Well, the first year or so of Obama’s administration has been interesting. The healthcare battle seems to finally be over as the Democrats have successfully pushed through the much needed reform bill. But, the war for reform has just begun and if the previous battle was any indication, it will not be easy.
So, ready your Pepto-Bismol, Tums and Wild Turkey because it is time for financial reform. And the crowd goes wild.
In all honesty, financial reform is very important, but it is also very boring. It is not as easy to understand as healthcare reform (which also is difficult to comprehend).
So, what do the commoners do while this stuff is being debated? Should we grab signs and start protesting things that we don’t understand?
See “Obama set to ban fishing video”
Or, should we maybe start the process of understanding financial reform?
I will choose the latter.
One of the best news publications out there today is, “The Economist.” They provide a well thought-out, thorough and articulate analysis of the most prominent events of the time. The recent financial reform has not escaped the grasp of their well thought-out analysis.
Here are some tidbits from The Economist:
In an era of general grumpiness with a hyperactive federal government, a Pew poll shows that 61% of Americans nonetheless want stricter restrictions on financial firms. A lawsuit brought against Goldman Sachs by the Securities and Exchange Commission has boosted expectations that a reform bill will pass. A slew of big financial firms have just announced stellar results, including Citigroup (which announced a $4.4 billion first-quarter profit this week) and Goldman (which announced a $3.46 billion profit), turning the heat up further.
Several aspects of the bill invite debate. Perhaps most notable is the proposal for a $50 billion fund, paid for by the banks, to keep banks in trouble from becoming a systemic risk to the financial system. The Republicans, echoing the anger of conservative populist “Tea Party” activists, have said that this will only encourage future bail-outs. The Democrats respond that it is to assist orderly liquidation of failing banks, not to rescue them. In practice, $50 billion might not be enough to cover the failure of even a single big bank. Both parties keep quiet about having supported past bail-outs for systemically important banks in 2008 and 2009. They would rather compete to show which is the most unwilling to do so in future.
The other big point for debate is a new consumer financial-services authority. Congress has already passed a bill reforming credit-card practices, and now wants a new body that will regulate things like mortgages and payday loans. Republicans worry about the cost of compliance that a new, standalone authority (with an aggressively pro-consumer slant) will impose on banks, especially small ones.
The third sticking-point is over derivatives. Both the banks and Republicans are opposed to the bill’s requirement that most derivatives trading be moved from dealer markets to regulated exchanges. Meanwhile a separate bill is moving through the Senate agriculture committee which is significantly tougher on banks than Mr Dodd’s proposal: it would force them to give up their swaps desks. For his part, Mr Obama says he will veto a bill that does not reform derivatives.
There is room for compromise on all these issues. But so far both sides prefer to play chicken: the Republicans to filibuster, the Democrats to paint the Republicans as protecting their fat-cat friends. The conventional wisdom is that the SEC’s case against Goldman now makes some kind of reform virtually inevitable; but it is not yet a foregone conclusion. Republicans do not want to be on the wrong side of this issue, but neither do they want to be rolled over as they were over health care: told to support a Democrat-only bill or get out of the way. Nor do American voters want the Democrats to do this alone. On such large, complicated issues they prefer reforms to come with a bipartisan stamp of approval.
The Democrats have the option of trying to peel off just one or a tiny number of Republicans. Susan Collins of Maine, along with Olympia Snowe of Maine and Bob Corker of Tennessee are the names mentioned most often. But the Republican leadership has been extraordinarily successful in keeping usually independent-minded senators on side. One Republican defector will not be enough to brand a bill bipartisan, and so any potential 60th vote from the Republican side will face enormous pressure from the leadership not to hand the Democrats a victory they will claim as theirs alone.
So the Democrats face a risk too. By not compromising with Republicans, they may be held in as much scorn as Republicans if a bill falls just short. Americans are still frustrated about the way health care was handled. Financial reform may be much more popular, but Democratic strategists will nonetheless have to remember that the way they have used their big majorities in both houses of Congress has made them extraordinarily unpopular, with just seven months to go before mid-term elections.
Recently, the opposition to this reform (big banks, Wall Street and the Republicans) said that this bill puts too much government regulation on the shoulders of the banks. They claim that if we reduce the amount of regulation that the market will correct itself.
They are not wrong either. The only problem is that when the market “corrects” itself, it will cost millions of people their jobs and will virtually destroy the US economy.
Besides using Herbert Hoover as a measuring stick for ideas, the Republicans have started a campaign of lies and trickery to derail any reform attempts. The deceit varies, but they all maintain the same common ground. That Obama is not a US citizen, is going to ban fishing, is sleeping with Goldman Sachs or is really a three-headed-toad that is hell bent on amphibian domination. They are all about how ‘bad’ and ‘scary’ Obama is.
So, with financial reform, why would we expect anything to be different?
Currently the momentum is on the side of the reformers. The hate speech and idiot-rhetoric of the Tea Party has lost any steam it gained in the main stream and is fighting against the current just to maintain ground.
I am not saying that we should all be jumping for joy at government expansion. I am just saying we need to battle an idea with another idea, not a bunch of unrelated gibberish.
Well, Obama gave his speech and Wall Street reacted unfavorably. But, what else did you expect? The SEC recently filed a fraud claim against Goldman Sachs which has continued the bad blood between the two entities.
As a reader (you), it might seem that I am all gun-ho about government and that I will dance to whatever song Obama wants to play. That is not the case.
In fact, I am a strong advocate of State’s rights and feel that the Fed’s role in our daily lives should be more limited then what it is currently.
Case in point:
When these banks were running amok with our money, the SEC was not there to protect the Taxpayers. We got screwed. What were they doing that was so important?
As the country was sinking into its worst financial crisis in more than 70 years, Security and Exchange Commission employees and contractors cruised porn sites and viewed sexually explicit pictures using government computers, an SEC investigation obtained by CNN showed.
“During the past five years, the SEC OIG (Office of Inspector General) substantiated that 33 SEC employees and or contractors violated Commission rules and policies, as well as the government-wide Standards of Ethical Conduct, by viewing pornographic, sexually explicit or sexually suggestive images using government computer resources and official time,” said a summary of the investigation by the inspector general’s office.
More than half of the workers made between $99,000 and $223,000. All the cases took place over the past five years.
“It is nothing short of disturbing that high-ranking officials within the SEC were spending more time looking at pornography than taking action to help stave off the events that brought our nation’s economy to the brink of collapse,” said Rep. Darrell Issa. The Republican is a ranking member of the House Committee on Oversight and Government Reform.
“This stunning report should make everyone question the wisdom of moving forward with plans to give regulators like the SEC even more widespread authority,” he said. “Inexplicably, rather than exercise its existing regulatory enforcement authority, SEC officials were preoccupied with other distractions.”
See the Question of the Week. “What should Obama do with Wall Street?”
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