03/18/2010 05:12 am ET | Updated May 25, 2011

Obama Goes For It


I have complained many times about how frustrating it is to see Obama not wanting to go with a populist message, especially in regards to going after Wall Street.

Yesterday, in a proposal to impose a major new surtax on the biggest banks, he really went for it:

Instead of sending a phalanx of lobbyists to fight this proposal or employing an army of lawyers and accountants to help evade the fee, I suggest you might want to consider simply meeting your responsibilities.

And this:

My commitment is to recover every single dime the American people are owed. And my determination to achieve this goal is only heightened when I see reports of massive profits and obscene bonuses at some of the very firms who owe their continued existence to the American people -- folks who have not been made whole, and who continue to face real hardship in this recession.

We want our money back, and we're going to get it. And that's why I'm proposing a Financial Crisis Responsibility Fee to be imposed on major financial firms until the American people are fully compensated for the extraordinary assistance they provided to Wall Street. If these companies are in good enough shape to afford massive bonuses, they are surely in good enough shape to afford paying back every penny to taxpayers.

We cannot go back to business as usual. And when we see reports of firms once again engaging in risky bets to reap quick rewards, when we see a return to compensation practices that seem not to reflect what the country has been through, all that looks like business as usual to me. The financial industry has even launched a massive lobbying campaign, locking arms with the opposition party, to stand in the way of reforms to prevent another crisis. That, too, unfortunately, is business as usual. And we're already hearing a hue and cry from Wall Street suggesting that this proposed fee is not only unwelcome but unfair -- that by some twisted logic it is more appropriate for the American people to bear the costs of the bailout, rather than the industry that benefited from it, even though these executives are out there giving themselves huge bonuses.

Ultimately, it is by taking responsibility -- on Wall Street, here in Washington, all the way to Main Street -- that we're going to move past this period of turmoil.

I know, I know, I can hear the protests rising already: Obama still isn't doing enough and Geithner and Summers are still out there messing things up. I'm with you. But going after the big banks with new taxes, and smacking them down with this kind of language is still a very good thing. So let's give credit where credit is due: if you never praise a politician even when they take a step in your direction, they won't have any incentive to do so.

There are two things I find especially encouraging about this:

  • The first is that when Bob Rubin worked in the Clinton White House, he had a huge impact not only on the policy but also on the rhetoric. He was always urging the President away from any hint of populist rhetoric, saying it would scare or anger the business community. And Clinton usually gave in. I don't know how much Geithner or Summers care about the rhetoric, but I would guess they have given similar counsel, and in this case they also lost big. Don't discount the importance of political rhetoric from a President, either. It makes it harder to back away policy-wise in the future, and it emboldens those White House staffers who do want to do the right thing (who are always in battle with the Geithner/Summers team who doesn't) in playing hardball with Wall Street.

  • The second reason this is good is that it means some decision has been made, at least for now, that the White House is willing to forgo some of the money that can be raised from Wall Street. In my experience, the biggest single reason for Democrats avoiding populist rhetoric is worrying about the political donations you would lose as a result. Giving speeches like that is going to mean several million dollars less in Wall Street money for Democratic Party committees and candidates, and I think that is well worth the price. As I have been writing, Democrats cannot win in the 2010 elections without going after the big banks, and that means they will have to give up a lot of money. The tradeoff is certainly worth it in terms of extra votes they will get.
  • As I wrote yesterday, there is far more to be done, including breaking up the banks, prosecuting bank executives, a tax on financial transactions. One speech doesn't change the overall direction of an administration. But yesterday's announcement- the speech and the tax- was a big step in the right direction.