Martin Wolf: Why Obama's Financial Reforms Won't Work

ft.com:

Proposals for reform of financial regulation are now everywhere. The most significant have come from the US, where President Barack Obama's administration last week put forward a comprehensive, albeit timid, set of ideas. But will such proposals make the system less crisis-prone? My answer is, no. The reason for my pessimism is that the crisis has exacerbated the sector's weaknesses. It is unlikely that envisaged reforms will offset this danger.

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Comments

[research]

We should have spent those trillions we wasted on the banks on green retrofits for all gov buildings, to states etc...

The money would STILL have ended up in the banks, but it would have restarted the economy which would have saved the good banks.

The money to the IMF was completely unnecessary too, the Banks own the world.

[DuganS1]

If the US govt spent trillions on "green retrofits" instead of injecting capital in the banks, the financial system would have imploded and unemployment would be closer to 20% right now and the economy would have very little possibility for recovery for many many years. This would lead to political and social unrest across the globe and inevitable war.

[research]

Unemployment would only be bad for gambling investment folks like you.

It is absurd to think that direct purchase from American companies would not reduce unemployment, or that putting trillions in banksters gambling counts will "trickle down"

You are getting desperate to keep you gravy train.

[joebaggadonuts]

We were hoping he was an organizer from Chicago when we voted for him.

[lvdragonlady]

If businesses owned by our friendly just say NO group would stop laying people off, then maybe O's plan would work.

[desertman]

You can't employ people without sales. It's a simple concept.

Capitalism’s job isn’t getting people what they want; it’s job is getting them what they deserve.

[joebaggadonuts]

Correction: Capitalism's job is getting people with money what they pay for.

[BabblingBrooks]

"Economy in shambles...no recovery in sight..."
--Warren Buffett

Sung to tune of "Changes in Attitudes, Changes in Latitudes..."

[BabblingBrooks]

Why won't they work? Because they aren't designed to work! The actions that would work weren't taken. Money was thrown at favored Democratic constituencies and districts. It was not a stimulus bill, it was a bribery bill. The taxes being imposed or discussed are already shutting down factories--500 cigar-makers out of work because of the tax on tobacco already!

Get used to it. Calling something a stimulus bill doesn't make it one! You have to stop emoting here, fawning and sucking up to Obama, and start looking at actual policies and their effects. These are not ALL unintended or unpredictable!

[SangZe]

I believe Obama has given too much of taxpayer money to the banks, but even so, the problem is not the government unless one considers it the failure of government to regulate the financial industry effectively, if at all. In order for his policies to succeed, the President must separate himself entirely from the greedy, self-centered yahoos who are running the country into the ground for their own pleasure.

[nomorefed]

When the people fear their government, there is tyranny; when the government fears the people, there is liberty.

~Thomas Jefferson

hat tip to http://www.short.ie/g264dk for the good articles

[SammyD]

I like that Thomas Jefferson guy. Why were they so much smarter back then?

[joebaggadonuts]

The people who were running things had b.alls and they read more widely.

[outnow]

I started reading Martin Wolf more than a year ago in Europe and told my German friends about the looming economic crisis while I was visiting them there. They all had a good laugh at my expense. My Wall Street relatives and friends also laughed. None of them laughs anymore.

Wolf states that loss of confidence in the intergrity of regulation will play a major factor in the future. Obama is just papering over too much to restore credibility in a meaningful way.

Obama appointed people who are planning to cut Social Security and attempt to re-inflate the assets bubbles. Lot's of luck there. If you are 59, or younger, your Social Security definitely will be cut. That gives you a few years to invest in Wall Street before you retire. Benefits will be cut in recognition of increased longevity statistics. This will force boomers to invest in a corrupt system again? I doubt it! We may be old but we are not that stupid.

[jsgaetano]

During the last eight years, Democrats were yelling into the wind, and told by the media their opinions didn't matter because they were the minority party.

Now, Democrats are the majority party... and still yelling into the wind.


Teh "libr00l" media.

[enoughalready13]

sad that the wishes of a small elite group take precidence over the welfare of 300 million people in this country ... so much for the administration looking out for the people.

[LRM216]

I didn't vote him in, but I stand behind him as our president. But do you honestly think and one man can move the mountains facing us all? I hardly think so. Government stinks bad and has through all of the prior administrations I have lived through - be they democratic or republican. My grandfather, rest his soul, used to say the only honest politician is a dead one, and I see the truth in that. While I think Obama's intentions are good, he also scares me in many different ways. How many things can he take on at once, spending like crazy, trying to tax like crazy, and meanwhile the whole world and our reputation for standing up to right and wrong throughout the world is going to hell in a handbasket.

[KCFreedom]

Your grandfather knew what he was talking about.

