On Thursday, President Obama called for the nation’s economic elite to end resistance to his plan for new financial regulations. In a scene reminiscent of his community organizer days, Obama told the Wall Street cognoscenti, “I’m here because I believe that these reforms are, in the end, not only in the best interest of the country, but in the best interest of the financial sector.”

There is no more pathetic display than a desperate parent pleading with a spoiled, petulant child. In those cases, stern and uncompromising authority is the best course of action. Yet it is this meek tone Obama chose to take with the leaders of Wall Street; his protestations regarding Wall Street excesses were far too mild given the economic collapse they engendered.

Perhaps Obama adopted a relatively soft touch because he was dealing with generous Presidential campaign donors. Others may say that the President’s approach was sensible, given his sagging poll numbers and the expenditure of political capital in the pursuit of health care reform.

This is erroneous. Financial reform must be pursued with the same vigorous devotion that secured the passage of health care reform. The economic crisis, combined with the nonsensical bonuses paid to top executives and the allegedly fraudulent (and undeniably sleazy) behavior of Goldman Sachs, has proven that Wall Street needs some exceptionally tough love, which must be administered without regard to the hurt feelings of predatory millionaires.

Comments

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  • Alaina

    In the interest of full disclosure, I was (and still am) in favor of TARP as it was originally intended.

    It was intended to buy bad assets off the books of the banks (not securities that give you ownership in the company) to inspire confidence between the banks and allow to credit market to start moving.

    At the time, and still to a large extent now, the credit market was at a standstill. Our economy runs on credit (in order to expand business, etc.) and that was hurting us as much as anything else.

    It was starting to work, then Obama got a hold of it and attached a lot of strings that made it difficult to lend money, which defeated the purpose of TARP, and shut the credit market back down.

    I’ve never seen that as a bailout because the government wasn’t just writing a check to a company to do what they wanted with it. They bought non-valued securities at a very cheap price and have made money. Again, they didn’t make a loan, they made an investment. I had a major problem with the loans given to AIG, GM, etc., but not the initial TARP investment.

    I didn’t and don’t have a problem with corporate bonuses. They have to invest in their good resources (staff). If they don’t, they’ll just go to their competitors. Also, it was a small handful of people (approximately 6) that were sitting on a trading desk at each of the companies making these bad bets and they’re all out of a job. The vast majority of the bonsuses were going to people whose division made a profit.

  • Troy La Mana

    This administration should recuse itself due to self -interest. You could almost call this the Goldman-Sachs Administration.

  • Christopher Nutter

    You’re right to be suspicious of the government, but don’t confine it to one particular administration or one particular party.

    There’s an unwholesome mingling of political and economic power… some call it “corporatism,” the intermarriage of political and financial elites united by their common interest. Anyone who despises this arrangement has common ground with me.

    Electoral protestations to the contrary, this nation is a plutocracy. It is run by the wealthy for the wealthy. Whether the man in the Oval Office is a Democrat or a Republican, you can be sure he is going to represent the interests of some sector of the nation’s elite.

    • Alaina

      Corporatism isn’t confined to Wall Street. And remember, when they announce how much one particular company donates to a candidate, it doesn’t mean that’s the view of the company as a whole. When I donate to a candidate, I have to delcare which company I work for and I can promise you that neither my company or any other company with an HR departments advocates donations to a particular political candidate. Employees are free to donate to any candidate they choose.

      “Electoral protestations to the contrary, this nation is a plutocracy. It is run by the wealthy for the wealthy. Whether the man in the Oval Office is a Democrat or a Republican, you can be sure he is going to represent the interests of some sector of the nation’s elite.”

      Ummm… have you ever worked for a poor person? My guess is no. When the rich get richer, the poor get richer. When the rich get poorer, the poor get poor. There’s a direct correlation.

      • Christopher Nutter

        Of course I never worked for a poor person. It sounds like you agree with me then… this nation is a plutocracy (“ruled by the rich”).

        Individual donations are effective en masse, but that isn’t what I’m referring to when I speak of corporatism. I’m talking about the sustained and tenacious application of pressure to get elected officials to do your bidding. You and I might send $50 to a candidate, but we’re not flying them out on Lear Jets to “workshops” to “educate” them on our point of view.

        There is no firm causation (apart from the mystical “Invisible Hand”) that leads to poor people becoming wealthier as a result of rich people becoming wealthier. It does happen, but just as frequently (if not more so) the wealthy become richer by laying off employees, reducing benefits, evading safety requirements.

        • Alaina

          Every nation in history has been ruled by the rich. No one has ever worked for (or been ruled by) a poor person. I don’t see that as a bad thing.

          Every company has lobbyists. It’s another reality we just have to deal with. Some of it is good, some of it is bad, just like everything else. We just have to hope that our politicians stand up to the bad.

          “There is no firm causation (apart from the mystical “Invisible Hand”) that leads to poor people becoming wealthier as a result of rich people becoming wealthier. It does happen, but just as frequently (if not more so) the wealthy become richer by laying off employees, reducing benefits, evading safety requirements.”

          First, let’s take evading safety requirements off the table because it doesn’t have anything to do with the former two.

