Obama insists economy is 'back from the brink' (Roundup)

By Chris Cermak Jul 23, 2009, 2:46 GMT

Washington - US President Barack Obama on Wednesday said the financial system had been stabilized and the country's ailing economy was on its way to recovery, but he warned of many more job losses and a long road ahead.

In an evening press conference that focused exclusively on domestic policy, Obama also defended his own prescriptions for reviving the economy and renewed pressure on lawmakers to fix the country's costly health care system.

'We have been able to pull our economy back from the brink,' Obama said at the White House, urging the public to give his economic plans more time to work.

But with the US unemployment rate hitting 9.5 per cent in June, Obama said: 'I'll be honest with you - new hiring is always one of the last things to bounce back after a recession.'

While jobs continue to be lost, Obama said the financial crisis that sparked the wider economic downturn was coming to an end. But he warned Wall Street not to return to the kinds of 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.

Many US banks reported surprising quarterly profits last week, but 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 an 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.

The Obama administration has proposed increasing the government's oversight over all corners of Wall Street. Obama said he was open to charging banks a fee for riskier loans in order to keep taxpayers from footing the bill of any future crisis.

But it was health care that dominated most of the press conference. Obama said the key to the economy's long-term success was fixing a system that is already the costliest in the industrialized world.

US legislators have been locked for weeks in a heated debate over the details - and cost - of a health care overhaul that has confounded many previous administrations.

Obama insisted that reforming health care would ultimately reduce the federal budget deficit, which has soared amid the economic crisis and prompted concerns from other countries, most notably China.

'The American people are understandably queazy about the huge deficits and debts we're facing right now,' Obama said.

Obama said health care was key to achieving long-term budget cuts: 'We're also gonna have to change health care, otherwise we can't close that (budget) gap.'

The federal deficit is projected to hit 1.8 trillion dollars, or nearly 13 per cent of economic output this year. Obama said the spending was necessary over the short term to combat the worst economic crisis since the Great Depression.