The people not in the room
President Obama says he wanted a “light touch” in his adminstration’s approach to regulatory reform. And he certainly appears to have gotten that, after a quick read of a draft copy of the administration’s 85-page “white paper.”
Much of the meat of the reform package has been known for quite a while and some of it–like the plan to create a new consumer financial products protection agency–is good. But too much of the reform proposal seems more aspirational than anything else. I stopped counting, but the word “should” appears throughout the text far too many times.
After Wall Street banks, credit rating agencies, greedy mortgage lenders and unscrupulous mortgage brokers almost brought the world economy to the brink of collapse, it’s time for Obama to get as tough with the financial markets’ players, as he did with that fly seen buzzing around him during a CNBC interview. (For those who didn’t see it, Obama showed great skill in swatting and killing the fly without a missing a beat).
Bill Mahr, the left-leaning, politically engaged comic, had it just right when he called out Obama for being too much of a conciliator and not being more forceful in dealing with the banking crisis–and other urgent problems. It’s good that Obama seeks out lots of viewpoints, but at the end of day he needs to be decisive and bold in forming his own.
Too much of this reform proposal reflects the Wall Street friendly sentiments of Treasury Secretary Tim Geithner and White House economic adivsor Larry Summers. Stephen Labaton has a good story in The New York Times today about all the people–the lobbyists, industry representatives, policiticans and consumer advocates–that got to meet with the White House team as they put together this “light touch” regulatory reform package.
But most notable is the list of people not in the room–some of the actual victims of Wall Street’s malfeseance. Where were the victims of Bernie Madoff and R. Allen Stanford? Where were the investors who were told auction rate securities were as safe as money market funds? Where were the investors who were told that Lehman issued structured notes were “principal protected” and a conservative investment? Where were the homeowners suckered into taking out adjustable rate mortgages and told time and again that housing prices never fall.
I could go on and on. The point is that this package of reforms would have been a good response to something like the bursting of the tech bubble–even the scandals at Enron and WorldCom. But it’s an inadequate response to the worst financial crisis since the Great Depression.