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Obama: Wall Street, Washington share blame

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Obama: 'Little to fear'
  • NEW: Obama says taxpayers should never again be on the hook because a firm is deemed 'too big to fail'
  • Obama says reform is in the interest of the country and the financial industry
  • Senate Agriculture Committee approved bill Wednesday to regulate derivatives

New York (CNN) -- President Obama on Thursday called on Wall Street to join him in efforts to reform the financial sector, telling an audience in Manhattan that the reforms he is proposing are not only in the best interest of the country, but would also benefit the financial sector.

"Ultimately, there is no dividing line between Main Street and Wall Street. We will rise or we will fall together as one nation," the president said in a speech aimed at the financial industry.

Obama said the goal of Wall Street reform is to ensure that taxpayers never have to pay for bailing out a firm considered "too big to fail."

Obama rejected a claim by opponents of reform proposals before Congress that the changes would lead to future bailouts.

"That may make for a good sound bite, but it's not factually accurate," Obama said. "In fact, the system as it stands is what led to a series of massive, costly taxpayer bailouts. Only with reform can we avoid a similar outcome in the future. A vote for reform is a vote to put a stop to taxpayer-funded bailouts. That's the truth. End of story."

Obama said that while the American economy is showing signs of improvement, "until this progress is felt not just on Wall Street but Main Street we can't be satisfied."

"That crisis was born of a failure of responsibility -- from Wall Street all the way to Washington -- that brought down many of the world's largest financial firms and nearly dragged our economy into a second Great Depression," the president said.

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Obama didn't beat up on Wall Street in his speech, in part because the White House believes it's winning the reform fight and doesn't need to stir the pot, senior administration officials said.

Instead, the president told the audience that the reforms he is proposing are not only in the best interest of the country, but are also in the best interest of the financial sector.

The president reiterated five key principles he wants to see in Wall Street reform legislation.

They include ending the idea of a bank being too big to fail, enacting the Volcker rule -- named for former Federal Reserve Chairman Paul Volcker -- that limits the risks banks can take, making complicated financial trades known as derivatives more transparent, creating a consumer financial protection agency and allowing investors to have more say in the compensation of bank company executives.

"The only people who ought to fear the kind of oversight and transparency that we're proposing are those whose conduct will fail this scrutiny," he said.

Obama ended his speech by quoting a Time magazine article quoting bankers saying if reform passes it will be a disaster.

Then he pointed out that the article was from the 1930s -- during the fight over creation of the Federal Deposit Insurance Corp.

Read the Time story from June 5, 1933, edition

Once back in Washington, the president is expected to ask congressional leaders for bipartisan support on a reform bill.

On Wednesday, the Senate Agriculture Committee voted 13-8 in favor of a bill that would impose regulations on the complex system of Wall Street trades known as derivatives.

Watch how derivatives work

Senate leaders will look at merging the measure with a financial regulations reform bill already passed by the Senate Banking Committee that is headed for debate by the full chamber.

The House of Representatives passed a regulatory overhaul in December.

The White House has started some preliminary discussions on Capitol Hill, with Obama meeting with congressional leaders last week in the push for regulatory overhaul.

"All of us recognize that we cannot have a circumstance in which a meltdown in the financial sector once again puts the entire economy in peril," Obama said. "I'm absolutely confident that we can work out an effective bipartisan package that assures that we never have too big to fail again."

CNN's Ed Henry and Kristi Keck and CNNMoney contributed to this report.