Obama's Economic Reforms Should Re-structure the System -- Not Just Reform It
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A recent study cited by the Editor of the Financial Times argues that we are now in a Depression although no one wants to use the term or face the music.
Recall that it took the National Bureau of Economic Research a full year to recognize the reality of a recession that analysts at investment banks had been acknowledging for as long. Despite everything that has happened, and is continuing to occur on the economic front---a rise in unemployment claims, mounting foreclosures, and escalating bankruptcies-the sense of crisis is being downplayed to stoke confidence and encourage the belief in "green shoots" and an emerging recovery.
The Obama Express is in full motion with new announcements, proposals, and laws signed daily. Yet, something's missing. Au Contraire, Mr. Maher, there is no lack of audacity, just a failure to recognize that cosmetic alterations do not fundamental change make. What we have is a political elite that is more Clintonesque than Rooseveltesque. (If only the Repugs were right with their fears of the Socialist menace!)
These proposals, described as "new rules for the road," were mostly embraced by the banks, a sign they are not tough enough. The Congress will probably approve them quickly because they were "hammered out" through a process of negotiations that seems to have heard more from the industry than public interest advocates.
The Washington Post tells us:
"Time and again, lawmakers, regulators and industry lobbyists pressed their concerns behind closed doors at the White House and the Treasury Department, according to participants.
"Turf-conscious regulators opposed the idea to consolidate banking oversight agencies and took their appeal over the Treasury directly to the White House. Ultimately the administration spared all but one agency.
"A few key lawmakers argued against merging the two federal agencies that oversee the stock and commodity markets. That did not happen.
"Insurance companies fought over whether a national regulator should oversee them. The White House dropped the proposal."
Etc. Etc. Etc, ad nuseum.
So now we have 88 pages of financial reforms as if the authors of this compromised and consensualized agenda were being paid by the word. The President is telling us that "mistakes" were made as if massive crimes, theft, fraud and unregulated greed were not involved in causing the calamity at the heart if the crash of the economy.
Bloomberg surveyed the wreckage: "Financial firms worldwide have recorded more than $1.4 trillion in writedowns and credit losses since 2007 as the U.S. housing market collapsed and the economy sank into recession."
Billions spent to unlock credit and get banks lending again have led nowhere. The financial news service quotes Tim Backshall, chief strategist at Credit Derivatives Research LLC in Walnut Creek, California.
"It is becoming clearer that banks are not as willing to lend," he said in an e-mailed message. "With their risk rising once again, risk premiums on non-financials must rise commensurately."
They don't see a recovery around the corner either, "The broad sense is we have not seen the bottom there yet," said Bert Ely, a banking consultant in Alexandria, Virginia. "For later this year, and into next year, there are just big question marks out there."
Question marks indeed.
What are the questions we should be asking? What happened to changes for ratings agencies that gave high marks for bogus mortgage securities? Why trust the Fed which, in the words of one critic "started the fire" through low interest rates to extinguish it?
Simon Johnson, the ex-IMF Chief now at MIT asks some others