          A company is not a wealthy person. People at the top make the decisions necessary to keep the business profitable. If the business isn’t profitable, the company (should) ceases to exist. In economic situations like we have now, they have to lay people off and reduce benefits. Sometimes they reduce benefits or ask employees to take a pay cut to avoid laying people off. Sometimes, laying people off is the only option. The company is put in a better position to make a profit, but no one, in most cases, are getting rich off of it. It’s not like the money they save from laying someone off is going directly into someone else’s pockets.

          All these wealthy CEOs that people like to villify more often than not forgo a salary and are paid in stock. They make money if the stock price goes up, they lose money if it goes down. When a company is profitable, they often times invest a large chunk of it back into the company which ultimately allows them to hire more people (making others richer) and increase benefits to attract a higher quality employee.

          So yes, most situations, the poor get richer when the rich get richer.

  • http://www.sotr.us Cordeiro

    With all due respect, Nutter, the last guy with any street cred when it comes to lecturing Wall Street is The One. Investing is a risky contact sport that does involve the acutal risk of losing the entire investment. There are winners and losers. The One’s attempt to regulate loss out of the equation will only add to the chaos he is attempting to bring order to.

    All that aside, how exactly does one embrace a bootstrap?

  • Brian H

    Nutter.

    Any chance this administration will hold members of the government up to the same standards?

    The politicians are the ones committing financial fraud and allegedly fraudulent (and undeniably sleazy) behavior. Government policies have proven that Washington, D.C. needs some exceptionally tough love, which must be administered without regard to the hurt feelings of predatory politicians seeking government control of your life.

    I have never understood how liberals can develope so much confidence in government. How can they not recognize govts. inability to manage anything in a way that is efficiant and productive?

    The Obama administration knowingly lied to the public by submitting an Obama-Care budget to the CBO without acknowledging that the “doctor fix” was going to be needed. They double counted cuts in Medicare to perpetrate the fraud of a deficit neutral bill. They collect taxes immediately and raise premiums for 10 years to cover the financial obligation for 6 years of service…on and on and on……….

    ENRON’s financial dealing were more legit then what this administration is doing.

  • http://twitter.com/theatomicmom East of Eden

    Perhaps if the SEC were actually doing their jobs, instead of watching porn, we’d be having a different conversation.

  • Alaina

    I’m still waiting to hear information that wasn’t known a year and a half ago.

    For the life of me, I can’t understand why people are hammering Wall Street other than it sounds good to villify the banks.

    The reason for the economic crisis started with Congress pushing Fannie and Freddie to losen loan requirements. As a result, people started buying houses they couldn’t afford. The bubble burst. The fault of the economic crisis falls on any politician involved in pushing Fannie and Freddie to losen loan requirements, any bank that gave mortgages to people who couldn’t afford them and the biggest culprit of all, the people who bought houses that they couldn’t afford.

    What happened to personal responsibility? Rather than a lesson for the consumers who over extended themselves, we villify the banks.

    Yeah, yeah, the trading of bad securities. The people who trade credit default swaps and mortgage-backed securities are the big boys. Those guys knew exactly what they were getting themselves into. Goldman (and all other banks) have to produce a prospectus that states the goals of the product and the types of securities in which they are comprised. So there shouldn’t have been any suprises.

    They aren’t your average investor walking down the street. Can you name one person who does not work for a major bank that traded those types of securities? I bet not. If they do trade they securities, they probably didn’t know what they were doing and rule #1 of investing is that you shouldn’t invest in something that you don’t understand. It’s kind of like going to Vegas and entering into a $100,000 Texas Hold’em tournament with out ever having played before.

    Those that continued to bet on those securities after the fall of Bear Sterns were idiots. Plan and simple, but they are not thieves. They did not steal our money.

    The financial reform we need is to let those banks fail that gave loans to people who couldn’t afford them.

    • Red State Eddio

      What should have happened is that if a bank or company took Stimulus $$, it should have been broken down to smaller units and re-launched as smaller independent companies.

      The penalty for screwing up the national economy is that you are put in a place where you re-learn market discipline and market fundamentals.

      That’s only fair for beggin’ Uncle Sam to bail out your behind.

    • Sartho

      Great explanation! It was the financial reform of 1993 that birthed the subprime lending market at the urging of government for the sake of not discriminating against the poor (or so they justified it). And now we get to reap the sorrows of a government decision gone bad. I don’t trust that the current administration could give us anything that would resemble quality financial reform anyway so I’d rather keep the corporate cronies for now – lesser of two evils.

  • Christopher Nutter

    I agree… the banks should have been allowed to fail. Until the government is willing to let its corporate cronies face the consequences for their risky behavior, all of that chatter asking regular people to embrace personal responsibility and bootstraps will fall on deaf ears.

  • http://www.politicalderby.com/ Jason Wright, Editor

    Ugh. “Corporate cronies” = lingo of the Left.

  • Alaina

    Yeah… gotta agree with Jason on the corporate cronies… I hate that term.

    “Until the government is willing to let its corporate cronies face the consequences for their risky behavior, all of that chatter asking regular people to embrace personal responsibility and bootstraps will fall on deaf ears.”

    Not only does the government have to let businesses fail, they have to let people fail. It doesn’t matter whether it’s a business or a person, it either expects a bail out, they’ll take greater risks.