Paul Volcker spent the past year getting frozen out of the White House

[Cees Binkhorst]

REPLY TO: D66 at nic.surfnet.nl

Markeer de grenzen en forceer Congress plaats te kiezen, met
verkiezingen Congress dit jaar voor ogen.

The 2010 midterm election will be held on Tuesday, November 2 with at
least 36 of the 100 seats in the Senate being contested and all House
seats coming up for election.

Groet / Cees

Friday, Jan. 22, 2010
Can Obama Profit from a Wall Street Crackdown?
http://www.time.com/time/politics/article/0,8599,1955808,00.html
By MICHAEL GRUNWALD

President Obama's new proposals to crack down on Wall Street — first the
new tax on big banks last week, then Thursday's new restrictions on big
banks — signal a somewhat new approach to financial reform. But they
also signal a very new approach to politics and governing: more
populist, more confrontational, less deferential to Congress, less eager
for common ground. His uncharacteristically blunt message to financial
giants and their political defenders said it all: "If these folks want a
fight, it's a fight I'm ready to have."

Obama outlined his plan for $117 billion worth of bank taxes to recoup
the costs of bailouts even before Scott Brown's Massachusetts victory
gave Republicans the 41st vote they need to filibuster the Senate. The
newest proposals — further limits on the size and risk profiles of
financial firms, plus bans on commercial banks playing the markets with
their own cash or owning hedge funds or private-equity funds — had also
been debated internally for months. But no matter what the White House
spinners say, the heightened emphasis on taming Wall Street is a direct
response to Obama's political problems in the Senate and throughout the
nation. To give another example, the Administration first proposed a
stand-alone consumer-protection agency for financial products last June,
but only Tuesday did it leak that Obama considers the agency
non-negotiable. (See the top 10 sound bites from Obama's first year in
office.)

The real message behind all the bank-bashing is that Obama is shifting
gears for his second year in office. Instead of calling for general
reforms and letting Congress work out the details, he wants to draw
bright lines and force lawmakers to choose sides: Do you want to reform
the financial system after the worst financial crisis since the Great
Depression or do you want to protect the status quo on Wall Street?
After cobbling together 60 Senators for health reform through endless
delays and deals — which thanks to Brown would now require cooperation
from at least one Republican along with a number of skittish or
recalcitrant or opportunistic Democrats — the White House wants to take
financial reform to the court of public opinion and pressure Congress to
go along. Obama made it clear that when it came to health care he would
sign just about any bill; with finance, he's putting down markers that
he's perfectly willing to accept no bill (and a potentially explosive
political issue) as opposed to a watered-down compromise bill.

The new focus also reveals a power shift inside the Administration, a
smackdown of Treasury Secretary Timothy Geithner, White House aide
Lawrence Summers and other centrists who consider populism a dirty word,
and have been accused (often unfairly) of being too close to Wall
Street. Former Federal Reserve Chairman Paul Volcker, the head of
Obama's Economic Recovery Advisory Board, has spent the past year
getting frozen out of the White House while blasting Wall Street as a
glorified casino; yesterday, he stood next to Obama as the President
described the proposed ban on proprietary trading by commercial banks as
"the Volcker rule." Other White House economic aides have also chafed at
the influence of Geithner and Summers; one of them recently told me that
if I wanted to understand financial reform, I should talk to MIT's Simon
Johnson, who until last week was trashing the Administration's reforms
as a cave-in to Wall Street. (See 10 things that have and haven't
changed during Obama's first year.)

Really, though, this shift is more about politics than substantive
differences in policy. Geithner strongly supports a stand-alone consumer
agency, and he devised the plan to impose taxes on liabilities of the
biggest banks, not only to recoup the bailout money but to discourage
excessive risk-taking and excessive size. He just happens to be allergic
to populism, and Obama political adviser David Axelrod wants to strike a
much more populist are-you-with-us-or-the-banks tone in 2010. Axelrod
and Obama aide Valerie Jarrett met at the White House on Wednesday with
Harvard law professor and TARP watchdog Elizabeth Warren, the mother of
the stand-alone consumer-agency proposal and an outspoken advocate for
reform; their message was that they'd welcome a fight with Wall Street.

So what happens next? Last month, the House narrowly passed a
financial-reform bill that included many of the Administration's
priorities, including a strong consumer agency. It received no
Republican votes. Senate Banking Committee chairman Christopher Dodd has
been trying to forge a bipartisan consensus around a similar bill, but
Republicans have made it clear that the consumer agency is a deal
breaker. And the Hill is swarming with financial lobbyists who are
desperate to preserve the status quo. (See judgments of Obama's first
year, issue by issue.)

The fact that Obama is now calling for even tougher measures may make it
even tougher to attract votes from Republicans or finance-friendly
Democrats like Tim Johnson of South Dakota, where Citigroup (like most
card issuers) has chartered its credit-card division. But Republicans
haven't shown much inclination to cast votes to help Obama get anything
done. And even if there were still 60 Democrats in the Senate, the
health care saga demonstrated the difficulty of keeping them all on
board without watering down the legislation, infuriating the party's
base and ultimately disgusting the electorate through extended exposure
to the sausagemaking process. The only plausible road to financial
reform is for it to become so popular that even Republicans are afraid
to obstruct it.

That clearly hasn't happened yet; Brown opposed Obama's proposed taxes
on big banks as un-American taxes on success, and Republicans on the
Hill remain confident that the larger issue is far too complex for
Democrats to turn into a referendum on Wall Street. But Obama is
obviously eager to try. The goal of his fight is not necessarily to win.
It's to show Americans that he's fighting, and who's fighting against him.

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