Liddick: Obama’s hollow scolding
So the Scold-in-Chief has given Wall Street’s Big Bad Bankers a piece of his mind.
“No more risky schemes, now – and stop with the big-buck bonuses.” One could almost see the wagging finger. “You’re all very naughty to have gotten us into this economic mess, and we’re not about to let you do it again. So there.” It was all very impressive – and hollow.
It’s not that I have any qualms about castigating greed – after all, it’s one of the seven on that famous list of all-time bad behaviors. But I think there’s a disconnect when one multimillionaire starts castigating other multimillionaires for being avaricious, in the hope of making political hay. I also have a bit of a problem with the government arrogating to itself the right to make moral decisions about how much is enough, especially when those decisions are going to be made by the likes of Congressman Charlie Rangel, who seems to have – to be charitable – a rather flexible idea about how much he’s worth, especially around tax time.
There’s also a practical problem in attacking the reward side of our economic system, built on the finely balanced calculation of risk-and-reward. Threaten the income of those who are bold enough, smart enough or just plain lucky enough to risk all in the expectation of doing well, and you threaten that which has made this country one of the most productive, prosperous and innovative in the history of mankind. Just ask any Colorado startup company what would happen if venture capital were to decrease by, say, 30 percent.
And there is the dichotomy between what the administration says and what it does. Chiding Wall Street may make for good press, but the fact is that when there was a chance to break up the very largest financial institutions in the country, the president chose instead to allow them to become larger. Now, under the tutelage of ex-Wall Streeters like Timothy Geithner and Clintonistas such as Lawrence Summers, institutions like Bank of America and Citigroup have been labeled “systematically important,” giving about 25 of these financial godzillas permanent special drawing rights on your wallet. Now that’s change – whether you believe in it or not.
One of the most important questions regarding regulation of the nation’s financial system is not the quantity of it – more is not necessarily better. Our banking system is already heavily regulated; possibly the nuclear and aircraft construction industries have more oversight – perhaps not. But what is important is who does the regulating, and how.
Everyone agrees that bad home loans, made to people who were poor credit risks for more property than they could afford, backed through sales of financial instruments no one fully understood, was at the heart of the housing collapse that crashed our economy last year. What may be less well known is the role the system’s political overseers played in the collapse. The left likes to howl about “deregulation,” but is loathe to admit the effects of meddling by those such as Congressman Barney Frank and Senator Chris Dodd, who pushed banks to lower lending standards for years, in exchange for political favor. Many on the right embrace deregulation, without noting the “wild west” atmosphere lack of oversight sometimes creates, especially when other people’s money is involved.
Clearly what is needed here is reform which combines sensible reserve requirements, commonsense approaches to lending – including real evaluation of borrowers’ capabilities – and some way to provide technical oversight while insulating financial institutions from demands for politically motivated policies. Such a reform will be difficult for this highly-politicized administration, but if it is serious about the nation’s financial health, that is the road to take.
There should also be a word to the others responsible for the country’s financial meltdown: those who took the money. Those who bought more than they could afford. Those who knew they were lying on loan applications, and did it anyway. Those who counted on bankruptcy to bail them out. Those who believed “you deserve it” regardless of their ability to pay. They should be reminded that, as much as any rogue banker, weasel-headed loan officer or boardroom bunko artist, they are responsible for the present situation. More than any number of regulators, they can help address the problems we face buy simply resolving buy only what they can afford; both they and the nation will be better off for it.
And to those who are all about emotional manipulation for political gain – in this case, through criticism of “excessive” salaries, a thought. Yes, unbridled avarice is undoubtedly bad. But if one simply replaces the sin of avarice with that of envy, have we really made any progress?
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