Two Takes on Obama’s Financial Reform

Here are two takes on Obama’s Financial Reform – first, the Wall Street Journal looks at what others are saying:

Ezra Klein, in his Washington Post blog, would have liked Obama to be a little more (Franklin) Rooseveltian in his denunciations of Wall Street practices. Comparing Obama’s speech to one FDR gave blasting the financial community in 1936 in New York, Klein writes that Obama “delivered a rather different message to organized money. He asked not for their hatred, but for their support. ‘I am here today because I want to urge you to join us,’ he said, ‘instead of fighting us in this effort. I am here because I believe that these reforms are, in the end, not only in the best interest of our country, but in the best interest of our financial sector.’”

Klein notes that the the proposed legislation Obama is touting merely changes the regulatory scheme for the financial industry. “But the question is whether that’s a sufficient thing. Whether we also need legislation that is decidedly not in the financial sector’s best interest. Legislation that brings down their share of total domestic profits and forces down their relative wages and makes it less lucrative for smart college graduates to rush into investment banks. “

Howard Fineman of Newsweek, by contrast, saw plenty of populist red meat. “There are those, like Ezra Klein, who think President Obama somehow wimped out in his speech at Cooper Union. But my take is different. I think that, certainly by his standards, that was a fiery populist speech—arguably, at least in tone, one of the toughest he’s given as president.”

Fineman continues: “He essentially said that anyone who doesn’t go along with his and the Democrats’ proposals are selfish, irresponsible, crooked, or all three. What is Obama up to with this? He’s trying to counter antigovernment populism with antibusiness populism. No, he didn’t demand that CEOs give their bonuses back, but he portrayed ‘Wall Street’—a phrase he repeated eight times in a short speech—as the ground zero of all that’s wrong with the markets. He and his advisers know what the public (and private) polling shows: that Wall Street and banks are deeply unpopular.”

Rich Lowery of National Review, meanwhile, sees deep underlying problems with the legislation itself. He thinks Democrats have taken in so much in campaign money that it’s showing in the law they are trying to push through Congress. “When Obama went to Cooper Union to chide the titans of finance on reform, it was basically a tiff within the family (although there are signs they are starting to warm to the GOP again). Wall Street has its share of ideologically motivated liberals who wouldn’t blink if Obama called for nationalizing the banks, so long as he continued to support abortion on demand. Goldman Sachs alum Jon Corzine is emblematic of the breed; he made a bundle on Wall Street before devoting himself in all earnestness to bankrupting New Jersey.” Democrats, he writes, “are running a protection racket. No matter how bad a ‘reform’ is, it could be worse. This is how they bought off the drug companies in the health-care debate — by threatening worse. It is why the insurance companies were conflicted. Yes, they were maligned. But they’d live to fight another day, and in the meantime, the government would mandate that people buy their product.”

Andrew Sullivan of The Atlantic sees financial regulation as fitting in with an Obama administration that has been much more productive than most think. “Here we are a year and a half in and what do we see? An end to illegal torture of terror suspects. A beginning to a saner method of detaining, trying and convicting terror suspects. Adept handling of the worst financial crisis and recession since the 1930s, leading to a profitable bank bailout (excluding Freddie and Fannie) and a return to growth….Salvaging of the automobile industry, which is now showing signs of life. Passage of an ambitious stimulus package that has helped repair many crumbling parts of the US infrastructure and poured money into green industry. The biggest social policy reform since LBJ – guaranteeing access to health insurance for all Americans. Financial re-regulation of an out-of-control Wall Street, and the beginnings of real scrutiny (see Goldman) of the self-serving corruption at the heart of the financial industry…My view is that Obama should aim for immigration reform next. Why? We need it. And it will force the GOP into an even whiter, nastier, angrier posture as they fight for the midterms. The long-term damage to the GOP among Hispanics will cement Democratic electoral dominance for quite a while.”


Next we have the coverage in the World Socialist Web Site – WSWS.org:

In a deferential speech pitched to top bankers in the Cooper Union audience, Obama urged what he called the “titans of industry” to call off their lobbyists and “join us” in passing his so-called reform. The subtext was that the White House and congressional Democrats had already removed most of the provisions to which the bankers objected, and were prepared to go even further in accommodating them.

The speech came less than a week after the Securities and Exchange Commission (SEC) indicted Goldman Sachs, the most profitable Wall Street bank, for defrauding its clients in order to cash in on—and encourage—the collapse of the subprime housing market in 2007. Obama did not mention the indictment. Nor did he suggest that what he called a “failure of responsibility” on Wall Street included criminal activities. Among those in the audience to whom Obama appealed was Lloyd Blankfein, the CEO of Goldman, who attended the event to underscore his contempt and defiance of the SEC.

