Audio Transcript:

MARCO WERMAN: I'm Marco Werman and this is The World.

BARACK OBAMA: We will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis where too many were motivated only by the appetite for quick kills and bloated bonuses.

WERMAN: President Obama issued a warning to Wall Street today and to paraphrase a former Wall Street firm when Barack Obama talks people listen.

OBAMA: Those on Wall Street cannot resume taking risks without regard for consequences and expect that next time American tax payers will be there to break their fall.

WERMAN: the president's direct audience was Wall Street itself. He spoke at Federal Hall in the heart of America's financial community. But audiences were listening around the world � in London, in Hong Kong, in Tokyo. Andrew Walker is the BBC's economics and business correspondent. Andrew thanks for joining us.

ANDREW WALKER: My pleasure.

WERMAN: President Obama actually didn't focus much on the global economy however he did say that the US is leading the way to a global recovery. Let's hear what he had to say first there.

OBAMA: The United States is leading a coordinated response to promote recovery and to restore prosperity among both the world's largest economies and the world's fastest growing economies.
WERMAN: Andrew Walker what is that response that the US is leading?

WALKER: I think the financial rescue package was absolutely central to it. And I mean it is interesting to hear President Obama talking about the US leading it. In the early stages, in the immediate aftermath of the collapse of Lehman Brothers, it was terribly chaotic. And in fact the initial proposals from the US, admittedly under the previous administration, were to do something � mainly buying problem assets from the banks � that they didn't actually do in the end. They chose a different strategy in the end, namely investing in the banks. But I suppose it's fair enough to call it leading in the sense that the big heavy lifting in dealing with the financial crisis has been done by the United States. And it's also true that various other measures in particular the kind of fiscal stimulus � the government spending programs in particular. Again the US has done a lot of heavy lifting in coordination with governments around the world. So there has been a coordinated effort to try and pull the world back of what at least certainly felt like being the brink of a depression. And I think there's a reasonable case for saying they've more or less succeeded in that.

WERMAN: I was going to ask you how effective have these international efforts � the investing in banks and stimulus efforts � been to coming up with solutions?

WALKER: To answer that in a way you need an answer to the question what would have happened had it not been done? And you never know the answer to that for sure but I think there's a good case for saying that actually it would have got very, very nasty indeed if we'd had. There was certainly sufficient evidence to suggest that the banking system was on the brink of shutting up its doors. It was very reluctant to do business with other financial institutions and maybe sufficiently panicked banks might have started calling in loans from all kinds of people and firms. You know that really would have been very bad news indeed. It is not absurd to say that we might have been looking at another depression � certainly a much, much nastier recession that we have actually experienced. And it has been � still is perhaps � a very unusually bad recession. Now on a global level it's clearly the worst one we've had since the 1930s.

WERMAN: President Obama speaking of interoperability between countries also spoke about free trade and protectionism. Let's hear him again.

OBAMA: No trading system will work if we fail to enforce our trade agreements � those that have already been signed. So when, as happened this weekend, we invoke provisions of existing agreements we do so not to be provocative or to promote self-defeating protectionism. We do so because enforcing trade agreements is part and parcel of maintaining an open and free trading system.

WERMAN: Andrew Walker with the BBC was President Obama there talking about Chinese tires � his announcement over the weekend to limit the import of Chinese tires to the US and would you call that protectionism?

WALKER: The answer I think is yes to both of those. He was certainly talking about Chinese tires and yes I mean of course it is protectionism of sorts. But he was keen to emphasize there that he is using provisions within the World Trade Organization's rule book that do allow countries to take these kind of protectionist measures in certain specified circumstances. Now I have no doubt that China feels that the US has broken the rules and maybe ultimately will get a ruling from the World Trade Organization on whether or not that is the case. But I do think it is important to note that a lot of the kind of measures that have been taken by the US and other governments too that have had some sort of protectionist affect have at least made the attempt of doing it within the rules. So it's not been a kind of protectionist free for all that some people feared.

WERMAN: Okay Andrew finally I need you to pull me into Economics 101 class. Here's a final comment that you can help us understand. A final comment from Mr. Obama's words today.

OBAMA: Just as gaps in domestic regulation lead to a race to the bottom so gaps in regulation around the world. What we need instead is a global race to the top including stronger capital standards as I've called for today.

WERMAN: Okay Andrew Walker I don't really understand that last line and I'm sure a lot of our listeners join me in that. �We need a global race to the top including stronger capital standards.� Explain that.

WALKER: That is about the resources that banks and other financial institutions have to put aside so that they've got a kind of financial cushion. And basically where they get the main source of those financial cushions is raising capital from shareholders. So basically what President Obama has in mind is international agreements under which banks would basically have to get larger amounts of cash in from shareholders compared to the amount risk they took by lending money on.

WERMAN: What did you think of Mr. Obama's speech today and the tone he had?

WALKER: I think he was talking to a number of different audiences there and clearly one of the key things that he was trying to do was to get a little bit of extra momentum behind the reforms of US regulation that he wants to get through congress. He was talking both to congress to encourage them to get on with it and to Wall Street to try and discourage them from resisting the elements in it they don't like. He was also talking to an international audience though. He wants to see similar kinds of reforms being introduced on a global level. Because if you do have these kind of more stringent capital requirements, for example introduced in one country, then there's a real temptation for banks to ship as much as their business as they can elsewhere where they can get away with putting aside lower levels of capital. So it was a speech very much to multiple audiences.

WERMAN: Andrew Walker, the BBC's economics and business correspondent. Thank you so much.

WALKER: It's my pleasure.