Washington Extra
It was two years in the making, runs to 2,300 pages, took three Republicans to pass it, and 11 pens to sign it into law. President Barack Obama put the seal on a drastic overhaul of the rules governing Wall Street and the banking industry today, using a separate pen for each letter of his name.
Behind him, Joe Biden chatted throughout the signing ceremony, often with his back to the camera, so we just have to assume the vice president thinks this particular legislative victory is also a “big … deal”.
Influential business groups lined up with Republicans to criticize the new law for the 533 new regulations they say it imposes, while Obama’s one-time friend, JP Morgan CEO Jamie Dimon, was not even invited to the signing ceremony. No sign of a rapprochement in the relationship between the presidency and Big Finance, as Obama used the occasion to take another swipe at “unscrupulous” lenders and the “abuse and excess” that lay behind the financial crisis.
It was Obama’s second major legislative victory of the year, confounding all those obituaries of his presidency written in the wake of Scott Brown’s Massachusetts victory in January. But there was one other set of numbers today that the president may find particularly uncomfortable reading.
Another poll, this time from Quinnipiac, showed the president’s approval ratings falling to a new low, and independents continuing to desert the Obama cause. More voters are now saying they would pick an unnamed Republican over Obama in 2012, although at this early stage the president still comes out ahead when pitted against Sarah Palin.
For Ross Colvin’s account of the financial regulation signing ceremony, click here and for on the Quinnipiac poll, see our blog.
Here are our other top stories from today:
from Summit Notebook:
What if there were no “too big to fail”? Fed’s Hoenig has a vision
Democrats and Republicans alike on Capitol Hill say they want to toss out the concept of "too big to fail" in the financial regulation reform they are tussling over. That way if a financial firm is going to go under, it will go under, with no thought for a taxpayer handout.
Since the concept of "too big to fail" has yet to be erased by law, and its demise yet to be tested by a failing financial institution, it was interesting to hear how Kansas City Federal Reserve Bank President Thomas Hoenig envisioned the financial industry without that concept to lean on.
Looking back in time -- "If you had a clear resolution process, and you had clear rules on leverage," a domino-like string of large bank failures may have been less likely.
"And if the other institutions were sound but only had liquidity problems, the discount window could have been and would have been used in those instances," he said at a Reuters Global Financial Regulation Summit.
"So, I don't know the counter-factuals, but I know there's a reasonable case to say if the market knows the rules are firm, that the resolution process is under the rule of law, that you will be held accountable, and here are the steps we're going to take, would you have had the same outcome?"
"If you cannot say that we can address this, then you need to break them up," he said.
Hoenig sees financial regulation reform as a measure of prevention that will mitigate another banking crisis. "But no one can guarantee anything. But I do know that if we don't address it, then I know exactly what the outcome is."
Who are you calling a “punk staffer”?
House Republican leader John Boehner’s comment about “punk staffers” involved in the writing of the financial regulation bill did not seem to sit well with White House economic adviser Lawrence Summers.
In an appearance at the National Press Club, Summers made a point of bringing up the comments by Boehner, who urged bankers to stand up for themselves and said they should not “let those little punk staffers” working on the bill take advantage of them.
Boehner may not have been spoiling for a fight, but he got one.
Summers pressed his criticism of lobbyists who the Obama administration accuse of trying to water down the proposals for tighter regulation of Wall Street.
“I do not think of the people who work on this project as ‘little punk staffers.’ I do not think that those who want to address these issues are ‘little punk staffers’ who need to be stood up to,” Summers said.
“And at a time when industry has hired –- has spent $1 million on lobbyists per member of Congress, at a moment when there are four lobbyists per member of the House and Senate working on this issue, we in the administration do not believe that the prominent issue is allowing bankers to stand up for themselves.”
Summers, a former Treasury secretary, his deputy Diana Farrell and several Treasury staff members worked closely with Senate Banking Committee Chairman Christopher Dodd on the 1,336-page legislation the Democratic senator introduced this week.
Boehner is a lacky of the bank lobby, send him off to his lobbiest career this november.
from MacroScope:
Another kind of death panels
U.S. Representative Barney Frank has never been shy about expressing his opinions. His opening remarks at a hearing he chaired with Treasury Secretary Timothy Geithner on Wednesday was no exception. Frank poked fun at a political squabble over healthcare reform as he detailed his position on what to do about non-bank financial firms considered "too big to fail."
"There will be death panels enacted by this Congress, but they will be for non-bank financial institutions that will not be considered too big to die. I say that because we have this euphemism that we are going to be 'resolving' these institutions. It has not been my experience that when someone says they are going to resolve something, they kill it. We are talking about dissolution, not resolution. We are talking about making it unpleasant for the entities. This is not a fate people will want."
Have lessons been learned on Wall Street?
President Barack Obama went to Wall Street on the one-year anniversary of the Lehman Brothers collapse to make a push for greater regulation of the financial industry.
He’s proposing creating a “resolution authority” to end the concept that some firms are “too big to fail.” And Obama is hoping that financial regulatory reform gets passed this year.
Obama had some words for those who defend the status quo or argue for less regulation. “There will be those who engage in revisionist history or have selective memories, and don’t seem to recall what we just went through last year,” he said.
Some critics say reform is needed, but Obama’s plan is just not the right prescription for what ails the financial industry.
Mark Calabria, director of financial regulation studies at Cato Institute, says Obama’s plan would “make bailouts a permanent feature of the regulatory landscape.”
He argues that “real reform” would be fixing Fannie Mae and Freddie Mac, the tax code and monetary policy, and that implementing Obama’s plan could mean the next financial crisis would be bigger than the current one.
What do you think? Is Obama’s plan the fix needed for Wall Street, or something else?
Wall street has not learned anything other than the pretense of humility. It is a collection of greedy, short termist individuals with a mandate only for self aggrandisement.
Exactly like the administration that is proposing to teach it a lesson, the administration before it that failed to spot the crisis (of which a number of advisors and Fed members have tennure in both administrations) and the next administration.
The government has encouraged and colluded with Wall Street due to the tax take and Wall Street has encouraged and colluded with the government due to the potential to make that tax take.
We will be going down this road again.
