I missed this commentary piece yesterday from Charles Gasparino, for which I thank the newly launched Atlantic Wire for bringing to my attention. In the column, Gasparino says that President Obama is treating the world of finance far easier than he should be, especially since its problems were mostly responsible for his winning the election. I think that this is an important, and striking, point.
Gasparino thinks that Obama's speech lacked teeth:
If the president really wanted to scare Wall Street to change its evil ways, he would have made one simple declarative statement: There will be no more bailouts. The concept of too big to fail is over, and what's left of Wall Street will be obliterated if it once again engages in the behavior that boiled over this time last year.
I too complained that Obama's speech was too mild. But Gasparino also makes a key observation: Obama's win last November was due in large part to the American people wanting him to change the financial industry so to avoid another crisis. As Gasparino notes, until the crisis began, McCain and Obama were neck-and-neck in the polls. McCain even pulled ahead at one point. Check out this chart from Gallup, showing the Obama-McCain poll numbers leading up to the election:
You can see the light green (McCain) bumping up above the dark green (Obama) in early September. Then, right around mid-September -- when the financial crisis got into full swing -- Obama began to pull away. The "change" these swing voters were, no doubt, looking for was almost certainly economic and very likely directed at the financial industry.
Instead, Obama appears to be a friend of the financial industry, largely ignoring the call to fundamentally reform its structure and focusing on his higher priorities. It isn't scared of him -- at least that's what the market believes. Gasparino explains this well, noting that financial sector stocks rallied after Obama's speech:
That's right, financials rallied, and my bet is that the two are related. For all his tough talk about the need for more regulation and consequences for bad behavior, Obama really said nothing that would lead Wall Street to believe that the government was going to make life that much more difficult and would end its current sweetheart deal with the greedy bankers that brought the financial system to its knees last year.
Like Gasparino, I find it surprising that Obama hasn't pushed financial regulation harder. The American people's expectation that he would do so is likely what got him the job. If sweeping financial regulation ends up failing, his approval numbers could suffer -- especially with the ever-so-crucial swing voters. If they see him as another Washington politician that lets big banks continue to put the economy at risk, they'll look for a real reformer next time around. It might seem unlikely that such an opponent would be a Republican, but when you've become a champion of the status quo, anything new can look like change.