Paul Revere by Cyrus Dallin, North End, Boston



Monday, September 22, 2008



Comfortable With Subject

Obama called for the overhaul of the financial-regulatory system and tougher enforcement well before this past week's traumas.

Detached observers who watched him last week, especially in a Bloomberg Television interview, were taken by how conversant and comfortable he was on the subject, despite his thin record. Few detached observers came away with that impression watching the Arizona senator.

Much of the re-regulatory fever focuses on the Federal Reserve and any new agencies created to clean up the fiasco. Central, however, will be a more vigorous Securities and Exchange Commission, or whatever holds that investor-protection function.

McCain displayed a sudden interest in the SEC last week when he demanded that Chairman Chris Cox be fired. When his campaign was asked if the senator had ever criticized the current commission's performance before, they failed to respond.

All For Obama

Tellingly, three former SEC chairmen, a Democrat, Arthur Levitt, and two Republicans, David Ruder and Bill Donaldson, have endorsed Obama. Levitt is a board member of Bloomberg LP, the parent company of Bloomberg News.

Donaldson, who was tapped by Bush to head the SEC, says Obama called him last year about the financial-regulatory problems. He has never heard from McCain.

``Obama has been talking about the need for better financial regulation well before this crisis hit and has done some real thinking about it,'' says Donaldson, a lifelong Republican. ``McCain comes across as someone who suddenly realized changes have to be made.''

There is a case for McCain: it's if you believe in less regulation, that the government should get out of the way and let the markets work their will.

No `Real Understanding'

``I don't think anyone who wants to increase the burden of government regulation and high taxes has any real understanding of economics,'' McCain said this spring at an Inez, Kentucky, town hall meeting, where he also declared ``the fundamentals of our economy are good.''

Until recently, he repeatedly invoked Ronald Reagan's calls for less regulation. He voted for the 2002 Sarbanes-Oxley corporate-governance regulations -- then last year said he regretted that vote.

McCain isn't averse to some regulations. He has strongly championed a greater federal role in campaign finance, tobacco and boxing. In each case, he saw a clear villain -- special- interest money, a tobacco product that puts profits ahead of lives, and unscrupulous boxing promoters.

There has been little evidence that prior to last week he ever put financial firms in this category. Although he assailed excessive corporate compensation last week, McCain has opposed a tepid House-passed bill that would give corporate shareholders the right to cast a non-binding vote on compensation of top executives.

Turning to Gramm

The person he has turned to most for counsel on such matters is his ex-Senate colleague Phil Gramm. Gramm is a political Gordon Gekko, a brainy economist with a Darwinian view of markets and public policy.

It's not easy to remember what the financial world looked like 10 days ago much less 10 months ago. Decisions that will be reached after this election will be the most important since the 1930s.
Obama, as more than a few Democrats are complaining, hasn't been as quick, sharp -- or demagogic -- as they would like. McCain has been beset by deeper difficulties: an inchoate and inconsistent message that seems to reflect political exigencies more than principled convictions.
On the financial crisis, last week belonged to Obama.

(Albert R. Hunt is the executive editor for Washington at Bloomberg News. The opinions expressed are his own.)


Handsome B. Wonderful said...

Yep, all the smart and experienced people on the economy are siding with Obama if not at least giving him credit for being ahead on this mess.

Patrick M said...

Considering the problems we see today are the accumulation of regulations and politics of the last 70 years, I seriously doubt that more regulation is going to solve this.

I do agree with Obama that there needs to be serious reform, but the idea that it was a lack of regulation that caused this is quite laughable. Considering every plan and most every idea I've heard come out of Washington doesn't address the root cause but just patches things up to pass on to the next administration.

By the way, what is Obama's plan on fixing this. I'm still not clear on that.

Patrick M said...

``Obama has been talking about the need for better financial regulation well before this crisis hit and has done some real thinking about it,'' says Donaldson, a lifelong Republican. ``McCain comes across as someone who suddenly realized changes have to be made.''

Nice quote. I came cross a couple more quotes that might be enlightening. Somehow, I think you'll ignore them.

If Congress does not act, American taxpayers will continue to be exposed to the enormous risk that Fannie Mae and Freddie Mac pose to the housing market, the overall financial system, and the economy as a whole.
-- John McCain, May 25, 2006

"There Is One Person Who's Been Consistent On Reform Issues, And That's Been John McCain." --Barack Obama 2006

Anonymous said...

Patrick, you may doubt that regulation will solve this. Fine. Doubt away.

I will point out, however, that the only side of AIG that did NOT crash was the insusrance side that is regulated. And the banks under regulations, as opposed to investment banks, are the ones that are okay.

Where there is greed there is need for regulation.

Human nature, being what it is, will always look for a way to scam anything and try to get away with it.

We can thank Ronald Reagan and his drunken deregulation buddies for this mess, aided by spineless Democrats who should have known better.

Phil Gramm has been THE architect of deregulation (with his bud, McCain cheering him on) since he came to Washington.

Deregulation has given us another financial disaster, as it did in the S&L scandal, and the Enron scam.

Why don't you read up on how all that happened. It's very instructive.

Patrick M said...

I won't argue that deregulation had nothing to do with this, because it played a role. Part of the problem is regulation, followed by deregulation, followed by reregulation and government entanglement, followed by deregulation, and so on.

If you notice, every time we have one of these messes, the government gets involved deeper. And each problem is worse than the last.

Interesting you mention the S&L scandal though. That was an attempt to cover the deposits of the failed S&L's after many of them wen5t into the red during the Carter administration, playing by one set of rules, then making stupid (and sometimes unethical and illegal) choices. Deregulation was only one part of the problem and was more of a trigger from what I understand.

And one of the results was further involvement in the situation by Fannie Mae and Freddie Mac. In hindsight, I wonder if the solution was worse than the problem.

BTW, other than change and regulations, I still haven't figured out more about Obama's solution.

Anonymous said...

I heard Obama speak on ideas about solving this gargantuan problem. He's not glib about it because it is an enormously complicated problem.

If he came out immediately with a "plan," I'd be very disappointed.

No one can say what the best way is, at this moment, to tackle this mess.

I've listened, this evening, to some of the best brains in economics discuss the situation, and THEY aren't sure how to attack the problem either.

Obama is being prudent and wise in not jumping in with some half-assed idea, just so his campaign can say he has a plan.

In times like this, I want a cool head and a thinker who can see many sides of the problem and many ways to approach it, and then act.

Meanwhile, McCain shot off his mouth with the harebrained idea of firing the head of the SEC.

That'll solve everything.

He looked pathetic.

Patrick M said...

Shaw: You characterize most of what McCain does as either pathetic or Rovian, so I'm suspecting there's not a lot of objectivity.

But I will be posting a general plan tomorrow, so don't worry about Barack coming up with one. It's not my plan, as my utter boredom with the whole subject (despite its importance) makes me just zone out, but it's a good'n.

Shaw Kenawe said...

PS. If you're really interested in Obama's ideas, go here:

Patrick M said...

Other than the blank check talking point it's a good start. Why we have to worry about the individuals who signed up for bad loans is a little mystifying, but I believe (and I believe McCain does as well) that if the fed gets involved in this business, they do get to regulate pay. That's a fair trade for federal cash. Although I'm still not convinced that the bailout is a good idea.