– John Kemp is a Reuters columnist. The views expressed are his own –
President Barack Obama’s proposed curbs on bank size and proprietary risk-taking will be criticised for being vague, hard to implement, and focusing on issues that were only part of the cause of the recent crisis.
But the president should ignore self-interested counsels of perfection from the industry that aim to preserve the status quo. The plan is good politics, and good policy.
On the political front, the plan is a belated attempt to reposition the administration and congressional Democrats. It aims to channel the popular revolt that washed away Democrats in New Jersey and Virginia last autumn and now in Massachusetts.
For much of the year, the administration and its allies have seemed obsessed by issues which are low on the list of voters’ concerns (healthcare, climate change) or reward special interests (bank bailouts) while appearing impotent to do anything about the rising tide of unemployment and punish those responsible for causing the crisis.
The president was radical where the electorate is cautious (healthcare and climate) but appeared to advocate the status quo where voters wanted change (banking, jobs and incomes). While each of these policies can be justified, the combination made the administration appear dangerously out of touch. The bank plan is an attempt to reconnect with the voters.