06 July 2010

Obama's financial reform bill and how democracy doesn't work

U.S. President Barack Obama had hoped to get his financial reform legislation passed before the G20 meeting in order to impress the world with American leadership on the troublesome economic front. Didn't happen. Both the House of Representatives and the Senate have produced bills but reconciliation of the two is not going well.

Not only the politicians have gone over the proposed bills with great care. The financial industry is watching closely and squeezing hard. It expects to be well served by those whose election campaigns it finances and whose districts it enriches. Senator Dick Durbin admits, "Hard to believe in a time when we're facing a banking crisis that many of the banks created [that they] are still the most powerful lobby on Capitol Hill. And they frankly own the place." Economist Simon Johnson of MIT suggests that Obama is in fact doing Wall Street's bidding while claiming the opposite. He says that after signing off on "the most generous and least conditional bailout in world financial history," the President is scrambling for political cover but the cover is without substance.

Insiders claim the proposed independent Consumer Protection Agency will be buried in the Federal Reserve Bank, the too big to fail provisions are gone, tough rules on derivatives are threatened by New York liberals who fear the banks will move business overseas, exemptions are being made for mutual funds, and so on and on. The teeth are being pulled.

The financial industry has 25 lobbyists for every member of Congress, scrupulously supervising with expert eyes the behaviour of each. This is an influence the American public, with its limited knowledge of the arcane world of finance, can't begin to match. Americans will simply have to accept the financial reform the industry, and politicians heavily dependent on that industry, give them. Their interests are subordinated to those of the bankers. I suspect President Obama would have it otherwise, but he too is a victim of the capitalist system and must tailor his goals accordingly.

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