Andrew Leonard has some specific advice for Barack Obama:
Why on earth would the Obama administration want to “avoid an ugly public fight with powerful interests in an election year”? Shouldn’t the opposite be true? Shouldn’t the Obama administration be going out of its way to pick a fight with Wall Street? Could there be any better opportunity to tap enduring popular anger at the financial sector and draw a clear line demarcating Obama from his challenger, Mitt Romney?
This is in response to the suggestion that the Administration wants to avoid an ugly fight with powerful interests in an election year. Leonard does invoke the now cliched FDR “I welcome their hatred” speech from Madison Square Garden in 1936, though he keeps it in fair territory because he’s not suggesting Obama can just use the bully pulpit to shame the banks and get Republicans to buckle, but rather merely to win the general election. This is appropriate, I think. FDR didn’t exactly precede that speech with slashing attacks on the wealthy, nor did he succeed it with such attacks. He used that rhetoric to win the election, and then spent most of that term attacking an overly activist Supreme Court, trying to purge racist reactionaries out of his party, and preparing the country to enter into war. On the last, at least, Roosevelt came to rely more and more on wealthy elites and Republicans, ultimately bringing Henry Stimson and Frank Knox, two of the very people whose hatred his 1936 self welcomed, into his cabinet in the top two military posts.
I agree with Leonard that a strong Volcker Rule (making banks gamble with their own money, basically) would boost Obama’s standing with the public. Certainly, a loud fight over it would. And Obama could do it! For all we’ve heard about how Obama hates to play hardball, he has done it before, most recently by recess appointing Richard Cordray to the Consumer Financial Protection Bureau. And that also shows he’s willing to play hardball against finance. But, as I’ve written before, Obama doesn’t seem to share my (or the progressive left’s) opinions when it comes to Wall Street. This is neither a surprise nor is it incomprehensible. Wall Street heavily supported Obama in 2008, and Obama treated them like part of the team from then on. And politicians in power tend to try to hold together their coalitions. In retrospect, Wall Street’s support of Obama in 2008 was a blip, they’d always backed Republicans before that, and they’ve backed them since. Obama would have been wise to be absolutely ruthless with them from the start, treating them as the fairweather friends they are, but he thought they were his friends, and treated them accordingly. He avoided any direct (and only rarely indulged in general) criticism toward them. He appointed one of their faves, Tim Geithner, to Treasury, and later one of their own as Chief of Staff. His team was endlessly conciliatory toward the bankers, to no effect. This is, basically, a dangerously shortsighted sector of the economy we’re dealing with here, one with no mission other than making lots of money, and the riskier the bets, the more money you get. There’s no perspective, no appreciation for how they can hurt people, as John Lanchester has argued many times. Even modest safeguards and criticism insult these folks, which is why they back Republicans, who offer none. But Obama’s team never saw it this way, and it’s still not clear that they do. At this point, changing their tack on Wall Street would require overcoming significant inertia, not to mention it complicates the narrative of the bailouts. I wouldn’t take out a derivative contract on it happening.
What I find odd is how passive Obama has become about the Volcker Rule. During the FinReg fight, Obama touted it more than any other provision of the bill. He trotted out Volcker for the cameras and sold it as the signature policy of the entire measure, the thing that would keep more bailouts from happening. Sure, other elements of the bill were mentioned, but the Volcker Rule was front and center. It was never really what bankers or conservatives wanted (that would have been no bill at all), or what progressives wanted (Glass-Stegall reinstatement, Canadian-style limits on leverage and capital requirements, and a financial transaction tax were the big ones that I recall), or what moderates wanted (?). The Volcker Rule, in other words, wasn’t a “hip” policy, but it made a good amount of sense, and one had to have figured that Obama mentioned it so often because his policy wonk side was passionate about the idea. Which is good. But then he allowed Tim Geithner to get it stripped out of the bill and to get written by Treasury regulators, which was certain to result in a weaker provision, and now he seems oddly impassive about the strength of what will probably be his last chance to make substantive policy this term. We go from signature issue to “not wanting to fight with powerful interests in an election year,” which neatly exemplifies the contradiction of Obama’s term: he wanted to simultaneously change the face of American government and society while healing America, avoiding bickering and bringing the people together, and (of course) winning another term too. You can have one of those things, maybe two, but all is an impossibility–the only president who pulled it off was Lyndon Johnson, and that was only because a president was murdered. If Obama wants to make good policy on the Volcker Rule–and help himself get another term–he’s going to have to intentionally piss off a lot of people when he has a choice not to (and it should be mentioned that the Cordray recess appointment was the result of having no other choice). While it would be good policy and a good campaign issue, there is some risk attached to the move. I don’t know that he can do it. I hope so.
I just signed up for a new checking account and I was pleased to find this new legally mandated opt-out:
For those of you unfamiliar with the process:
- Before: Banks would automatically sign you up for “debit card overdraft ‘protection‘” [ed. LOL] and then charge you astronomical overdraft fees to process each debit card purchase you make when the bank knows that you don’t have any money in your account.
- Now: Following passage of the recent financial regulatory reform bill, customers like me get the option to say “No thanks. If I don’t have any money in my account, please decline the transaction and I will use another card, thank very much.”
This gets me to thinking about all the whining that went on during the passage of financial reform, and the banks complaining about how the new rules would hurt their profits. These days, it seems that if any bad practice is allowed to get entrenched over a period of time, the justified push for slapping it down is always met solely with diversions like “No! My profits!” or, “No! It will kill jobs!” For obvious reasons, the malefactors never argue from first principles.
It always makes me wonder what would happen if we were to suddenly discover that:
- an influential defense contractor has been running a highly profitable, decades-long raping and pillaging division (the “R&PD”),
- that employs 310,000 people in the U.S. alone,
- the expeditions that the R&PD go out on to get their booty (in both senses) are backed by a complex system of hedges and derivatives that all the big financial players invest heavily in.
In the land of my thought experiment, seriously ponder to yourself which aspect of this scenario would get more attention and lobbying:
- the killing, raping and pillaging part (you know, the bad stuff); or
- all those precious jobs that could be lost by rushed and heavy-handed government regulation, not to mention the catastrophe on Wall Street if we just yanked the rug out rather than letting the industry develop a self-regulatory body to study the problem for the next 5 years.
Sure, it’s an reductio ad absurdem but, to flavor your thinking, remember that some of the most strident opponents of drug law reform in California are the prison industrial complex and the prison guard’s union! Jobs! Profits! Nooooo!
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