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Barack Obama meets with US financial services industry leaders - Source: Reuters -
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Mr Obama's headmaster's-office visit for the naughty chiefs of America's banks at the White House was portrayed by the First Communicator as a discussion between sensible people. The President stressed his intention not to 'villify' any particular people, or group, or sector.
How very civil. And how confusing given that last night on '60 Minutes' he was quoted venting his frustration on Wall Street's hypocrisy (take state money when you're on the verge of collapse, refuse to change your ways when the bust goes a little boom-y). "I didn't run for office," said the President, "to be helping out a bunch of fat cat bankers on Wall Street."
So yesterday evening's fat cats, are today's house guests.
As usual, the President is speaking out of both sides of his mouth, and pleasing nobody. The White House visit by the bankers was because this administration believes Wall Street isn't lending enough.
It's right. Lending has declined in five successive quarters. I've had anecdotal confirmation that credit is still tough to get, and companies are still, like starving bodies with fat, chewing into their cash reserves.
But - to be fair to Wall Street - the appetite for credit is usually diminished in a recession. And after the Street has been accused of making bad bets in the past, it seems prudent to be, well, prudent.
This jockeying is taking place before a legislative struggle within the Democratic party between its liberal and conservative wings in Congress.
Both the Associated Press and Reuters have called the recent passage of The Wall Street Financial Reform and Consumer Protection Act through the US House of Representatives, the most ambitious reform plan since the New Deal.
Well, perhaps. It is certainly august, but as a news consumer, yours truly advises you to beware when grand comparisons are invoked.
The Great Depression, and President Franklin Delano Roosevelts's response to it have been cheerfully deployed by journalists for the past year, all without the aid of 27% unemployment, and tent cities springing up in Central Park as one did during 1931-33.
I'm not saying things aren't bad. One in six New Yorkers is on emergency food. Those with jobs are holding on. Those without are struggling. Whole sectors of the US economy have been destroyed and they are not going to be rebuilt.
Wall Street, however, is bonny. Last week the Dow Jones breasted its highest level for 2009. Bonuses are so good in some firms that they're being paid solely in stock, and vesting over five years. Typically bonuses are a stock/cash deal, but the appearance of prosperity in the midst of a slowdown is an 'optic', as it's called here, that many Wall Street firms would prefer to avoid.
Hang on, let me translate that last sentence.
Cashing in while the rest of America is cashing out is a bad look. It's an awful look.
Wall Street doesn't like the look of this new piece of legislation, which for the sake of brevity, we'll call The Act. Amongst other things, The Act hopes to prevent the too-big-to-fail model that allowed companies like AIG to sidle up to the US taxpayers teat; it creates a new agency that will oversee banking. Hedge funds and rating agencies are brought to book. The Federal Reserve, so active in the unpopular Wall Street bailouts, is brought under increased scrutiny.
A phalanx of lobbyists was deployed by the finance sector, and large companies to defang the legislation, and with some success. Derivatives, the mechanism that allows firms to make sometimes financially-beneficial, but sometimes catastrophic assessments of risk (a layman would call them bets, though this is perhaps unfair), are to be partially regulated, but not as much as some say is necessary for such an important market.
Mr Obama said that the heads of the banks conveyed to him their eagerness for financial reform, but he perceives a gap between what they tell him, and the activities on their representatives in Congress. He hopes they will close that gap; I'm sure many hope it will widen. Some of those people may been sitting before him at the White House today, smarting at being called obese and feline.
Either Wall Street has decided President Obama is merely bluffing, or they no longer pay attention to what he says, except for when he says, "Free money, anyone?"
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