Wednesday, April 14, 2010

The Politics of Financial Regulation

If there is one thing almost everyone seems to be agreed upon in the wake of the severe recession of 2008, it is that we need to put some curbs on Wall Street speculators to try to prevent such events from occurring again, similar to the way financial regulations like the securities acts of 1933 and 1934 were put in place to curb the abuses of the 1920's that led to the Great Depression.  So you would think that financial regulation of some sort should sail through Congress on a bi-partisan basis, since everybody is for it.  You would think that anyone opposing such a bill would easily be tarred as taking the side of the credit default swapping, mortgage securitizing, bonus-paying, foreclosing fat cats who played such a large part in getting us into this mess, against the ordinary citizens who have lost their jobs and their homes to the financial collapse.

Not so fast!  Give the Republicans credit for coming up with a plausible way of explaining their opposition to Senator Dodd's financial regulation bill.  After their near success tapping into popular fear of government intervention to justify their defense of the none-too-popular health insurance industry, now they are playing on popular disgust with financial bailouts to justify taking the side of none-too-popular bankers and speculators.  No matter that the bailout policy was established by the Bush administration, and that many Republican senators supported the AIG bailout and the TARP program that were enacted in the wake of Lehman Brothers' collapse in the fall of 2008. 

It is of course legitimate for the opposition, minority party to raise objections to the governing party's plans, even at the cost of consistency or coherence.  But would it not be more responsible to try to incorporate some Republican philosophical ideas into the financial reform bill, rather than simply obstructing and opposing it?  And if we continue to see nothing but obstructionism, is it not legitimate to keep pointing out that the opposition has no program of its own to offer?  Not only would the Republican leadership suggest doing nothing to avert the next financial collapse, they also advocate doing nothing to keep the economy afloat after another collapse.  Are the short term potential political gains of this strategy really worth its potential long term political and economic dangers?

In other news, the Dow Jones Industrial Average passed 11,000 this week, up more than 50% from its low point a little over a year ago.

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