Jan 29, 2010
The debate over banks and
banking came front and center this week. In his toughest language yet,
President Barack Obama vowed to veto financial reform legislation that
is not tough enough on Wall Street. "The lobbyists are already trying
to kill it," Obama told Congress in his State of the Union address.
"Well, we cannot let them win this fight. And if the bill that ends up
on my desk does not meet the test of real reform, I will send it back."
The President's rhetoric offers an important measure of progress.
Now we can be assured that the political elite are paying attention to
the poll numbers showing an unprecedented anger at the big banks and
the Wall Street bailouts. Democrats are starting to figure out if they
don't take up this populist message and run with it in November, the
Republicans will.
But the rest of the President's speech and the other dramatic
developments in the banking world this week indicate that Democratic
actions are falling far short of their rhetoric, a pattern that voters
are sure to notice.
First, the speech. Many had anticipated a big announcement on jobs.
With jobless rates in the double digits and a projected 5-10 year haul
to get employment back to normal levels, workers were hoping for
something big and bold. Instead, Obama proposed $30 billion in TARP
funds to get credit flowing to small businesses. $30 billion to put 16
million Americans back to work? $30 billion when the Wall Street bonus
pool for a few thousand bankers was $140 billion this month? Democrats
will live to regret this missed opportunity.
Also on Wednesday, U.S. Treasury Secretary Tim Geithner was called
on the carpet once again by irate members of the House for his
mishandling of the AIG bailout. To their credit, several Democrats
asked the toughest questions. But Geithner bobbed and weaved and no
knock-out punches were landed. This is a problem for the Democrats. The
whole incident paints an ugly picture of the federal response to the
financial meltdown, best described by Representative Edolphus Towns
(D-NY): "The taxpayers were propping up the hollow shell of AIG by
stuffing it with money and the rest of Wall Street came by and looted
the corpse."
On Thursday, Federal Reserve Chairman Ben Bernanke was reconfirmed
by the Senate for another four year term. His nomination had been in
trouble and a record number of senators voted no, but Obama stood by
his man and pushed him through. The problem with Bernanke is best
summarized by economist Simon Johnson: "Bernanke is an airline pilot
who pulled off a miraculous landing, but didn't do his preflight checks
and doesn't show any sign of being more careful in the future - thank
him if you want, but why would you fly with him again (or the airline
that keeps him on)?" While Bernanke may have saved Wall Street, he has
shown little interest in using his power as Fed Chairman to
aggressively aid Main Street. He is not the man for the job in these
tough economic times and that will soon be apparent to the detriment of
the Democrats who secured his confirmation.
Ultimately, however, the most important developments of the week
were played out behind closed doors in the Senate. Senate Banking
Chairman, Chris Dodd, made the decision some time ago to try to devise
a bipartisan financial reform package. His package of reforms was then
handed over to four bipartisan working groups. With thousands of bank
lobbyists swarming the hill, it is no surprise that these groups are
busily making the Dodd bill worse.
The derivatives language is being weakened and bankruptcy is
emerging as the preferred method of unwinding financial institutions,
which could leave taxpayers to foot the bill for this expensive
procedure. To truly end the "too big to fail" problem and crack down on
the reckless behavior of the biggest banks, we need strong, specific
preventative measures such as leverage limits, capital and margin
requirements, limits on counterparty exposures, a ban on proprietary
trading and limits on bank size through a low cap on total liabilities.
Even Obama's signature reform, an independent consumer agency is in
danger of being whittled down to a corner desk in a failed federal
agency.
The President understands that the Wall Street bailout was "about as
popular as a root canal." But if Democrats continue to peddle this type
of rhetoric while neglecting meaningful reform as they have done this
week, the Republicans will run away with the anti-bailout message and
with the election in November.
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Mary Bottari
Mary Bottari is the Chief of Staff to Madison, Wisconsin Mayor Satya Rhodes-Conway. Previously, she was the Director of the Center for Media and Democracy's Real Economy Project.
