Robert Johnson: Financial Reform Bill Follows A 'Grand Strategy Of Forbearance'
As the House and the Senate squabble over the finer points of the financial reform Bill, economist Robert Johnson, executive director of the Institute for New Economic Thinking (and HuffPost blogger), believes the bill is already too watered down to offer anything useful to the public.
And, if you believe him, this is all part of the government's twisted plan of saving the economy.
"The reason why [the bill is being watered down] is what I call the Grand Strategy of Forbearance," he tells senior editor Paul Jay, of the Real News Network.
Government forbearance towards Wall Street began in the spring of 2009 when "they chose not to take over some of the insolvent banks, and to pretend, through relaxation of accounting standards, that these institutions were solvent," he says.
"Here we are a year later and the two most profitable activities are derivatives market-making and proprietary trading. Those are like the soap pumps used to fill the holes of these fragile balance sheets."
The proposed bill has been structured to "give the Fed discretion as a regulator over when to impose and when to enforce," he says. "And that's consistent with the idea of continued forbearance."
In other words, the final bill will likely allow Wall Street banks to continue operating as before.
Later in the video, Johnson shifts his sympathies from the American public to the Democrats' "damned if they do, damned if they don't" position with the bill.
"The Democrats are in a dangerous place regarding the passage," he says. "If they don't pass the bill the American public can look at them and say, 'You had the White House, a majority in the House, 59 votes in the Senate, and you didn't pass financial reform? You're not fit to govern."
On the other hand, he notes, if the party passed a watered-down bill, it could put the Republicans in a position to turn public sentiment against their political rivals.
"This is a very treacherous game in terms of politics right now," Johnson says. "Public policy is not being well served because the role of money in politics is far too great. That's true in health care, in energy, and most powerfully, in finance."
WATCH the full video interview below:
Loading comments… 
First Posted: 06/11/10 04:42 PM ET Updated: 05/25/11 05:45 PM ET