The Problem With Leaving Financial Regulation Till September
As if the administration didn't have enough on its plate, Monday will see President Obama giving a speech on the need for financial regulatory reform, which has bogged down a bit in Congress.
This is one of the few places where I think the administration made a serious error in timing. Financial regulation reform was the natural partner for the bailouts. It was the only policy package that offered the hope of a sort of political closure for an angry public. The bailouts might have been necessary, but they were galling. A new regulatory approach, however, would at least have let the Obama administration argue that Wall Street had been badly punished, and a new norm had been quickly established. As it was, the bailouts just hung there, alongside AIG's compensation packages and news of Goldman Sachs recovering to post record profits and the American people facing down a record deficit. The angry public never received any satisfaction. Obama famously told the banks that he was all that was standing between them and the pitchforks, and he was right. But that's not a popular place to stand unless you have some alternative method of satisfying the mob.
The end result was that the Wall Street rescue was very loud and very swift, while regulation is happening very quietly, and rather late. The arguments for this are what they are: Time was needed to do it right, bandwidth was needed for issues such as health care, and the market's recovery was fragile. But politically, it robbed the American people of closure, and left a simmering anger that Wall Street had fleeced the country. Which it had. More substantively, it also gave the banks time to regain their footing, Republicans time to build some momentum, and the political system time to turn the bulk of its attention to other things. So it's not clear to me that the schedule will actually end up with a better result.
Photo credit: By Susan Walsh — Associated Press
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