Washington Post Columnist Steve Pearlstein’s column today advises the Obama administration to stay calm in the face of Scott Brown’s election and the obvious disarray and panic among Democrats. While we don’t agree on every segment of his column, he makes some interesting points about Obama’s unexpected pivot yesterday to change the subject and go after the banks:
One of my favorite bits of Monday morning quarterbacking is that President Obama should have put health care and Afghanistan and climate change and everything else on the back burner for the past year and insisted that he and everyone else focus exclusively on jobs, jobs, jobs. What do you call a $787 billion stimulus package of tax cuts and increased spending, a $50 billion auto industry bailout, a $1 trillion prop to the housing sector and nearly another $1 trillion in old-fashioned monetary stimulus — chopped liver? And how exactly do you square the idea that the president and Congress should be working 24-7 to “create” jobs with that other nugget of conventional wisdom, that Americans are demanding smaller government, less spending and lower budget deficits?
The answer is… you can’t! The $787 billion stimulus package was a failure and any assertion to the contrary is pure, delusional spin! The administration appears to be lousy with two kinds of people: partisan idealogues and/or economic illiterates, PhDs notwithstanding.
Pearlstein then addresses the President’s anti-bank pivot yesterday:
Instead of moving to take back the health-care issue, however, President Obama on Thursday seemed more interested in changing the subject, launching another broadside against the big Wall Street banks.
In the populist imagination, the root of the recent financial crisis was the decision in the 1990s to allow commercial banks, which take deposits and make loans, to get into the riskier but more lucrative investment banking business, where firms underwrite and trade securities on behalf of their customers and themselves. For months, liberals have been pushing to reinstate the old rules to separate the two activities. And for months, Treasury Secretary Tim Geithner has pushed back, arguing that many of the banks that got in trouble did so the old-fashioned way, by making stupid loans, while many of the institutions that contributed most to the crisis — Bear Stearns, Lehman Brothers and AIG — weren’t in commercial banking at all.
However, Obama suddenly reversed course and embraced the populist critique, demanding that commercial banks give up their risky investment activities. In truth, the new rules probably would not do much to reduce the chance of another crisis, or another bailout. The president’s motives seemed less substantive than they were political, allowing him to shift from defense to offense and put Republicans in the uncomfortable position of having to defend the Wall Street status quo.
Consider that the federal government now owns the two biggest culprits in the economic meltdown and is still protecting them and propping them up to the tune of potentially trillions: Fannie Mae and Freddie Mac. Yet, like Voldemort, their names are never mentioned and were conspicuously absent from yesterday’s announcement.
Even Treasury Secretary Geithner and his National Economic Council Director Lawrence Summers have grave misgivings about this strategy…but this administration has always been completely schizophrenic when it comes to the banks and the financial services industry. They attack them, then they cajole, then they beg them to do more, now they are going to muscle them with new regulations which have nothing to do with what caused the meltdown in the first place; congressional meddling and government-created incentives to make lots of bad loans!
Wouldn’t it have made sense now, after the Brown victory, to go back and address the real reasons for his victory? The mindless wasteful spending, the gigantic deficits and debts, the imperiousness of Congress, the knee-jerk secrecy and arrogance? And, if they want to address healthcare reforms that could be enacted with bipartisan support, they could begin by exploring incremental, pro-free market, patient-centered steps that a vast plurality of Americans have said they favor.
Instead, President Obama chooses to demagogue an issue his pollsters and the ideologues in his Cabinet apparently perceive as a populist winner: the public’s disgust with the banks.
Filed under: Pork