Obama's Dance of the Seven Veils

“Thou art not listening to me. Be calm. As for me, am I not calm? I am altogether calm.” (Oscar Wilde, “Salome”)

The ink is not yet dry on President Obama’s proposals for overhauling the financial regulatory system, and already it looks like it is being sidelined. In order to succeed, this behemoth of a proposal must satisfy two key requirements. It must materially increase transparency across all markets, and it must address the special interests, so as to hold water politically.

The largest and most complex financial institutions are those that benefit most from the cloaking provided by regulatory inefficiencies. This is no secret, and it lies at the heart of President Obama’s credibility. What everyone from the highest levels of government to the popular media is calling the “interconnected” financial firms are, in fact, the most conflicted ones and those most likely to balk at lifting the veils.

But lift them we must. Systemic risk czars and resolution authority over large institutions are all to the good. These mechanistic repairs will plug gaping holes in the system – assuming they are unambiguous as to authority and staffed with the right people – two big “ifs”. But fundamental and lasting benefit will result from Mr. Obama’s proposals only to the extent they result in greater disclosure of information, and greater uniformity of that information, for the future of the marketplace rests in transparency.

While the world is still enamored of Mr. Obama, the world is very decidedly not in love with the US model of market capitalism. This leaves us at a precarious tipping point: on the one hand, we have the moral momentum of a new president with the world’s backing to force dramatic change.

At the same moment, we are the inheritors of what the world considers a failed and discredited model. The press today is referring to the reigning “Anglo-American” market model that the entire world has definitively rejected.

This explosive convergence – damning failure of our market model, coupled with the resounding success of our political choice – has created a window of opportunity that is at once quite large, but that will not remain open for long.

We fear that President Obama’s power is already on the wane domestically, and the lack of muscularity in his white paper proposals will not be seen by the world as hope they can cling to.

While the markets are being roiled by fits of economic uncertainty, we fear that regulatory uncertainty will prove to be most devastating of all. If the United States does not lead a massive charge to restructure the oversight of financial markets, the certainty is that fragmentation will rule for some time to come. Then markets will not be able to coalesce into a global engine for recovery for transnational capitalism.

Rather, countries with closed-off markets and tightly controlled economies will assert themselves, both regionally, and in those markets where they have clout.

Think China, which has replaced the Dictatorship of the Proletariat with dictatorship of the Bourgeoisie, and which controls enough US dollars to dictate the direction of our hedge funds industry. Think Russia which, now that oil has struck a speed bump, may need geopolitical unrest to restock its coffers. Think Europe, whose low-octane capitalism has not managed to drag itself even to the level of indecision of the US, and that will hobble the engines of growth with a Vonnegutian web of regulation.

Think how quickly political unrest can rock the cradle – or how quickly it can be snuffed before it even draws breath. We have another hour to show real leadership. Bland as much of Mr. Obama’s proposals are, they will be seen as meaningful if he attacks Congress, Wall Street and industry with a muscular and even-handed ruthlessness to make the plan a reality.

Alas, it looks as though President Obama intends to throw the overhaul of the financial markets to the political process. Already we hear talk of the all-important health care and global warming bills before congress. Already, our expectations are being managed to a certainty that the debate on financial markets reform will not even begin before next year.

While there are indisputable social and economic issues to be addressed in the areas of health care and the environment, every day we put off definitive changes in our financial markets, we lose credibility and stoke anger worldwide.

Obama’s promised reform – the one with immediate global implications – will be eviscerated before the debate even starts. By placing what will be perceived as domestic initiatives ahead of market reform, Obama is paradoxically signaling to the world that the business of America is business as usual.

Be afraid. Be very afraid.

Comments

[old boat guy:]

If the Federal Reserve and Goldman Sachs do not want financial reform (thus more "transparency") then there will not be financial reform. Period.

Jun 25 09:13 AM

[robert.b.fe...:]

I'm sorry but the entire premise that the world should dictate how we operate our markets is rediculous. Our brand of capitalism has created more wealth for more people than any other single thing in the history of the planet. Our standard of living and health care sytem is the envy of the world. President Obama's rush toward European style socialism is an ill wind that blows no good for any one. Did you watch the Billy Maze Obama infomercial on the All Barak Channel (ABC) last night? Once again it was long on philosophy (I especialy abhored the part about government deciding who lives and dies) and short on specificity. No surprise there. President Obama is weak minded and inept his policies collectivly and seperately are likely to bankrupt this country. He needs to be challenged publicly by an adversarial press not coddled like a school girl. I haven't seen this much fawning since Bamby. This article is pretty much worthless. Just like the majority of things written and broadcast by most media out lets. Like the Jon, Mayer song "When they own the information they can bend it all they want.".

Jun 25 09:31 AM

[Dave Wrixon:]

"Think Europe, whose low-octane capitalism has not managed to drag itself even to the level of indecision of the US, and that will hobble the engines of growth with a Vonnegutian web of regulation."

In view of that the fact than post-impending-train-c... America is basically going to have to wind the clock back a quarter of a century at least, this may not be such a bad thing. Because Europe has been so slothful it has not hared up your blind canyon.

