Barry Ritholtz has an interesting post suggesting that the Democrats made a significant tactical error in pursuing health care reform before pursuing financial regulatory reform:
There was widespread popular support for a full reform of finance. What the White House should have pursued was: 1) Reinstatement of Glass Steagall; 2) Repeal the Commodity Futures Modernization Act; 3) Overturning SEC Bear Stearn exemption allowing 5 biggest firms to leverage up far beyond 12 to one; 4) Regulating the non bank sub-prime lenders; 5) Continuing high risk trades to be compensated regardless of profitibility; 6) Mandating (and enforcing) lending standards, etc.
All of this could have been accomplished in the first 6 months of the Obama administration. The consumer protection stuff could have been tossed in as well, though it was not the cause of the collapse.
What we got instead, was the usual lobbying efforts by the finance industry. They own Congress, lock stock and barrel, and they throttled Financial Reform. It did not help that the Obama economic team is filled with defenders of the Status Quo — primarily Summers, but it appears Geithner also — the dynamic duo that fiddled while the economy burned.
Given the contentious debates surrounding healthcare reform, my prediction is that when push comes to shove on regulatory reform, Wall Street will have the Administration for lunch. Let’s hope I’m wrong.
I guess it depends on whether you think financial reform is more important than health care reform. In both cases, the moneyed interests will certainly prevail. When’s the last time they haven’t?