Simon Johnson - Huffington Post - 1/21/10
Paul Volcker, legendary central banker turned radical reformer of our financial system, has won an important round. The WSJ is now reporting:
President Barack Obama on Thursday is expected to propose new limits on the size and risk taken by the country’s biggest banks, marking the administration’s latest assault on Wall Street in what could mark a return — at least in spirit — to some of the curbs on finance put in place during the Great Depression.
This is an important change of course that, while still far from complete, represents a major victory for Volcker – who has been pushing firmly for exactly this.
Thursday’s announcement should be assessed on three issues.
1. Does the president provide a clear statement of why we need these new limits on banks? The administration’s narrative on what caused the crisis of 2008-09 has been lame and completely unconvincing so far. The president must take it to the banks directly – tracing the origins of our “too big to fail” vulnerabilities to the excessive deregulation of banks following the Reagan Revolution and emphasizing how much worse these problems became during the Bush years.
2. Are the proposed limits on the total size (e.g., assets) of banks, or just on part of their operations – such as proprietary trading? The limits need to be on everything that banks do, if they are to be meaningful at all. This is not a moment for technocratic niceties; the banks must be reined in, simply and directly.
3. Is there a clear strategy for (a) taking concrete workable proposals directly to Congress, and (b) win, lose, or draw in the Senate, running hard with this issue to the midterm elections?
Push every Republican to take a public stand on this question, and you will be amazed at what you hear (if they stick to what they have been saying behind closed doors on Capitol Hill.)
The spin from the White House is that the president and his advisers have been discussing this move for months. The less time spent on such nonsense tomorrow the better. The record speaks for itself, including public statements and private briefings as recently as last week – this is a major policy change and a good idea.
The major question now is – will the White House have the courage of its convictions and really fight the big banks on this issue? If the White House goes into this fight half-hearted or without really understanding (or explaining) the underlying problem of unfettered banks that are too big to fail, they will not win.
President O’bama is finally getting it. We can not meaningfully address problems in the United States if we do not address the excesses in the financial industry. The financial sector is the foundation for everything else in this country. If it stays rotten in it’s philosophy and practices, that cancer will drive everything else. As long as profit at all costs rules our society it is pointless to speak about any other cultural issues. It is the unfettered and unregulated pursuit of profit which is the single biggest contributor to the culture of death. It is not abortion. It is not gay marriage. It is not stem cell research.
Forget health care as that is a dead horse and it deserves to be. This vein attempt to hide another hideous corporate welfare program behind concern for unisured Americans deserves to be buried. It’s epitaph should include the idea that it was the last failed attempt by corporate interests to purchase this government and fleece it’s people for the sake of corporate profit.
Here’s a simple thought direct from the pen of Pope Benedict: People must come before profit. It’s a thought the USCCB should be all over in demanding the President Obama finally walk his talk. They should man up and take their croziers and start shaking them in the faces of any politician or corporate board member who balks at regulating the financial industry. Forget about sending hapless poor women to hell for caving into the economic expediency of abortion or castigating gay couples for the crime of loving one another. Get after the real cancer. That’s the one currently on display in all it’s virulence in Haiti. That’s the same cancer that has eaten away the life savings of too many senior Americans, forced solid traditional families out of their homes, resulted in millions unable to find jobs, taken hope in the future from our younger generations, made our own health care a distant second to plain old survival, allowed wealth distribution in this country to lag behind third world countries, and greases the wheels of two war machines grinding up the lives of our soldiers and the mostly innocent populations in the countries in which they are operating.
Go after the real cancer bishops and support this president on this issue no matter what you think of his take on any other issue. If Americans can’t afford to survive in America all the rest of your disagreements are meaningless dross.