Is Obama Too Conservative?

[CountDeMoney]

As far as oversight is concerned, the SEC should be brought under the FBI.

I thought you hated those guys?

I do.  Which is why it is only fitting that they go after the other guys I hate even more.

[Admiral Yi]

Yes.  The radical options would be to let the banks fall or root-and-branch reform.

Most people when they read the word conservative don't think "anything that isn't radical."

[Sheilbh]

Most people when they read the word conservative don't think "anything that isn't radical."

If Iwere trying to define conservatism I'd say a preference for stability, a resistance to change and opposition to radical solutions, however radical the circumstances. 

But of course it's a muddy phrase, like all ideology because it's caught between a tradition, innovators, the self-appointed protectors and its opponents.  All of which have some impact on what it means.  So of course you're right.

[KRonn]

Yeah, seems good business/political policy direction, and not a left or right political issue. Though for people/groups who see the economic/financial collapse as ways to push through significant, or even more radical business change along the lines of their agenda perhaps, then something along the lines of staying the course (even with more regulations to prevent future such issues) would probably seem conservative.

Well Martin Wolf and the Financial Times are hardly radical.  What Wolf's suggesting is that if Obama's only goal is to stabilise the financial system and get it back to where it was - which is a conservative desire and is neither as radical as letting them collapse, or nationalisation, break-up and re-privatisation - then he could just be storing up trouble.  If we end this financial crisis with as many institutions that are too big to fail and without a change in the financial system (especially credit rating agencies and so on) then we're just waiting until the next time the government has to bail them all out.

Good point about the problems of restoring the same system to fail again, and I do support regulations to address the problems. I would have hoped that regs would have been put in place prior to the meltdown, given that some of the problems were being given due concerns. That's annoyed me, the failure of business and legislation that helped lead to this very expensive crisis we're all going through. I may not want heavy change in the economic systems, but I fully expect some regulations to address the things that have gone wrong. I'll be very annoyed if government fails at that, again.

[Valmy]

Most people when they read the word conservative don't think "anything that isn't radical."

Well it should.  Conservatism literally means wanting to conserve what is there.

But of course people in the US who call themselves 'Conservative' actually want to make fairly radical changes.  That is because in American discourse all political terms are all but meaningless as a description of actual ideology.

[Sheilbh]

I'll be very annoyed if government fails at that, again.

I think you're far too anti-government on this.  There were numerous failings. 

The one that I think is most likely to repeat itself is that emerging economies will continue to build up ridiculous reserves so that they are, to some extent, insulated from the global economy (this was what many of them learned in response to the Asian financial crisis); that means the money will flow, overwhelmingly, into the US again.

The consumer culture got fucked up.  The personal debt of the average American tripled from the mid-80s to now, in the UK it's even worse.  We didn't have a problem because our government had a deficit, we had a problem because we all did.  I think the much discussed greed of Wall Street and the City was a problem but it was just a magnification of what was happening on 'main street', as it were.

Then there was a general cultural failing which was, I suppose, partly due to economists.  We had a post-Thatcher, post-Reagan consensus.  The sort of regulations required to stop the 'too big to fail' stuff from happening would have required the government to use anti-trust monopoly to split businesses up.  The opposition would have been enormous, not least on languish because the consensus was, overwhelmingly, that tighter regulation wasn't needed and that the banks were okay to be that big because they were 'safe as houses'. 

The Fed also deserves some blame.  I believe some economist who came up with a rule of how to predict interest rates that actually became a rule of how to set interest rates (Taylor?) places most of the blame, in his new book, on the Fed because under Greenspan they abandoned that rule, I think after 9/11.

I think blaming government for getting the regulation wrong is a right wing version of blaming corporations because they paid far too much in salaries.  I don't think business can be trusted to self-regulate, especially if they're able to get to such a state that the government will almost have to bail them out or watch the entire system collapse.  We had a social and a cultural problem that was, frankly, systemic.  From credit card bills to preposterous takeovers, from light-touch regulation to too low interest rates there was a failing.

I'm actually quite sympathetic because my understanding is that on conventional economic theories that have predominated in recent years this sort of thing shouldn't have happened.  Unfortunately it did.  The challenge which I think is the largest and the most important governments worldwide have faced in decades is how do you preserve the good while building a new system.  How do you keep the benefits of globalisation, which have been enormous, while mitigating the costs?  This'll be especially important for the 'angel' countries who are suffering as much if not more than the 'devils' like the US and UK.  They're locked in for now but we really need them to become more involved.

My view on the stress tests, by the way, was that they were good because they allowed for more.  If this fails and we enter a second period of free-fall and panic in a few months time then there is more that can be done, such as nationalisation (theoretically, Obama's political capital could be shot by then as I think his numbers will start dropping pretty soon).  That may still be necessary.  I believe that the response to this that the US would call for were it affecting any nation but the US would be to nationalise the banks, break them up, work a system for the bad debt and then re-privatise.

The trouble is if the stress tests don't succeed then Obama may regret his conservatism if he's unable to be necessarily radical further down the line and they could fail to alter the system in the ways it may need changing.