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If Wall Street Wants a Fight, Obama Should…

Posted by Larry Doyle on January 21, 2010 3:59 PM |

Earthquakes always lead to after-shocks.

With all due respect and sensitivity to the residents of Haiti, the earthquake felt in the Massachusetts Senate election on Tuesday has led to the after-shock dropped on Wall Street today by President Obama. Obama’s call to limit the size and risk-taking of Wall Street banks is meant to address the rage and anxiety of the American public. Any vision, however, will only be as effective as those commanders charged with its execution.

Who on Obama’s team will ultimately be in the position to execute this vision to reconstruct Wall Street? Tim Geithner, Ben Bernanke, Larry Summers, and Mary Schapiro. Each of these individuals is badly scarred as a result of the crisis that started on Wall Street and, in turn, crushed Main Street.

I do think Obama’s proposal to reign in risks on Wall street has some real merit. That said, I have little confidence that it will be consummated in the face of the heavy Wall Street lobby which will inevitably weigh down on Washington.

In fact, Wall Street has already indicated its enormous displeasure with Obama’s plan. Bloomberg addresses this fact in writing, Obama Calls for Limiting Size, Risk-Taking of Banks:

The plan is subject to approval by Congress, where the president’s earlier regulatory proposal has hit resistance from some lawmakers and opposition from financial firms. Financial industry executives, lobbyists and analysts were critical of the proposal.

Obama’s proposals are “arbitrary restrictions on growth and activities” of banks, the chief executive officer of Wall Street’s main lobbying group said in a statement today.

Tim Ryan, CEO of the Securities Industry and Financial Markets Association, said the group supports “strengthened regulatory oversight, and flexibility like that originally proposed by the administration.”

Obama anticipated that reaction in his remarks.

“If these folks want a fight, it’s a fight I’m ready to have,” he said.

The problem Obama faces in having a fight with Wall Street is the very fact that his financial generals, specifically Geithner, Summers, and Schapiro, are very much conflicted. Each of these three generals have proven themselves incapable of effecting real change and making real impact for the American public against their former Wall Street cronies. Thus, how effective can and will Obama’s proposal be without financial generals who are not largely beholden to the Wall Street industry?

What does Obama need to do?

He needs new financial generals if he thinks the American public will buy his plan and if he thinks Congress will implement it.

To this end, Obama should do the following:

1. Fire Tim Geithner and replace him with Paul Volcker.

2. Fire Larry Summers and replace him with Harvard economist, Martin Feldstein.

3. Fire Mary Schapiro and replace her with New York Attorney General Andrew Cuomo.

If anybody in Washington, on Wall Street, or in any other part of America views these moves as overly aggressive, they clearly are not feeling the same sense of rage as those I engage. That rage consistently is directed at Geithner, Summers, and Schapiro.

Obama can’t fire Congressmen. The American public will take care of that.

Massachusetts sent a missile right up Washington’s ass with the vote on Tuesday. If Obama wants to redirect that missile and send it up Wall Street management’s ass he needs to strap Geithner, Summers, and Schapiro to its back.

Short of these moves, Obama’s talk will be watered down and his punch will likely land very softly upon those from Wall Street filling Washington’s coffers.


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