Barack Obama's speech to Wall Street guardian.co.uk

President Barack Obama delivered a stern warning to Wall Street today that bankers must scrap "quick kills and bloated bonuses" in favour of a new sense of social responsibility as the first anniversary of Lehman Brothers' spectacular bankruptcy dawns with a sense of fragile hope for an economic recovery.

On a visit to the heart of New York's financial district a year on from the collapse of Wall Street's fourth largest bank which threw the global financial system into disarray, President Obama expressed confidence to an audience of senior figures in the financial world that "the storms of the past two years are beginning to break". But during an address inside a hall directly opposite the New York Stock Exchange which briefly quieted Wall Street's usual hubbub, the White House incumbent ordered the financial community to move further in cleaning up its act.

"There are some in the financial industry who are misreading this moment. Instead of learning the lessons of Lehman and the crisis from which we are recovering, they are choosing to ignore them," said Obama. "We will not go back to the days of reckless behaviour and unchecked excess that were at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses."

Obama has come under pressure from liberal Democrats, and from leaders of European nations, to be tougher in cracking down on bonuses and on unfettered risk taken by top US institutions. His appearance brought hundreds of financiers onto the street to stand outside Federal Hall, site of the inauguration of George Washington, and his language was far from sympathetic. Obama urged the leaders of top financial institutions to "embrace serious financial reforms" rather than fighting them, with a pledge of the biggest overhaul of regulation since the Great Depression."

"It was a collective failure of responsibility in Washington, on Wall Street and across America that led to the near collapse of our financial system one year ago," said Obama. He told bankers that they should not wait for legislative action forcing them to translate financial products into plain language, put executive pay up for shareholder votes and alter bonuses to focus on long-term, rather than short-term, performance.

"Many of the firms that are now returning to prosperity owe a debt to the American people," said Obama. "It is neither right nor responsible after you've recovered with the help of your government to shirk your obligation to the goal of wider recovery, a more stable system and a more broadly shared prosperity."

Although the president's address was billed in the US media as a "cautious victory speech", experts warn that the world's largest economy is far from free of trouble. More than 450 US banks and mortgage lenders have gone out of business and a further 416 are on a regulatory watch list of troubled firms. With 6.9 million people out of work, US unemployment stands at 9.7%, its highest since 1983.

Nouriel Roubini, the economist nicknamed "Doctor Doom" for his accurate early forecasting of the credit crunch, said vast losses in credit cards, student loans, commercial property and car loans are still working their way through the system, inhibiting any return to growth.

"All these losses, slowly, slowly, are adding up. It's going to be death by a thousand cuts. You're not going to have another blowout like Lehman because we decided nobody systemically important is going to be allowed to collapse but the financial system is severely damaged," said Roubini.

The Obama administration's plans to avert future crises include a sharpening of financial regulation to cover hitherto free-for-all markets in hedge funds and exotic derivatives, tougher powers for the Federal Reserve to monitor banks considered "too big to fail" and shareholder votes intended to counter excessive pay deals in corporate boardrooms. Mortgage companies will be obliged to hang onto part of every loan, rather than selling them on to shed risk. But the White House has backed away from earlier efforts to cap bankers' pay.

Stocks were subdued on both sides of the Atlantic as analysts reflected on a year's progress in cleaning up the banking system. The FTSE 100 index closed with a rise of 7 points to 5,018 and by lunchtime in New York, the Dow Jones Industrial Average slipped 27 points to 9,578.

The public have not forgiven bankers for their role in the global economic downturn. An international opinion poll across the G20 member nations by Globespan/PIPA for the BBC World Service found that only 32% of people are satisfied with the actions of banking executives to address the crisis. In Britain, views of the City are particularly negative with only 20% declaring themselves satisfied with bankers' behaviour and 78% unhappy after a year in which bonuses, derivatives and trading have become a subject of vitriolic popular discontent.

A sense of suspicion is mutual. Among financial professionals, few are willing to extend gratitude to government officials and taxpayers for intervening to prop up the banking system. Bob Iati, global head of consulting at the strategic advisory firm Tabb Group, said: "Those in the industry are very reticent to give the government credit for turning business around. Most are in favour of less regulation and certainly don't believe politicians have a good sense of what's going on."