Jun 25 09:45 AM

[pungent:]

Apart from the reference to Vonnegut, this article is useless. With regard to "the world is very decidedly not in love with the US model of market capitalism", allow me to ask: Then why do they keep showing up as regular customers to our little coffee shop? Because the US economic model is the most powerful, vibrant brand available. Where Europe is decaf, the US is a double-shot of espresso. This article (and Mr. Obama) conveniently neglects the real reason behind the current fiasco: government intervention in banking -- both in inducing bad loans and then in rescuing the financially non-viable. The current "rescue" efforts have exchanged a period of extreme pain for citizens/investors (who would have rightfully blamed the government) with a much longer period (15-25 years) of general misery and malaise for a much larger population -- many of whom are as-yet unborn. Beware the voice that whispers "I'll make today good if you will sacrifice tomorrow".

Jun 25 10:27 AM

[old boat guy:]

Yep," the US economic model is the most powerful, vibrant brand available." Just look at us now. What ignorant drivel, smell-boy.

Jun 25 10:40 AM

[pungent:]

"old boat guy" -- apart from the name calling, did you have anything to contribute? I didn't say things were good, just better than the other guys. And moving toward the European socialist model certainly won't help us to be more vibrant. BTW, I agree with your original comment since at the top levels Banker=Politician & Politician=Banker.

Jun 25 11:16 AM

[Mr. Ed, Jr.:]

"Systemic risk czars and resolution authority over large institutions are all to the good."
"While the world is still enamored of Mr. Obama, the world is very decidedly not in love with the US model of market capitalism. "

Well, that is only because we have not yet appointed enough czars to satisfy the rest of the czar-loving world.

Obama has appointed at least 16 czars, with more to come. They have been given authority to dictate policy. I cannot recall the section of the constitution that mentions czars. (I am, of course, referring to the U.S. Constitution.)

One last statement by the author....

"We fear that President Obama’s power is already on the wane domestically..."

Change the word "fear" to "hope" and you will be on the path to regaining your senses.

Jun 25 12:49 PM

[Boxed Merlot:]

International “moral momentum”, (i.e. Mr. Obama), vs. “a failed and discredited ‘Anglo-American’ market model”?
…This explosive convergence – damning failure of our market model, coupled with the resounding success of our political choice – has created a window of opportunity that is at once quite large, but that will not remain open for long…
…every day we put off definitive changes in our financial markets, we lose credibility and stoke anger worldwide…

Am I reading this correctly? Mr. Obama is now the leader of the world and he’s after the same thing the hijackers of 9/11 failed to accomplish? What am I missing here?

I thought the term “moral” is anathema to government / marketplace discussions. I guess “ethical” wouldn’t evoke enough religious sentimentality.

By the way, Brain’s going to be pretty upset that someone got to take over the world before him.

Jun 25 01:19 PM

[Boxed Merlot:]

…Mr. Obama [’s proposals are, they] will be seen as meaningful if he attack[s] Congress, Wall Street and industry…

Sorry for parsing the article, but this is just too rich to resist. Look at the desire to “to be seen as meaningful” even if it is only lip service. Now this is where it gets tricky. Should this be read "Mr. Obama...attacks", or "Mr. Obama's proposals...attack" . Or are they to be a one-two punch of "ruthlessness".

Either way, I thought good shepherds tend their flock, not scatter it. Oh yeah, obscure biblical references are so divisive now that we aren't a Christian nation anymore. (I keep forgetting we changed.)

Let me put it another way, shouldn't our president be more concerned with unifying the United States rather than unifying the globe. If the globe wants to unify with us, that's ok, but we should concentrate on our own Independance first. I don't see that as protectionism, I see it as recovery.

Jun 25 03:42 PM

[robert.b.fe...:]

Amen! Ooops, that christian stuff again. How dare I?


On Jun 25 03:42 PM Boxed Merlot wrote:

> …Mr. Obama [’s proposals are, they] will be seen as meaningful if
> he attack[s] Congress, Wall Street and industry…
>
> Sorry for parsing the article, but this is just too rich to resist.
> Look at the desire to “to be seen as meaningful” even if it is only
> lip service. Now this is where it gets tricky. Should this be read
> "Mr. Obama...attacks", or "Mr. Obama's proposals...attack" . Or are
> they to be a one-two punch of "ruthlessness".
>
> Either way, I thought good shepherds tend their flock, not scatter
> it. Oh yeah, obscure biblical references are so divisive now that
> we aren't a Christian nation anymore. (I keep forgetting we changed.)
>
>
> Let me put it another way, shouldn't our president be more concerned
> with unifying the United States rather than unifying the globe. If
> the globe wants to unify with us, that's ok, but we should concentrate
> on our own Independance first. I don't see that as protectionism,
> I see it as recovery.

Jun 25 06:50 PM

[Chris Butler_:]

Sorry, but one way I measure the effectiveness of any US policy is to see if it "stokes anger worldwide." If the proposal receives angry chirping out of Europe, we're probably on the right track.

I don't even buy the argument that our model of capitalism stokes any global anger at all. Foreign governments sure do buy a lot of our government paper (despite their official proclamations and despite their "anger").

Foreign corporations sure do like selling the US consumer their goods. That must really enrage them.

Foreign countries aren't too "angry" to bend over backwards to offer their cheap labor to our manufacturers.

You're mixing up what foreign governments "say" and what their citizens "do."

Jun 26 10:40 AM

[wavelength:]

I can think of more apt Oscar Wilde quotations. How about "we are all of us in the gutter, but some of us are looking up at the stars"? Neither the basic premise of this article or its inferences are worth commenting on further. One day it will be morning in America again - Pungent, please wake me when the expresso resumes flowing and the koolaid is off the menu.

Jun 26 12:51 PM

[Northstar10000:]

Reform is sap for the masses. there has never been any meaningful reform that has not been repealed after the jokes find out by accident they did something right.

Jun 27 04:22 PM