The debate over banks and
banking came front and center this week. In his toughest language yet,
President Barack Obama vowed to veto financial reform legislation that
is not tough enough on Wall Street. "The lobbyists are already trying
to kill it," Obama told Congress in his State of the Union address.
"Well, we cannot let them win this fight. And if the bill that ends up
on my desk does not meet the test of real reform, I will send it back."
The President's rhetoric offers an important measure of progress.
Now we can be assured that the political elite are paying attention to
the poll numbers showing an unprecedented anger at the big banks and
the Wall Street bailouts. Democrats are starting to figure out if they
don't take up this populist message and run with it in November, the
Republicans will.
But the rest of the President's speech and the other dramatic
developments in the banking world this week indicate that Democratic
actions are falling far short of their rhetoric, a pattern that voters
are sure to notice.
First, the speech. Many had anticipated a big announcement on jobs.
With jobless rates in the double digits and a projected 5-10 year haul
to get employment back to normal levels, workers were hoping for
something big and bold. Instead, Obama proposed $30 billion in TARP
funds to get credit flowing to small businesses. $30 billion to put 16
million Americans back to work? $30 billion when the Wall Street bonus
pool for a few thousand bankers was $140 billion this month? Democrats
will live to regret this missed opportunity.
Also on Wednesday, U.S. Treasury Secretary Tim Geithner was called
on the carpet once again by irate members of the House for his
mishandling of the AIG bailout. To their credit, several Democrats
asked the toughest questions. But Geithner bobbed and weaved and no
knock-out punches were landed. This is a problem for the Democrats. The
whole incident paints an ugly picture of the federal response to the
financial meltdown, best described by Representative Edolphus Towns
(D-NY): "The taxpayers were propping up the hollow shell of AIG by
stuffing it with money and the rest of Wall Street came by and looted
the corpse."
On Thursday, Federal Reserve Chairman Ben Bernanke was reconfirmed
by the Senate for another four year term. His nomination had been in
trouble and a record number of senators voted no, but Obama stood by
his man and pushed him through. The problem with Bernanke is best
summarized by economist Simon Johnson: "Bernanke is an airline pilot
who pulled off a miraculous landing, but didn't do his preflight checks
and doesn't show any sign of being more careful in the future - thank
him if you want, but why would you fly with him again (or the airline
that keeps him on)?" While Bernanke may have saved Wall Street, he has
shown little interest in using his power as Fed Chairman to
aggressively aid Main Street. He is not the man for the job in these
tough economic times and that will soon be apparent to the detriment of
the Democrats who secured his confirmation.
Ultimately, however, the most important developments of the week
were played out behind closed doors in the Senate. Senate Banking
Chairman, Chris Dodd, made the decision some time ago to try to devise
a bipartisan financial reform package. His package of reforms was then
handed over to four bipartisan working groups. With thousands of bank
lobbyists swarming the hill, it is no surprise that these groups are
busily making the Dodd bill worse.
The derivatives language is being weakened and bankruptcy is
emerging as the preferred method of unwinding financial institutions,
which could leave taxpayers to foot the bill for this expensive
procedure. To truly end the "too big to fail" problem and crack down on
the reckless behavior of the biggest banks, we need strong, specific
preventative measures such as leverage limits, capital and margin
requirements, limits on counterparty exposures, a ban on proprietary
trading and limits on bank size through a low cap on total liabilities.
Even Obama's signature reform, an independent consumer agency is in
danger of being whittled down to a corner desk in a failed federal
agency.
The President understands that the Wall Street bailout was "about as
popular as a root canal." But if Democrats continue to peddle this type
of rhetoric while neglecting meaningful reform as they have done this
week, the Republicans will run away with the anti-bailout message and
with the election in November.
