Politicos Peruse President’s Populist Pivot

By mw | Related entries in Banks, Fiscal Responsibility, health care reform, Politics


Considering President Obama’s propensity for continuous machine gun-like rapid fire communication, it is important to sort out which administration missives demand attention and which can be safely ignored. I take my cue from the number of politico’s lined up behind the podium.

Based on this metric, Thursday’s briefing deserved our attention. This was a 10-bagger. Ten – count them – ten administration and congressional luminaries lined up like so many potted plants serve as backdrop to the presidential announcement. There you have Paul Volcker, Bill Donaldson, Joe Biden, Chris Dodd, Barney Frank, Christine Rohmer, Peter Orszag, Larry Summers, Tim Geithner and somebody else I don’t recognize. The occasion was President Obama’s announcement of the latest refinement to the administration “Financial Reform” initiative:

“It’s for these reasons that I’m proposing a simple and common-sense reform, which we’re calling the “Volcker Rule” — after this tall guy behind me. Banks will no longer be allowed to own, invest, or sponsor hedge funds, private equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers. If financial firms want to trade for profit, that’s something they’re free to do. Indeed, doing so –- responsibly –- is a good thing for the markets and the economy. But these firms should not be allowed to run these hedge funds and private equities funds while running a bank backed by the American people.”

He cautioned financial industry lobbyists to not fight his “common sense reforms … “ continuing “if these folks want a fight, it’s a fight I’m ready to have. The remarks came one week after he announced “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…” and one day before hitting the road for an Ohio Townhall where he promised to “never stop fighting to protect you from the kind of deceptive practices we’ve seen from some in the financial sector”. Clearly, the predicted presidential populist pivot against the banks is well underway.

Coincidentally (or not), all this bank bashing takes place in the context of a surprising rejection from the Massachusetts electorate, and equally breathtaking Democratic party retreat on the health care reform bill.

Wall Street reacted badly, falling in anticipation of the President’s speech, sliding further while he was speaking, and continuing to drop after he finished. This was possibly the worst Wall Street reaction to an administration initiative since Tim Geithner announced the plan to save Wall Street almost one year ago. Then, Tim Geithner was standing next to Obama as financial reform was introduced and later when the details were fleshed out over the summer. There is less certainty where he and Larry Summers stand now. At least in their role as potted plants, they appear to have moved closer to the exit than the president.

Whether financial reform is more politics than policy, or optics over substance, or whether it goes the way of health care reform, will be dependent on Congress and the bills being shaped in Chris Dodd’s Senate and Barney Frank’s House committees. It cannot be encouraging to reform proponents that Barney Frank went directly from his role as stage prop to an interview on CNBC where he soft pedaled the reforms announced minutes before.

Wall Street professionals were understandably confused:


I have not seen Rick Santelli quite this exercised since he inadvertently inspired the Tea Party movement last spring.

Let’s wrap this up with a quick Financial Reform Bill status check: The President is on the stump, giving speeches, sitting for interviews, and conducting town-halls in a media blitz supporting this major reform initiative. He campaigned on this reform and his administration has promoted several iterations of the bill since taking office. In the meantime, Democrats in the House and Senate are crafting reform bills that are inconsistent (if not incompatible) with each other and with the President’s promises.

No one knows what version, if any, will pass.

I think I have seen this movie before.

cross posted from Divided We Stand United We Fall


This entry was posted on Monday, January 25th, 2010 and is filed under Banks, Fiscal Responsibility, health care reform, Politics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

9 Responses to “Politicos Peruse President’s Populist Pivot”

  1. Mike A. Says:

    Yes, let’s gauge policy success or failure on wallstreet, a group that can’t see past the next quarter and who believes consistent quarter-on-quarter growth is long-term strategic thinking.

  2. wj Says:

    Of course, this morning the market was back up again. I could maybe see judging some policies by what the stock market does over the course of 6 months to a year. But to judge by less than a week’s worth of data? No way — the signal is just too noisy. (That means that, over a short span of time, the random jumping up and down is bigger than the actual trend.)

  3. kranky kritter Says:

    I predicted the anti-wall street reforms would come in the run up to the midterms. They’ve been moved up due to the Brown panic.

    These reform will IMO be quite hard for Republicans to oppose. Now, they can say that the programs will cost the gov’t (and thus taxpayers) more money and hurt jobs creation. And maybe they’ll have a point. But they’re still stuck campaigning this fall against an opponent who says Republicans want to let the guys who caused the economic collapse off the hook.

    I am hoping the economic reforms include a proposal for facilitating principal writedowns on underwater mortgages. But I don’tthink this can be donw without giving banks a genrous writedown on their losses and also some sort of clawback provision where the person mortgagee who gets the writedown would have to share later gains if property values swelled again later.

    I know there are big objections to such a plan. But I think that we need to expedite getting real estate back to a stable equilibrium. That can’t happen with people still walking away from underwater mortgages.

