prevent another crisis," Barofsky said.