Wow. Our experiment is off to a great start—let's see if we can finish it off sooner than expected.
In remarks prepared for delivery Wednesday afternoon, the president offers no specific regulatory framework, but calls for "core principles." Among them are consumer protections, accountability for executives and a regulatory plan that covers a broad series of financial transactions that have escaped regulation in the past.
Atrios says Obama is "making the right noises" here, but I'm not quite so sure. Consumer protections are fine, but frankly, not really central to what caused the financial meltdown. "Accountability" for executives is mush. They're already accountable in most meaningful senses of the word.
That leaves a "regulatory plan that covers a broad series of financial transactions that have escaped regulation in the past" — which is fine but could mean pretty much anything. What's the core principle here?
I know everyone is probably tired of hearing me say this, but I wish Obama would talk more about a real core principle: regulating leverage more effectively, and doing it everywhere and for all types of securities. This isn't easy, especially when you need to get practically the entire world on board, but more than any other single change it would force financial institutions to be more responsible; it would make future asset bubbles less destructive; and it would fundamentally put a stop to the casino atmosphere and outlandish paydays that have permeated Wall Street over the past decade. If we really wanted to get ambitious, we might even try to set up a countercyclical regime that increased capital requirements in good times and lowered them during bad times. But regardless of how the details turn out, if our new regs are driven by a core concern for regulating leverage, they'll do some good. If not, it's likely to be a repeat of Sarbanes-Oxley: lots of good intentions, but not much bang for the buck.