  4. Nick Benjamin Says:

    If Obama actually gets health care passed in the next few weeks his next target is pretty obvious: prescription drug companies.

    Their sweetheart deal with the administration (they close the donut hole in Medicare Part D, they don’t get totally screwed anywhere else) only applies to this bill.

  5. kranky kritter Says:

    This does bring up a issue of real interest for me, as someone who likes to take the temperature of how closely the public really is watching the government.

    I believe that the election of Scott Brown is a prominent data point that suggests both that the public is very disturbed and worried about government overspending and that the media is now paying much closer attention to these popular sentiments. Closely related to this is the public vibe that the government hasn’t been heeding their sentiments.

    We’ve seen rapid track-shifting of both the President and the democratic party in response. Congress pretty much has taken healthcare off the front burner. And the thing Obama is accentuating in his public speech are different.

    [Let's face it, before Brown, Obama was hoping to delay a return to federal fiscal sanity for at least another 1 or 2 budget cycles. And even though I have been a vocal hawk saying that current levels of overspending were VERY unsustainable, I am sympathetic to the economic pickle the President is in.

    Though the overspending is easy to criticize and some of it is wasteful, it has been doing some usefult things. Like propping up state budgets to prevent draconian service cuts, extending unemployment benefits and cobra subsidies, encouraging car and home sales, and paying for construction work on public projects to keep unemployment lower than it could be.]

    The “temperature-taking” I’m interested in? Will the public swallow Obama’s shift in focus as sincere and intelligent, or will they believe he lacks credibility because of how much it contrasts with his previous focus?

    Undoubtedly, the GOP will try to cast Obama as an insincere johnny-come-lately. What will the people think?

    Hopefully, they’ll be smart enough to recognize that when it comes to actual actions to control spending, most of out federal pols are johnny-come-latelies. As recently as 2 years ago, they were all coasting on presumptions of uninterrupted economic growth. That old math suggested that any spending problems could be solved with tweaks. Not anymore. What we need now is the making of hard serious choices. Maybe that’s a driver of the retirements of “old guards” congresscritters.

    Perhaps the 2010 mid-terms will bring higher than usual rate of overturnon both sides of the aisle. THAT would be a salutary outcome.

  6. mw Says:

    @MikeA @wj
    I wasn’t suggesting using the market to gauge policy. As I have said here before:

    “I agree that it is silly to use to day-to-day Wall Street reactions to gauge public policy. It doesn’t mean much, but it is fun to watch, about like the live squiggly reaction lines that CNN broadcasts during the debates.”

    In a case like this, where a major policy surprise is announced during market hours that directly affects the biggest players in the market, it is a go0d indication about how those players feel about the policy. Of course, it gets muddled when the guy who is actually going to write the legislation undercuts the impact of the policy.

  7. mw Says:

    “Will the public swallow Obama’s shift in focus as sincere and intelligent, or will they believe he lacks credibility because of how much it contrasts with his previous focus?” -kk

    Whether he can pull it off, will depend on whether his actions comport with his presentation and whether he will stand firm under the inevitable criticism. Announcing new spending in the morning and a spending freeze the same afternoon, is a little hard to swallow. And it does not help when an administration flack immediately appears on a progressive outlet to argue that the cuts are much less than meets the eye.

    CAPTCHA: “President glibness” – Really. This is scaring me now.

  8. Doomed Says:

    The obvious solution, of course, would be a sharp turn to the left. Go where the real solutions are. Fight the good fight. Call liars ‘liars’ and thieves ‘thieves’. Do the people’s business. Become their advocate against the monsters bleeding them dry. Create jobs. Build infrastructure. Do real national health care. End the wars. Dramatically slash military spending. Produce actual educational reform. Launch a massive green energy/jobs program. Get serious about global warming. Kick ass on campaign finance reform. Fight for gay rights. Restore the New Deal era regulatory framework and expand it. Restore a fair taxation structure. Rewrite trade agreements that undermine American jobs. Rebuild unions. Fill the spate of vacancies in the federal judiciary, and load those seats up with progressives. Rally the public to demand that Congress act on your agenda. Humiliate the regressives in and out of the GOP for their abysmal sell-out policies.

    Professor Green of Hofstra university.

    Here is the progressive mantle in a nutshell. As you can see corporations are evil. No where does Obama show his non moderate, centrist views then in going after the very corporations that fuel our jobs and our health care.

    If the Alinsky methods of the progressives can continue to fuel CRISIS>>AFTER CRISIS….then they have the opportunity to fix things with progressive policies.

    They have no desire to fix unemployment until the people scream to the government for HELP…..save us mr. president…save us.

    Okay but “But I dont want the people that caused this mess to do a lot of talking”

    Sorry Mr. President…..save us.

  9. Donklephant » Blog Archive » Administration: Don’t like our message? No worries. We have a different message just for you. Says:

    […] Frank stood behind the president on the podium in visual support of the policy. As noted in my last post, the Chairman of the House Financial Services Committee then proceeded directly to an interview on […]

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