Financial System Reform?? + update 4.3.09
French President Sarkozy’s earlier high profile threat to wreck the London G20 financial summit if his demands for tougher financial regulations were not met suggested that he well understood the signals coming from the Obama administration that they were not inclined to promote real reform. Much of the same unease was clear in the NYT editorial which detailed the evasions in Treasury Secretary Geithner’s well hyped but discouraging proposals.
The NYT editorial (3.29.09) “Questions for Reform” pointed out that Geithner’s call for large hedge funds and private equity firms to register with the Security and Exchange commission is a good start, but that under his proposal, the SEC would not really have the full authority necessary to address important concerns. Instead it would be reduced to merely reporting issues up a “convoluted chain of regulatory command.”
Secondly, Geithner’s call for oversight of unregulated derivatives includes a loophole “disguised as a new rule.” Despite the clear demand by the public and the international community for effective hedge fund and derivative regulation Geithner’s proposals suggest that the Obama administration has caved in to the worst offenders who seem to wish to maintain the current discredited system.
There’s more. The Times goes on to criticize what Geithner left unsaid. They fault him for not challenging the concept of firms too big to fail. Instead they find that the Geithner plan unaccountably “assumes that such firms will be a feature of the financial landscape going forward.”
The Times also notes the absence of a call for a thorough investigation of all the moving parts of the current system, without which the proper fix may be elusive and Geithner’s proposals merely a “charade.”
If the Obama administration is not going to take this once in a generation opportunity to promote effective reform on this clear and crucial issue, how can we expect them to protect our interests on much more tangled and controversial issues.
Whatever we might think of the right of center Sarkozy, it seems he has a better line on what is currently necessary than does the Obama administration.
It was embarrassing to read the front page story of the NYT for 4.2.09, “Obama Faces Calls for Rules on Finances.” Instead of enjoying our attractive and well spoken new leader cutting a dashing figure on the world stage, we find the Times forced to confirm that Obama was standing naked for all to see.
Obama’s position seems to be that Europe and the rest of the world – mainly China – should stimulate their economies so they can bail out Obama while he not merely bails out the reprehensibles (some of his major contributors), but, by giving real reform the back of his hand – as we might expect from Cheney – he works to ensure that their time in the sun will continue as long as Obama can create the trillions to do it with.
There’s so much on the economic misdirection from Obama and his economic sidekicks, Geithner and Summers, that it's difficult to keep up -- not to mention, as Paul Krugman, writes, despair making.
One of many notable and important broadsides comes from the Times op ed page, by Nobel laureate Joseph E. Stigliz, “Obama’s Ersatz Capitalism," 4.1.09.
See also the very good Counterpunch.org website which seems to have article after article detailing the mess. For example:
Mike Whitney, Zombie Economics: Judgment Day for Geithner,” (3.23.09); “Geithner’s Hog Wallow” 3.27-29, 2009)
Dave Lindorff, “Toxic Bailouts” (3.23.09)
Dean Baker, “Billions More for Failed Banks” (3.25.09)