Maybe Obama Should Scold the New Democrats, Rather than Bankers, Over Financial Reform « The Washington Independent

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The meeting was always just going to be political theater. Wall Street bankers were supposed to play their part on the public stage in Washington, and submit to a scolding from the president about bonuses and the need to start lending more to help get the economy moving.

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But inevitably public perception will issue its harsh ruling, and it goes something like this: If the meeting were really that important to Mr. Blankfein, Mr. Mack and Mr. Parsons, they would have found a way to get there.

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Even positive aspects of the bill, such as the establishment of the Consumer Financial Protection Agency, were significantly watered down. New Democrats — the people we used to call “Republicans” — won concessions that give federal regulators more scope to preempt state consumer-protection laws deemed to “significantly interfere with or materially impair a national bank’s ability to do business.” The change was sponsored by Congresswoman Melissa Bean, the most bought and paid for member of the House (not an inconsiderable political achievement amongst our current political profiles in courage). Bean justified the change on the basis of having “robust national standards and enforcing them uniformly”, which sounds good until one considers the history of federal regulators, none of whom have historically moved when they plainly should have done so. How many federal regulators do you recall actually blocking the most egregious excesses in the mortgage market over the past 15 years? Preventing the states from moving proactively means that we will likely repeat the experience of the 1990s. Historically, the reform impetus has emanated from the states, not the federal government — Governor Eliot Spitzer’s administration being a prominent illustration.

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More and more voters are beginning to believe this façade of reform is deliberate — a cynical act of kabuki theatre by the President to mask his own reticence to deal with the problem in an honest manner.It was clear to many of us that the president may not have been serious about reform when he picked Tim Geithner and Larry Summers as the leaders of his economic team a year ago, and essentially relegated any genuine progressive to the Cabinet equivalent of Siberia, as Matt Taibbi recently highlighted.