OBAMA 2.O / FINANCIAL REFORM
it was bailed out in the crisis,
in a unit that made bets against
mortgage-backed securities. He
got that job on the recommendation of a colleague in the Clinton
administration, former Treasury
Secretary Robert Rubin, one of
the chief architects of market deregulation in the 1990s. Lew has
said that he didn’t think deregulation led to the financial crisis, a
view in line with Rubin’s laissezfaire approach. Lew’s pick signals
that financial reform will take a
back seat in Obama’s second term
to matters of the budget. That
may prove shortsighted.
“If you care about the fiscal crisis, the first place to start is to
make sure we prevent another financial crisis,” said Neil Barofsky,
former inspector general for the
Troubled Asset Relief Program,
the crisis-era bailout fund. “We’re
having this fiscal crisis now because of the financial crisis. If we
have a $4 trillion or $5 trillion hit
from another crisis, negotiations
over the sequester will be nothing.”
In interviews with The Huffington Post, Barofsky and other reform advocates identified at least
five things that must happen in
Obama’s second term to maintain
the momentum for reform and
HUFFINGTON
01.27.13
make another devastating crisis
less likely.
They agree that there is almost
certainly no chance that Obama
will embrace more dramatic reform ideas being advocated in
some circles, including breaking
up large banks or reinstating the
“I think the failure to set our economy
straight with regard to the financial sector
could well be the blight that the president
had a chance to but did not correct.”
Depression-era Glass-Steagall Act
separating commercial and investment banking. Even the five modest goals presented here might be
too much of a stretch, they fear.
But they are possible.
One: First, Do No Harm
Dodd-Frank is far from perfect.
It does not clear up the murk of
bank balance sheets, bring sanity to executive compensation
or much reduce the influence of
flawed credit-rating agencies. Its
provisions for winding down big
banks might not work. But doing
away with Dodd-Frank could be
much worse; even the administration’s harshest critics on the left
admit it is better than nothing.
Critics on the right, meanwhile,