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The Amazing Shrinking Regulatory Overhaul

I wrote yesterday that it looked to me like President Obama had undershot rather than overshot in his proposals for changes in the nation's financial regulatory system.

David Cho and Zachary A. Goldfarb writes in The Washington Post:

The plan President Obama unveiled yesterday to overhaul the government's oversight of the financial system was not the wholesale remaking of Washington that the administration had initially envisioned.

As the proposal came under intense pressure this spring, its chief architects held firm to a few reforms they deemed the most fundamental to averting another financial crisis while giving ground on nearly everything else.

Time and again, lawmakers, regulators and industry lobbyists pressed their concerns behind closed doors at the White House and the Treasury Department, according to participants.

Joe Nocera writes in the New York Times that:

in terms of the scope and breadth of the Obama plan — and more important, in terms of its overall effect on Wall Street's modus operandi — it's not even close to what [Franklin Delano] Roosevelt accomplished during the Great Depression.

Rather, the Obama plan is little more than an attempt to stick some new regulatory fingers into a very leaky financial dam rather than rebuild the dam itself. Without question, the latter would be more difficult, more contentious and probably more expensive. But it would also have more lasting value....

If Mr. Obama hopes to create a regulatory environment that stands for another six decades, he is going to have to do what Roosevelt did once upon a time. He is going to have make some bankers mad.

Timid as it may have been, however, it still managed to ruffle feathers all over.

Walter Hamilton and Jim Puzzanghera write in the Los Angeles Times:

At its core, President Obama's overhaul of regulations for the financial industry seeks a fundamental change: Make the federal bureaucracy work for consumers, not just Wall Street. And Wall Street, not surprisingly, doesn't like it.

Stephen Labaton writes in the New York Times:

No sooner had President Obama proposed a new regulatory road map for the country's financial system on Wednesday than senior lawmakers expressed reservations about one of the plan's central elements — to broadly expand the reach of the Federal Reserve to regulate financial risk across the entire system.

And Binyamin Appelbaum writes in The Washington Post:

Legislators, regulators and advocates all welcomed the idea of change, but industry groups already are arguing that elements of the plan will hurt consumers or the broader economy, not to mention financial firms.

Opposition is piling up with particular speed against the idea of a new agency with broad powers to protect borrowers and other customers of financial firms, setting up a high-stakes contest between the industry and the White House for the loyalty of a few moderate senators who increasingly hold the balance of power.

By Dan Froomkin  |  June 18, 2009; 1:03 PM ET
Categories:  Financial Crisis  
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In other words, the Blue Dog dynamic, just like with health care. That's to be expected.

Obama doesn't want to go the full Krugman "make banking boring again" route--he'd like to leave room for big profits and creative investment products. I hope the bankers lose the tug-of-war, but we'll see. The evidence is overwhelming, that we can't trust industry--any industry--to police itself.

Posted by: whizbang9a | June 18, 2009 1:59 PM | Report abuse

For now how about just re-instating the Glass-Steagall Act? How many more Federal employees and Czars will this new regulatory organization have. Soon we will have more Czars for the Comrade In Chief than Congressional Representatives.

Posted by: Bubbette1 | June 18, 2009 4:45 PM | Report abuse

Also, pass HR 1207 for an audit of the Federal Reserve. Let's see what has been going on behind the curtain.

Posted by: Bubbette1 | June 18, 2009 4:51 PM | Report abuse

Dan, I think it's absolutely wrong that you were fired by the WaPo. The paper has turned itself into the Moonie Times or The Weekly Standard instead of being one of the leading papers of our country.

Only Eugene Robinson remains as a voice of reality in a sea of neo-cons, conservatives and 'stay the course' pundits.

This will only decrease the popularity of the paper.

Posted by: cfeher | June 19, 2009 8:14 AM | Report abuse

Why is Dan Froomkin getting fired?

maybe its because he writes 20 words and then qoutes other people for 3/4 of a page?

just maybe

Posted by: dummypants | June 19, 2009 2:30 PM | Report abuse

Obama needs to come right out and tell the American people that organized crime and special interest are running our government. These criminals are not the newly elected politicians but the old and stale that know exactly how to deter any idea that endangers their position in the free market. They do nothing other than party vote and pass out money to special interest that seems to cost the average tax payer money rather than aid the economy with good jobs and lower taxes. Their smiling mannequin looking faces are regularly seen in your local papers around election time fighting for medicare, social security, or the military. Same old stuff every time. Their worthless leadership has made us the biggest debtor country in the world. They have us buying our house and paying them property tax to live in them. People in our country are dying because they don't have medical insurance. Sheriff sales for taxes are breaking up families and putting people on the streets. Fathers and mothers are working long hour just to get bye. Children are being neglected. College's are nothing more than a money mafia that gets you a good paying job that a high school drop out could do. All this and more while our military and federal government are touring the world for the benefit of special interest. What other country of people in the world are this stupid and exactly who is benefiting?

Posted by: kimkimminni1 | June 21, 2009 11:35 AM | Report abuse

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