It was also a week in which the top five banks reported combined profits of more than $15 billion for the first three months of 2010—a huge increase over the previous year.As the Goldman indictment makes clear, these profits are bound up with rampant fraud that helped crash the financial system–driving millions in the US and around the world into unemployment and poverty—followed by trillions of dollars in taxpayer bailouts and virtually free credit from the Federal Reserve.

…With complete cynicism, Obama and congressional Democrats, with the assistance of the media, are presenting their regulatory proposals as a sweeping reform comparable to the banking measures implemented by the Roosevelt administration in the Great Depression.

In reality, the Senate measure, like the bill passed last December by the House of Representatives, proposes certain marginal changes in the way government agencies monitor financial firms, but does nothing to reverse the deregulation of banking carried out over the past three decades, which dismantled the restrictions imposed during the 1930s. It introduces no structural reforms to limit, let alone ban, the speculative practices that have become central to the accumulation of profit and personal wealth by the American ruling class.

Obama and the congressional Democrats have rejected capping executive pay or banning credit default swaps, collateralized debt obligations, structured investment vehicles and other exotic forms of speculation that played a major role in the financial crash and global recession. Provisions to regulate derivatives markets, a major source of profits for the top Wall Street banks, are loaded with loopholes and exemptions. A financial consumer protection body will have no power over 98 percent of banks or any car dealerships, and will be subject to a Federal Reserve veto.

The most important innovation in the House and Senate bills is the establishment of a procedure for the government to wind down large financial firms, including insurance companies and other non-bank entities, whose failure could trigger a systemic collapse. This is being billed as an end to “too-big-to-fail” financial companies and a guarantee against future taxpayer-funded bailouts.

It is nothing of the kind. The proposal would institutionalize government rescue operations to protect the interests of bank executives, shareholders and creditors and the wealth of the financial elite as a whole, ultimately at public expense. It is designed to keep the banking system in private hands while preparing for the inevitable consequences of allowing the banks and big investors to continue “business as usual,” i.e., another financial crisis on the order of the crash of 2008.

In his speech on Thursday, Obama declared that “a vote for reform is a vote to put a stop to taxpayer-funded bailouts.” This is a lie. The administration-backed bill passed by the House would give the Federal Deposit Insurance Corporation, with the consent of the treasury secretary and the Federal Reserve, the power to “extend credit or guarantee obligations … to prevent financial instability during times of severe economic distress.” This amounts to a blank check to use taxpayer funds for future bailouts.

Obama has continued Bush administration policies that, far from reining in Wall Street, have strengthened the power of the biggest financial firms. The share of all banking industry assets held by the top 10 banks rose to 58 percent in 2009, from 44 percent in 2000 and 24 percent in 1990.

Nothing other than a license for Wall Street to continue stealing from the American people could possibly emerge from a political system dominated by an all-powerful financial aristocracy and awash in corruption and bribery. The financial industry has to date spent $455 million to lobby Congress on the financial overhaul.

The securities and investment industry has thus far handed out $34 million for the 2010 election cycle. Goldman Sachs is the second biggest corporate donor to political campaigns, after AT&T. Since 1989, the bank’s political action committee and employees have given $31.6 million in campaign contributions, two-thirds of the total to Democratic candidates.

The financial industry funded Obama’s presidential election campaign to the amount of $15 million. Goldman was Obama’s single biggest donor, giving nearly $1 million.One indication of the ties between Wall Street and the White House: Gregg Craig, who until January was Obama’s White House counsel, has been hired by Goldman Sachs to defend the firm against the SEC indictment.

Now the fundamental problem I have is when I do fact checking I find that the World Socialist Web Site is riddled with facts. Checks at IMF, OpenSecrets.org, Pew, NYTimes, and even the WSJ prove that many [but certainly not all] of the assertions being made by WSWS are “on the money” . The biggest problem beyond the socialist tone is the confusion over citing the legislation. There is some big differences amongce in the House Legislation versus the Senate Bill – and the Agriculture Committee’s proposal on derivatives which WSWS fails to clarify. Also all of the measures are still a)not finalized and approved and b)reconciled which also leaves wiggle room.
I am surprised that only the NYTimes has a good comparison and compendium of what is currently in the financial reform legislation delineating 7 aspects of the bill – but even this is not up to date on the latest changes particularly the Senate Agriculture Committee’s important recommendations on derivative trading. So I will have to continue to go to WSWS.org to get another viewpoint on key financial and political news even though WSWS.org provides no links to the various sources [such poor Net Etiquette just sinks the credibility of WSWS, but I digress] it uses so freely and relatively accurately. Nonetheless, Paul Krugman at NYTimes catches the popular mood more exactly – Don’t Cry for Wall Street.

Pin It on Pinterest