Mark Calabria of Cato, a supersmart observer of the financial sector in DC, gives me his two cents:
She emails me on the Obama plan to limit bank activities:
1) I think that they are now panicking and veering from solution to solution. They will roil the markets and just make themselves panic more. Politically, i’m not sure. It will be hard for republicans to be against this, just like it is hard for them to fight the bank tax. Although if markets fall by hundreds of points, it gives the GOP an opening to say that Obama doesn’t know what he’s doing.
Obama’s plan to limit risky activities at big banks is more about forcing Republicans to take tough votes than preventing another credit meltdown.The Volcker Plan was already rejected by the WH econ team (Summers, Geithner) and this is being pushed by the political team (Rahmbo, Axelrod) in the wake of the Massachusetts Meltdown. (In fact, this may help tamp down pressure from congressional Dems to dump the econ team.)