What Should The President Say On Thursday?

By Simon Johnson, co-author of 13 Bankers: The Wall Street Takeover and The Next Financial Meltdown

On Thursday, President Obama will give one of the defining speeches of his presidency. Most presidents are remembered for only 2 or 3 policies or events during their tenure. The SEC case against Goldman Sachs means, like it or not, the legacy of this administration is wrapped up with the outcome of this and related cases.

The president is apparently lining up to give a fairly conventional “support the Dodd bill” speech. This would be major miscalculation.

The Democrats are afraid that if they truly take on the big banks, they will lose campaign contributions and be placed a major disadvantage for November 2010 and 2012 – “don’t push it too far” is the message from the White House to the Senate. But this just shows the White House has not fully comprehended the modern nature of banking.
The banks are already coming after the Democrats. A pro-big bank group launched advertizing yesterday against Harry Reid in Nevada, as well as in Missouri and Virginia; the media spend is eye popping. Neal Wolin (Deputy Treasury Secretary) already declared war on the Chamber of Commerce over consumer protection; the people behind the Chamber are not nice people and they are very angry about what they think will hurt their interests.

If you want to rally the country against oversized banks that serve no productive purpose, you need to really end the Too Big To Fail problem – half measures simply will not convince people or rally sufficient support. And what we have so far is half measures, as understood from left and right – see today’s New York Times – because the “resolution authority” simply cannot work for large complex cross-border financial institutions.


It will help manage the failure – and avoid bailouts – at purely domestic US financial institutions, but it does not help for cross-border institutions because there is no international agreement on how to handle such failures and – I can assure you – there is no prospect for such an agreement in at least the next 20 years. The Dodd bill will help for resolving bank holding companies and for nonbank financial companies, but not for the megabanks.

How can you take on the banks – whose executives are out for revenge because of the consumer protection measures and because of what seems likely to happen on derivatives, and just to show they are still the top dog (e.g., Goldman) – with one hand tied behind your back in November?


remainder in full: http://baselinescenario.com/2010/04/21/what-should-the-president-say-on-thursday/

and to the point speech. Save time and gain many new friends...LOL.

No matter what the issue, the lobby money comes between meaningful reform.