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Get Ready for the Next Rumble

The question of how to reshape the nation's collapsed financial system hasn't been a big political issue thus far -- in part because the Obama administration has yet to make its intentions clear.

But Peter G. Gosselin writes in the Los Angeles Times that a big partisan battle may be ahead.

"The administration is under mounting pressure to deploy hundreds of billions -- perhaps trillions -- of new dollars to shore up financial firms into which the government has already poured a fortune. Analysts say the only way to make such a politically unpopular step palatable is for the new president to explain what he'll do to ensure the problem never happens again.

"That means a return to the kind of regulatory system that Wall Street and economic conservatives fought to dismantle going back to Ronald Reagan's presidency and continuing through that of George W. Bush -- or something even more stringent....

"Democratic and Republican appointees to a congressionally created panel overseeing the government's $700-billion financial bailout issued drastically different accounts of what needed to be done to keep the nation's banks and markets from veering off course in the future.

"On one side, the Democratic majority, led by Harvard University bankruptcy expert Elizabeth Warren, called for new regulatory structures as sweeping as any since the Great Depression. The framework would be likely to transform how Wall Street does business....

"On the other side, the group's GOP minority suggested that about all that's needed are stricter standards for mortgages and streamlining existing agencies. It strongly implied that the country's financial problems stem mainly from too much, not too little, regulation."

By Dan Froomkin  |  February 3, 2009; 11:50 AM ET
Categories:  Financial Crisis  
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Comments

What they should do is seize the banks, ie nationalize them, remove the bad "assets" to a "bad bank" recapitalize them, maybe new management and then turn them loose as corporations under the Feds, sort of like USPS. If and when they are profitable, they can do an IPO and payoff the government. The Swedish model. This way, the shareholders pay a price (since they got the profits in the run up) and we get a clean bank right now and not a never ending drain. You get to really clean house.

Posted by: samson1 | February 3, 2009 1:05 PM | Report abuse

"On the other side, the group's GOP minority suggested that about all that's needed are stricter standards for mortgages and streamlining existing agencies. It strongly implied that the country's financial problems stem mainly from too much, not too little, regulation."

Classic. Ignore the other 90% of the problems that led up to this complex catastrophe, further imply that the fault lies entirely with borrowers by proposing only stricter mortgage standards, and then pay off loyal constituents with even more of the same deregulation that allowed investment banks to spraypaint charcoal and call it gold.

The GOP truly is as intellectually bankrupt right now as at any time in my life. Were it not for the existence of an parallel media structure dedicated to championing them and their failed ideas, I would have a hard time believing they are a viable major political party.

Posted by: BigTunaTim | February 3, 2009 1:46 PM | Report abuse

Watching hearings that the TARP panel held, I listened in horror as Rep. Jeb Hensarling once again trotted out the right wing mantra about FDR creating the Great Depression with his New Deal. If the right has no viable spokesmen, then there will be no ideas that relate to reality from them. These irrational arguments are for the purpose of obstructing, not assisting, recovery.

Posted by: jocabel | February 3, 2009 2:15 PM | Report abuse

Let the gov't lend to people and cut the banks out. Or give the money to the people and let them pay back their loans to the banks. Whatever we do we cannot keep funding the lifestyles of the rich and criminal Wall St. executives.

Posted by: davidbn27 | February 3, 2009 2:39 PM | Report abuse

@samson1:

I agree with your sentiment but there is one flaw in your solution to the problem.

Current shareholders haven't yet realized any profits, those who have realized profits are no longer shareholders.

Posted by: rpixley220 | February 3, 2009 3:11 PM | Report abuse

We've tried the GOP way. It was a bridge to nowhere. Now, it's time for something different.

Posted by: truthman3 | February 3, 2009 6:06 PM | Report abuse

Put a fox in a hen house. Next day... some hens are missing. Add more hens. Next day.... more hens are missing. Repeat daily to infinity.
OR: chain the fox.

Posted by: badgervan | February 3, 2009 8:38 PM | Report abuse

Looks to me like we've basically got two groups coalescing in DC.

One says, "If you wouldn't regulate us so much, we wouldn't cheat so often." Unfortunately history disagrees.

The other says, "Well, Wall Street and the banks got us into this, so they're in the best position to get us out." This doesn't even pass the laugh test.

Clearly we should nationalize anything too big to fail, and let the rest fail. We should switch to a twenty-first century post-imperial economy as soon as we can to maximize our remaining influence in the world.

We don't need more televisions or superhero movies or prisons. We need schools, hospitals, and public transportation. We don't need more roads and cars. We need to invest in the country's future with solar and wind and water and bio.

It's not chance that capitalism, at least as practiced in the US, allows those at the top to rig the game, to tilt the table in their direction. We need to re-orient our minds and values, and build a different way to do things.

Posted by: chuckdupree | February 4, 2009 3:30 AM | Report abuse

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