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Obama and the Battle Over Wall Street
Washington Post had a column recently that told the following story:
In late February 1902, J.P. Morgan, the leading financier of his
day, went to the White House to meet with President Theodore Roosevelt
and Attorney General Philander Knox. The government had just announced
an antitrust suit — the first of its kind — against Morgan’s
recently formed railroad trust, Northern Securities.
Morgan argued strongly that his industrial trusts were essential to American
prosperity and competitiveness. Roosevelt’s lawsuit was intended to stop
the creation of the mammoth trust. Financiers threatened that the government
lawsuit would cause a panic on Wall Street. Knox memorably replied: “There
is no stock ticker at the Department of Justice.”
Morgan’s response at the White House that February day was to say: “If
we have done anything wrong, send your man to my man, and they can fix it up.”
But the president was blunt: “That can’t be done.”
And Knox succinctly summarized Roosevelt’s philosophy. “We don’t
want to fix it up,” he told Morgan. “We want to stop it.” Afterward,
Roosevelt said that Morgan’s attitude was “a most illuminating illustration
of the Wall Street point of view.”
The Washington Post story suggests that “to battle Wall Street, Obama should
channel Teddy Roosevelt.”
Simon Johnson of the Massachusetts Institute of Technology, and Nobel Prize winner
Joseph Stiglitz of Columbia University, have written books calling for the government
to rein in the power of the biggest banks and chastising economists and policymakers
for believing before the crisis that financial markets could police themselves
and correct their own excesses.
Now, that complacent attitude seems to be changing. Attention has been drawn
to barackobama.com as the White House has begun an online pop-up ad campaign
calling for economic reform.
When Google users search for information regarding Goldman Sachs, Wall Street’s
preeminent investment banking house, now under investigation for fraud by the
Securities and Exchange Commission (SEC), they are greeted by a pop-up window
that takes them directly to www.barackobama.com. The link reads “Help Change
Wall Street” and leads Internet users to a page where they can pledge their
In Obama’s weekly radio address to the nation on April 17, now posted on
the White House Web site, the president has singled out a lack of accountability
on Wall Street as a major component of the recent economic recession.
“There were many causes of the turmoil that ripped through our economy
over the past two years. But above all, this crisis was caused by failures in
the financial industry. What is clear is that this crisis could have been avoided
if Wall Street firms were more accountable, if financial dealings were more transparent,
and if consumers and shareholders were given more information and authority to
make decisions,” the president observed.
President Obama stated that due to unethical business practices by companies
such as Goldman Sachs, “Eight million jobs lost, trillions in savings erased,
countless dreams diminished or denied.” The president is now trying to
assure Americans that he will do everything in his power to prevent another event
like this from happening during his presidency.
Obama flew to New York last week and delivered a speech at Cooper Union, a New
York school, to “remind Americans what is at stake if we do not move forward
with changing the rules of the road as part of a strong Wall Street reform package.” His
speech took place the day Senate Democrats brought the reform bill to the floor
for deliberation. The debate on the bill is expected to commence this week.
There is no doubt that public opinion toward Wall Street and big banks favors
regulation. A recent study of the Pew Center for People and the Press shows that
while the public is wary of too much government involvement with the economy,
it suspends that concern when it comes to stricter regulation of major financial
companies. A clear majority (61 percent) says it is a good idea for the government
to more strictly regulate the way major financial companies do business.
Emboldened by such sentiment, the Obama administration and Senate Democrats are
pushing for a showdown on their sweeping overhaul of financial regulations.
And, as usual, Democrats and Republicans are at odds about how the legislation
should look. Democrats are accusing Republicans of siding with Wall Street to
block new rules that could avert another financial meltdown. Republicans charge
Democrats with setting taxpayers up for more bank bailouts down the road.
The stakes in this debate are huge. The New York Times has pointed out that both
parties want to show that they are working aggressively to prevent the risky
practices that led to the worst recession since the Great Depression. The parties
also need to demonstrate that they share voters’ anger over huge paydays
that returned to Wall Street even as unemployment remains high and economic recovery
slow in much of the country.
One thing seems for sure: The Republicans are apparently going to oppose just
about anything Obama proposes. Anything. In a letter distributed last Friday,
all 41 Republicans in the 100-seat Senate have now expressed their opposition
to the financial reform bill, but said they were willing to continue working
with Democrats on the issue. Just like Little Bo Peep’s sheep, they are
falling into line as the party of “No” even as they claim they’re
willing to work with Democrats.
Democrats plan to respond aggressively. In his radio address last Saturday, Obama
accused the Republicans of being “cynical and deceptive” by signaling
their opposition to the bill and suggesting that it would amount to a bailout.
“Every day we don’t act, the same system that led to bailouts remains
in place — with the exact same loopholes and the exact same liabilities,” Obama
said. “And if we don’t change what led to the crisis, we’ll
doom ourselves to repeat it. That’s the truth. Opposing reform will leave
taxpayers on the hook if a crisis like this ever happens again.”
The underlying desire to put an end to the excesses of certain corporations and
their executives is a matter which Teddy Roosevelt put squarely on the national
Obama is considered by some to be “shockingly naïve” for trying
to follow the same path as his illustrious, swashbuckling predecessor of a century
ago. But that does not make his efforts any less worthy or any less necessary
in the year 2010.
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