Mary Bottari
Mary Bottari is the Chief of Staff to Madison, Wisconsin Mayor Satya Rhodes-Conway. Previously, she was the Director of the Center for Media and Democracy's Real Economy Project.
The debate over banks and
banking came front and center this week. In his toughest language yet,
President Barack Obama vowed to veto financial reform legislation that
is not tough enough on Wall Street. "The lobbyists are already trying
to kill it," Obama told Congress in his State of the Union address.
"Well, we cannot let them win this fight. And if the bill that ends up
on my desk does not meet the test of real reform, I will send it back."
The President's rhetoric offers an important measure of progress.
Now we can be assured that the political elite are paying attention to
the poll numbers showing an unprecedented anger at the big banks and
the Wall Street bailouts. Democrats are starting to figure out if they
don't take up this populist message and run with it in November, the
Republicans will.
But the rest of the President's speech and the other dramatic
developments in the banking world this week indicate that Democratic
actions are falling far short of their rhetoric, a pattern that voters
are sure to notice.
First, the speech. Many had anticipated a big announcement on jobs.
With jobless rates in the double digits and a projected 5-10 year haul
to get employment back to normal levels, workers were hoping for
something big and bold. Instead, Obama proposed $30 billion in TARP
funds to get credit flowing to small businesses. $30 billion to put 16
million Americans back to work? $30 billion when the Wall Street bonus
pool for a few thousand bankers was $140 billion this month? Democrats
will live to regret this missed opportunity.
Also on Wednesday, U.S. Treasury Secretary Tim Geithner was called
on the carpet once again by irate members of the House for his
mishandling of the AIG bailout. To their credit, several Democrats
asked the toughest questions. But Geithner bobbed and weaved and no
knock-out punches were landed. This is a problem for the Democrats. The
whole incident paints an ugly picture of the federal response to the
financial meltdown, best described by Representative Edolphus Towns
(D-NY): "The taxpayers were propping up the hollow shell of AIG by
stuffing it with money and the rest of Wall Street came by and looted
the corpse."
On Thursday, Federal Reserve Chairman Ben Bernanke was reconfirmed
by the Senate for another four year term. His nomination had been in
trouble and a record number of senators voted no, but Obama stood by
his man and pushed him through. The problem with Bernanke is best
summarized by economist Simon Johnson: "Bernanke is an airline pilot
who pulled off a miraculous landing, but didn't do his preflight checks
and doesn't show any sign of being more careful in the future - thank
him if you want, but why would you fly with him again (or the airline
that keeps him on)?" While Bernanke may have saved Wall Street, he has
shown little interest in using his power as Fed Chairman to
aggressively aid Main Street. He is not the man for the job in these
tough economic times and that will soon be apparent to the detriment of
the Democrats who secured his confirmation.
Ultimately, however, the most important developments of the week
were played out behind closed doors in the Senate. Senate Banking
Chairman, Chris Dodd, made the decision some time ago to try to devise
a bipartisan financial reform package. His package of reforms was then
handed over to four bipartisan working groups. With thousands of bank
lobbyists swarming the hill, it is no surprise that these groups are
busily making the Dodd bill worse.
The derivatives language is being weakened and bankruptcy is
emerging as the preferred method of unwinding financial institutions,
which could leave taxpayers to foot the bill for this expensive
procedure. To truly end the "too big to fail" problem and crack down on
the reckless behavior of the biggest banks, we need strong, specific
preventative measures such as leverage limits, capital and margin
requirements, limits on counterparty exposures, a ban on proprietary
trading and limits on bank size through a low cap on total liabilities.
Even Obama's signature reform, an independent consumer agency is in
danger of being whittled down to a corner desk in a failed federal
agency.
The President understands that the Wall Street bailout was "about as
popular as a root canal." But if Democrats continue to peddle this type
of rhetoric while neglecting meaningful reform as they have done this
week, the Republicans will run away with the anti-bailout message and
with the election in November.
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