With their Senate health care victory still fresh in the mind, is Team Obama finally getting serious about reforming Banking and Wall Street?
News reports that the White House is “growing frustrated that the banking industry is fighting President Barack Obama’s plan to overhaul financial regulations” seems to have been caused, in some part, by the mounting political backlash over big profits and bigger bonuses at Goldman Sachs and others.
As we have noted repeatedly — and unlike health care — the White House cannot rely on Congress for this one, as the place is fully bought and paid for by the finance lobby. Left to their own devices, the Parliament of Whores would produce extremely bank friendly regulatory reform. As we saw last week, the Financial Services Committee created the world’s biggest loophole, exempting more than 98% of all banks from consumer protection oversight (it exempts 8,000 of the nation’s 8,200 banks).
Regardless of your views on this particular bill, it is apparent that Congress is congenitally incapable of producing coherent regulatory reform when it comes to their patron saints, the large investment houses and banks.
Well, good news kids: It appears that the White House has had enough; They are finally beginning to push back against the banking lobby. Obama adviser Valerie Jarrett was quoted as saying “We are disappointed by the lobbying of anyone in the financial industry against regulatory reform.”
That is a very broad statement — in my read, it suggests a major change in policy is about to occur.
Even Larry Summers, the former hedge fund employee who has been way too friendly with Wall Street’s banks, may be finding religion. At the Economist’s Buttonwood gathering last week, he stated:
“Financial institutions that have benefited from government support can, should and must use this moment to think about what they can do for their country — by accepting the necessary regulation to protect the American people. There is no financial institution that exists today that is not the direct or indirect beneficiary of trillions of dollars of taxpayer support for the financial system.”
We will find out soon enough if this is lip service or something more significant.
As I have noted previously, it was a mistake to not pursue regulatory reform while the crisis was in full throat. And, the half measures that have been proposed won’t prevent the next crisis.
Obama Reform Plan Fails to Fix Whats Broken (June 18th, 2009)
Obama’s Weak Regulatory Reform For Derivatives (June 23rd, 2009)
Tactical Error: Health Care vs Finance Regulatory Reform (September 9th, 2009)
Summers: ‘Time has come’ for deep change for banks
Ronald D. Orol
MarketWatch Oct. 16, 2009
Top aides to Obama upbraid Wall St.
Michael A. Fletcher and Zachary A. Goldfarb
Washington Post, October 19, 2009
Obama Administration Pushes Back at Bank Lobbying on Regulation Share
Bloomberg Oct. 16
Bill Shields Most Banks From Review
NYT, October 15, 2009