Over at the Economix blog, David Leonhardt has four really good questions for Obama as the president prepares to speak today a year after after the Monday that changed American finance. His questions for Obama are:
1) Since the banks are going to put up a huge fight -- and spend millions of dollars -- to avoid some of your proposed bank regulations, why should we believe you can pass this reform?
2) Can we hear some details of the bank plan besides "higher capital requirements" and "significantly higher capital requirements"?
3) Will Obama rely on shame-on-you tsk-tsking of bankers' pay to drum up popular support for the financial regulations?
4) Why should we believe that this won't happen again?
That last question strikes me as the best, and hardest to answer. First, we can agree that billions of taxpayer dollars are on the line because banks were deemed too big to fail. But today, Bank of America and JP MorganChase are bigger than ever. Second, we can agree that low Federal Reserve interest rates through the 2000s facilitated, if not encouraged, the housing bubble, whose big burst spat toxic bubble soap all over the banks' balance sheets. But today, the bank bailout plan gives the Federal Reserve even more power to regulate large banks. Third, we can agree that financial regulation fell behind financial innovation, so that Wall Street was investing with financial instruments, like credit default swaps, that carried risk our regulators didn't understand how to monitor. But today, there is little evidence that we have the tools to price that risk even as Wall Street moves from packaging mortgages to packaging life insurance plans.
This article available online at:
http://www.theatlantic.com/business/archive/2009/09/four-questions-about-obamas-financial-reform-speech/26494/
