Letter to Obama: Losing Political Capital
Dear President Obama,
I say this as a supporter and as someone who wishes you success as we face extreme challenges on many fronts. I work among conservative Republicans and actually had to sneak out of the office to watch your inauguration. It was a touching and historic moment I will never forget.
You are on the verge of losing whatever political capital you had coming into office due to your refusal to acknowledge that the people you are relying on for economic policy are the very people who are responsible for getting us into this situation. Greenspan, Bernanke, Paulson, and now Geithner (and Summers) all continue to fail to see the causes of the crisis. As a consquence, current proposed regulatory reform is bound to fail yet again.
At this point, the rapid loss of confidence in both Geithner and Bernanke are weakening your ability to push your agenda in other critical matters. You must do something to remove them both or you will imperil your potential to accomplish lasting and necessary change.
He enunciates six unacceptable weaknesses in your proposal:
1) No major changes for the ratings agencies!
2) Turn Derivatives into Ordinary Financial Products
3) If they are too big to fail, make them smaller.”
4) The Federal Reserve, Despite its Role in Causing the Crisis, Gets MORE Authority
5) Require leverage to be dialed back to its pre-2004 levels.
6) Restore Glass Steagall
All of which suggests that the status-quo-preserving, sacred-cow-loving, upward-failing duo of Lawrence Summers and Tim Geithner are still in control of economic policy. The more pragmatic David Axelrod and the take-no-prisoners, don’t-give-a-shit-about-Wall-Street Rahm Emmanuel have yet to assert authority over the finance sector.
All these should be considered uncompromising requirements of any regulatory reform. Anything less than these six items will have no positive effect and will likely lead to another crisis before the end of your first term.
You are running out of time.