Obama’s Newfound Populism: All Hat, No Cattle
Marshall Auerback
http://www.newdeal20.org/?p=6956">New Deal 2.0 (A Project of the Franklin and Eleanor Roosevelt Institute)
President Obama is taking a sharp, populist tone with Wall Street and scolding the ways of Washington. Once again, he is looking to the Senate to follow the House and pass a top legislative priority: sweeping financial regulatory reform. It might feel satisfying to hear the President criticize “reckless”, “fat cat” bankers, but the financial reform legislation passed by the House last Friday (and lauded by the President) provides little incentive to change their behavior. In reality, populism — with nothing of substance behind it — is just cynical posturing designed to mask genuine failure. To use an expression favored by his predecessor, this president is once again showing himself to be all hat, no cattle.
Appealing to the peanut gallery at this stage is an insult to the voters’ intelligence. The most telling comment on the latest reforms came from the stock market: Bank stocks ended the day higher last Friday (when the House bill was passed to great fanfare), with the KBW Banks index slightly outperforming the benchmark Dow Jones industrial average.
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Even positive aspects of the bill, such as the establishment of the Consumer Financial Protection Agency, were significantly watered down. New Democrats — the people we used to call “Republicans” — won concessions that give federal regulators more scope to preempt state consumer-protection laws deemed to “significantly interfere with or materially impair a national bank’s ability to do business.” The change was sponsored by Congresswoman Melissa Bean, the most bought and paid for member of the House (not an inconsiderable political achievement amongst our current political profiles in courage). Bean justified the change on the basis of having “robust national standards and enforcing them uniformly”, which sounds good until one considers the history of federal regulators, none of whom have historically moved when they plainly should have done so. How many federal regulators do you recall actually blocking the most egregious excesses in the mortgage market over the past 15 years? Preventing the states from moving proactively means that we will likely repeat the experience of the 1990s. Historically, the reform impetus has emanated from the states, not the federal government — Governor Eliot Spitzer’s administration being a prominent illustration.
More and more voters are beginning to believe this façade of reform is deliberate — a cynical act of kabuki theatre by the President to mask his own reticence to deal with the problem in an honest manner. It was clear to many of us that the president may not have been serious about reform when he picked Tim Geithner and Larry Summers as the leaders of his economic team a year ago, and essentially relegated any genuine progressive to the Cabinet equivalent of Siberia, as Matt Taibbi recently highlighted. Yes, Summers and Geithner both have ample experience. But does that mean that they were qualified to take on the positions they were granted in the Administration? I suppose that depends on whether you think a doctor who botched your surgery ought to be given the role for the next one, simply because he has greater familiarity with your body than another surgeon.
Some on the left have hit Taibbi very hard for the attacks on Obama. Matt is no conservative, and more importantly, he is correct: Taibbi calls the President what he is, a sweet talking man who cannot fulfill one single promise he made to the public to get elected. So we have this incompetent financial reform bill, which will not place any limits on another systematic collapse. We have a health bill with no means of sensibly restraining cost pressures within the private health insurance industry. We are still fighting two wars, one of which is being escalated. The economy is still struggling and jobs are being lost.
Far easier to resort to cheap populism than to actually do something about it. If the President were serious, he would be pointing out that the bankers have been undercutting every effort at reform, and have been paying off Congress to put loopholes into all legislation. If he were genuinely upset, he would be channeling the country’s anger constructively, by calling on the population to take to the streets in mass protests against Wall Street with a view to shutting down the biggest banks and breaking their power once and for all. Of course, the President would never do anything so “irresponsible”. Far better to throw a few bones to the peasants and hope that the appearance of reform pacifies them.
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