Shortly before noon EST on April 21, 2010 President Obama addressed “the Street” at Manhattan’s Cooper Union which sits just a few blocks from Wall Street.
After the customary “good to be here,” acknowledgment of “special guests,” and introductory humor, the president proceeded to recap the economic situation of the past two years; the eight million eliminated jobs, the “countless” small business closings, the “trillions of dollars of lost savings” and the postponed retirements, college entries, and entrepreneurial pursuits; and of course the necessity of Federal intervention in all of it.
Then the president placed the blame or as he termed it “the failure of responsibility” on “Wall Street all the way to Washington.” Now, said the president, America must face the “underlying problems that led” to the economic crisis and “learn the lessons” from it.
So, how does the president suggest those be accomplished?
The president’s speech was effective in that he clearly spelled out what he wishes to result from the passage of a Wall Street reform bill. President Obama underscored the fact he believes in a free market but not a “free license to take whatever you can get, however you can get it.” To achieve the boundaries he’s after, the president said we must ignore the “furious effort of industry lobbyists” and we must replace the current “flawed rules” with a “set of updated, commonsense rules to ensure accountability on Wall Street and to protect consumers in our financial system.”
So, what does such a set of rules look like?
The House of Representatives already passed a Wall Street reform bill (HR 4173). The Senate is currently in debate (S 3217). As always the differences between the two chambers are in the particulars of how things ought to be done. Here are the four major points of reform…
1. Enact the “Volcker Rule,” which will place limits on the size of banks and the kinds of risks that banking institutions can take.
2. Enact “transparency” rules that make it more difficult for financial institutions to play hide-n-seek with financial instruments.
3. Enact the strongest consumer financial protections in US history that will protect consumers from deceptive practices.
4. Enact Wall Street reforms that will give all shareholders new power in the financial system. In this way all shareholders will have a say in executive bonuses and corporate directions.
People who don’t read the entire speech will perceive mixed messages depending on which newspaper they read and which television news anchor and radio talk show hosts they listen to. Some people will say the president spoke out of “both sides of his mouth” while others will say it’s another step on the road to socialism.
Neither is true. The truth is that US business has reached a point where reform is sorely needed on Wall Street. After all, Wall Street trades in public companies not private ones. Government is the only entity that truly exists for the good of the public; and believe it or not it does much good.
Most current US companies aren’t run by their founders; they’re run by high paid strangers. When a company goes public there ought to be executive salary caps and a myriad of “watchdog” rules. Recent history shows that high paid executives aren’t really earning their pay. In the President’s words they’re “making out like bandits.”
Adam Smith and Gordon Gecko (Wall Street) were wrong; greed isn’t good.
Read the entire speech on The White House.com
The House of Representatives.com