realitybase - Journal

One narrative of Obama's policies is that his personal preferences are to the left but that he has to bend pragmatically--or reasonably judges that he does--to public opinion and Congressional politics and that is the reason his policies seem centrist or even center right. I've said something like that here. But in the financial institution legislation pending in the Senate, that seems clearly wrong. Public opinion and even Congressional politics favor tougher legislation than is apparently going to pass the Senate, but the President has weighed in against tougher legislation. In his statement today, he went out of his way to say the consumer protection provisions in the bill would not hurt business.

And the reform I sign will not stifle the power of the free market -- it will simply bring predictable, responsible, sensible rules into the marketplace. Unless your business model is based on bilking your customers and skirting the law, you should have nothing to fear from this legislation.

Possibly, he is "correct" on the merits, but he did have lots of political room to move further left on these issues and probably would have gained more support amongst voters and his left-wing base had he done so. In this case, at least, he leaned right by choice.

Update on Friday, May 21, 2010 at 07:19AM by

Skeptic

For example, Simon Johnson points out here that the White House leaned against an amendment to prohibit proprietary trading by banks:

Yet, at the end of the day, the Merkley-Levin amendment did not even get a vote. Why?

Partly this was because of procedural maneuvers. Merkley-Levin could only get a vote if another amendment, proposed by Senator Brownback (on exempting auto dealers from new consumer protection rules) got a vote. Late yesterday afternoon, Senator Brownback was persuaded, presumably by his Republican colleagues and by financial lobbyists, to withdraw his amendment.

Of course, Merkley-Levin was only in this awkward position because of an earlier lack of wholehearted support from the Democratic leadership – and from the White House. Again, the long reach of Wall Street was at work.

But the important point here is quite different. If Merkley-Levin did not have the votes, it was in the interest of the megabanks to have it come to the floor and be defeated. That would have been a clear victory for the status quo.

But Merkley-Levin had momentum and could potentially have passed – reflecting a big change of opinion within the Senate (and more broadly around the country). The big banks were forced into overdrive to stop it.

Update on Monday, May 24, 2010 at 03:05PM by

Skeptic

Mark Thoma and Robert Reich say here that Obama opposed parts of the financial reform legislation that would change the size, structure, or basic businesses of the big banks because he didn't want a war with the financial services industry. Public opinion was/is in favor of having that war. Was that a choice forced on him by politics or a personal preference?

Update on Tuesday, May 25, 2010 at 07:24AM by

Skeptic

James Kwak, co-author with Simon Johnson of 13 Bankers, says it was Obama's choice:

But on financial reform I think they could have gotten more done. First of all, public opinion wanted more; and second, the administration lobbied against some of the most far-reaching changes, such as Kaufman-Brown and Blanche Lincoln’s derivatives spinout provision, and Merkley-Levin never got a vote. The whole theater of the administration trying to put the bill into stone before it got much stronger should have been embarrassing to them, but they decided they could take the hit.

I think the explanation for this is some combination of (a) the economic policy guys really think that the financial system we have today is basically fine and just needs a little better oversight and (b) Obama just doesn’t care that much and wants to save his political capital (and his support from the financial sector) for other issues, like (hopefully) jobs and climate change.