Sept. 14 (Bloomberg) -- President Barack Obama, speaking a year after Lehman Brothers Holdings Inc.’s collapse, warned against complacency as the financial crisis ebbs and said Wall Street firms must accept a new regime of “common-sense” regulations to avoid another market meltdown.

Obama used the backdrop of Federal Hall in New York City to renew his push for revamping market regulations. The president urged the financial community to support that goal and he emphasized the need for global coordination on financial oversight.

“There are some in the financial industry who are misreading this moment,” Obama said. “Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them.”

Lehman’s bankruptcy helped trigger a global financial crisis that led to more than $1.6 trillion in losses and writedowns by financial institutions and unprecedented government interventions in banking, insurance and auto industries.

In response to the financial crisis, the Obama administration proposed on June 17 changes to U.S. financial regulations, including oversight of the systemic risks that large financial institutions pose to the economy, new ways for the government to dismantle failed companies and a regulator to oversee financial products for consumers.

Government Involvement

Americans can be confident that “the storms of the past two years are beginning to break,” Obama said.

“While there continues to be a need for government involvement to stabilize the financial system, that necessity is waning,” he said, adding that “normalcy cannot lead to complacency.”

Obama called on Wall Street to “embrace” reforms, not fight them.

“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,” Obama said.

He said financial institutions need to rebuild trust and not wait for new legislation to take action.

‘Plain Language’

“You don’t have to wait to use plain language in your dealings with consumers,” Obama said. “You don’t have to wait for legislation to put the 2009 bonuses of your senior executives up for a shareholder vote. You don’t have to wait for a law to overhaul your pay system so that folks are rewarded for long-term performance instead of short-term gains.”

Richard Parsons, chairman of Citigroup Inc., was among those in the audience, and he applauded Obama’s willingness to work with Wall Street firms.

“All of us who are in the financial services sector have to take a little bit more responsibility,” Parsons, who served on Obama’s economic advisory team during his transition, said in an interview.

The president defended his call for the creation of a consumer financial protection agency to regulate financial products such as mortgages and credit cards.

The banking industry and Republicans have said such an agency would limit consumer choice and access to credit.

“Nothing could be further from the truth,” Obama said. “The lack of clear rules in the past meant we had the wrong kind of innovation.”

New Rules

The president said the administration will work with the financial industry to develop new rules and regulations that will “promote transparency and accountability” without stifling growth and innovation.

“But the old ways that led to this crisis cannot stand,” he said. “And to the extent that some have so readily returned to them underscores the need for change and change now.”

In addition to an overhaul of U.S. rules, the world’s largest and fastest-growing economies need to work together to fill regulatory gaps, Obama said.

Finance ministers and central bankers from the Group of 20 nations agreed on a blueprint for changes to financial services regulations, including global standards on pay, on Sept. 5 in London. Among them is a global pay code that includes forcing banks to “claw back” cash awards if earnings falter and more closely tying compensation to long-term performance.

G-20 Meeting

The issue will be at the forefront when Obama plays host to a meeting of G-20 leaders Sept. 24-25 in Pittsburgh.

“As the United States is aggressively reforming our regulatory system, we’re going to be working to ensure that the rest of the world does the same,” Obama said.

The administration’s focus on health-care legislation has overshadowed work being done to craft a new set of financial regulations that the president called for earlier this year.

Americans for Financial Reform, a coalition of consumer, labor and community leaders, plans to ramp up its grassroots campaign in the coming weeks to urge lawmakers to support Obama’s plan.

“People’s frustration and fear about what’s happening to their jobs and communities, that still is there,” said Heather Booth, the group’s executive director.

The Senate Banking and the House Financial Services committees are drafting the legislation. The House in July approved a measure aimed at limiting incentives in executive pay that spur excessive risk taking.

Frank and Dodd

The House committee’s chairman, Massachusetts Democrat Barney Frank, and Senate Banking Chairman Christopher Dodd, a Democrat from Connecticut, and other architects of the legislation have backed away from a provision in Obama’s proposal that would give the Federal Reserve authority to monitor the systemic risk from all large companies whose failure could threaten the stability of the financial system. Instead, support is building for a council of regulators that would share that authority.

Seventy percent of Americans lack confidence the federal government has taken safeguards to prevent another financial industry meltdown, according to an Associated Press-GfK poll. Almost eight out of 10 respondents said banks and lenders that made risky loans deserve quite a bit of the blame.

The telephone survey of 1,001 adults was conducted from Sept. 3-8. It had a margin of sampling error of plus or minus 3.1 percentage points.

After his speech, Obama had a private lunch with former President Bill Clinton at Il Mulino, an Italian restaurant in Greenwich Village.

To contact the reporters on this story: Nicholas Johnston in New York at njohnston3@bloomberg.net; Catherine Dodge in Washington at cdodge1@bloomberg.net

Last Updated: September 14, 2009 14:03 EDT

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