How about why can we still afford all these perpetual wars we're in, the empire, and spend 60% of the entire world's defense budget at deficit (borrowing)?

[iceage7]

Trying to clean the mess bush left us. Go back 8 years and study up. How easily we try and excuse the mismanagment of this country by Bush and company and blame it on Obama. Its the usual rethug blame game. Blame Obama. Damn if he do dman if he dont. at least his trying. Doing something as oppsosed to bush who just hid in the white house choking on pretzels and watching TV. Obama has done more in 5 months than bush and clinton ever did in 16 years.

[jerrypl]

Obama's economic reform plan is not tight. It does not do what it should do and that is make the banking system totally transparent, and accountable. CDS need full regulation and must be traded and sold through the shadow banking network.

Obama is being controlled by the banksters. No doubt, he is being told what to put in this plan by the banksters.

http://eye-on-washington.blogspot.com

[wehrke]

The big issue as pointed out in the article is excessive leverage with limited downside for the speculators. This is the same thing that drives up commodity prices. This type of gambling needs to be stopped.

[jeanrenoir]

Aside from all the nuclear threats we face, the only real political issue for Obama is whether or not he can improve the economic life of Joe the Plumber by 2012. If he does, he wins again in a landslide and truly bestrides DC politics like a colossus. If he does not, he will be completely crucified politically, and the Republicans will overwhelm the Democrats in a tidal wave of racism and hatred. We Obama supporters had better pray for his economic success, since if he fails, he becomes the American Weimar Republic before the fascist deluge.

[joebaggadonuts]

Prayer is not enough. Mouth to phone, pen to paper (electronically), and foot to pavement. Let's get moving.

What we need Obama to do is to stand behind his words and ask for our help to get things passed in our interest. That's what Reagan did. Communication means nothing if it does not motivate assistance of the governed to control the government.

[Nutcase]

Obama's plans may work. They may not. But, the track record of the Financial Times doesn't inspire confidence that they are the ones to make such judgments.

[conservatismontherise]

You don't get it (Its impossible)....The Government has been blaming us for overspending...Its the governments fault....Bank Deregulation in 1998 started the Crisis..The government is the culprit in all Crises

[Keurgui]

I am sorry the government is not the problem. The problem is those bankers and wall street smart making millions of dollars every year selling empty papers. This financial crisis has nothing to do with government.
Again I am not saying government is the answer but we need some smart regulation.

[Nutcase]

Wrong. The problem started with Reagan. When he took office we were the leading exporter of manufactured goods. Now we are the leading importer. We were the largest importer of raw materials. Now we are the largest exporter. We were the largest lender. Now we are the largest borrower. That describes a third-world country.

If you give me a credit card and tell me that it has no limit and I don't have to pay it off I can throw one helluva party. Reagan financed what little economic "growth" there was during his administration and those tax cuts on borrowed money. Still there were two minor recessions and one period of no growth during his time in office. There was another recession during the years of Bush the elder. I call that overspending.

Reagan did not experience an economy with problems of the scale we now have. Going into debt during relatively good times in unwise. Borrowing should be left to times such as the present. Our situation would not be so bad if there had been no borrowing for tax cuts during the Terms of Reagan and the Bushes.

[Nutcase]

BTW, the banking legislation to which you refer was in 1999, not 1998. It did exacerbate the problem but it didn't originate it.

To say that the government is the culprit in all crises is ridiculous. It is simply regressive cant. Sometimes it is responsible but it is more a factor of a pro-business administration and Congress looking the other way and not enforcing the regulations on the books. This permits the financial community to act as pirates, taking advantage of everyone else. They suck $650 billion out of our economy each year and give us paper.

[jsgaetano]

The problem isn't the government- the problem is conservatives giving the banks deregulation they requested.

It's a criminal collusion- they don't call it the Conservative Culture of Corruption for nothing.

[Riverrat10k]

I find it telling that there are 270 comments on this board over the emotional issue of equating Obama to Hitler, but only three discussing the much more important and knowledge-based issues of our financial system.

[Nutcase]

Your point is well-taken but I do have a little difficulty accepting most discussion of our financial system as being knowledge-based. Having done my graduate studies in International Relations and International Economics at Johns Hopkins SAIS, I don't consider economics sufficiently developed to qualify as an true academic discipline.

[kasinca]

This is the one place I disagree with Obama and his administration. He has to cut it off at the bud and that is the salaries of the thieves who dream up the ponzi schemes.

[Liberal2]

The only way to do this is raise tax rates on "incomes" over $500K (including *ALL* perks and company paid expenses) to 70-90%, zero out tax deductions for those salaries, perks, and expenses.

[aristippe]

that's nuts

[vagabondvet]

Increasing tax burdens causes a decrease in employment.