In 2008, simply put, Wall Street ate Main Street. In 2010, President Obama ate Wall Street. In one fell swoop the Obama Administration changed the United States marketplace from an extremely unregulated market into an economy of hyper regulation. The federal government can now review, liquidate, and regulate any financial institution it so desires. This explosion of federal regulation has not gone unnoticed, with members of Congress, economists, and even the Congressional Budget Office lodging complaints about the new legislation. Yet our Campaigner-In Chief, a.k.a. President Obama, seems to ignore these constructive criticisms and only seems intent on continuously being his own personal cheerleader. This "look at me, look at me" attitude has not been uncommon throughout this process with Senator Harry Reid doing much the same thing to save his own political career. This post is simply the follow up to "When Wall Street Ate Main Street" and will help the reader understand the drastic shift that has been taken in America's economic policy.
From One End to the Other
In 2007 and 2008 the United States entered into the worst economic recession since the Great Depression. Unemployment rates exceeded 10% of the population (over 31,000,000 people) and still today hover in the close vicinity, at the same time the sub-prime housing crisis saw houses foreclosing across the nation and many families were forced out of their homes. Democrats immediately seized upon the Bush Administration as the culprit and demonized the concept of deregulation in front of the American public. With that the Pelosi-Reid Agenda became the banner bearer of increased government regulation and thus, this new Wall Street Reform and Consumer Protection Act of 2010 represents that. The thousands of pages long bill has three main points of contention within it: it doesn't eliminate too big to fail, allows for an expansion of federal power, and infringes upon free market principles.
Title II of the Wall Street Reform Package allows for the "orderly liquidation authority" given to the Federal Reserve, FDIC, and the SEC. This section preserves the idea of 'too big to fail' companies by allowing businesses to pay into a fund that they can then apply for funds from if they run into financial issues. Excuse the rant, but I thought the idea of this bill was to eliminate the risky business practices that got the country into this recession? But by actually legalizing the idea that the federal government will step in and save a failing industry, how can anyone expect companies to operate any differently than they did before? Basically psychology teaches that to stop and unwanted habit, one must discourage it, not encourage it. Well by providing a fail safe for large corporations, the Obama Administration can only be viewed as encouraging it. This also conflicts with basic free market principles because in economics, businesses fail for a reason. Continuously reviving a broken business will not only drain our government funds, but will also impede our economy itself because its presence will discourage many other, smaller, more viable businesses from entering the market place. This section was actually supposed to be thrown out but some how found its way back in again.
The second most contentious section establishes the Bureau of Consumer Protection because many economists fear that it may interfere with free market principles. The agency was created within the Federal Reserve but was given such a broad structure and power basis that its scope has never been defined. Republicans rightfully champion the dangers of such a bureaucratic agency because, without the correct limitations, it could very well dictate many of economic policies and practices. The idea of scope is not knew to this debate, in fact it lies at its very heart. Both sides agreed that change needed to happen to revamp our economic systems but the differences began with how and more importantly how much change is needed. This same principle applies to the derivative debate, that also waged during this same legislative process. This new set of regulator practices changed where these types of trades can be made but it does nothing past that. That's the irony of these bills, they over-regulate certain areas and completely ignore (or encourage) the main practices that got the United States into the recession. How's that for change?
What Lies Ahead
What the future holds on this issue remains to be seen. Recent polls suggest that only four out of ten Americans approve of President Obama's economic plans and policies. With unemployment rates still hovering near 10% and with no real end in sight to our economic woes, one can only hope thata new Congress will help better steer our nation toward the right path. Regardless, the fact remains that things still need to change, because the change we supposedly got, seems all to familiar.
Later,
Cody
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