The presidential election may not have debated many issues, but it sure was about whether or not to kill Wall Street financial reform. Republican candidate Romney was Wall Street’s choice: They supported him with tens of millions of dollars, and Romney said repeatedly that he would repeal financial reform. In stark and clear contrast, the president said he would continue implementing it, one of the historic accomplishments of his first term.
President Obama’s reelection was critical because nothing less than our financial system, our economy and our standard of living are at stake when we are talking about financial reform. The most recent financial crisis almost caused a second Great Depression, and it’s going to cost more than $12.8 trillion, which doesn’t include the incalculable human suffering of the tens of millions who are or have been unemployed, the millions who have been thrown out of their homes and those who lost savings, retirements and educations, not to mention faith in the American dream. (See Better Markets’ report on the cost of the crisis.) Now that he’s won, what should the president do to make sure that Wall Street can never again do this to our country? He must complete the job of implementing the financial reform law with strong and clear rules that truly protect Main Street from the recklessness of Wall Street.
First, people are policy. He must quickly fill all the senior financial regulatory positions with people who are committed to getting financial reform into place as thoroughly and as quickly as possible. These people must also reject the deregulatory beliefs that ushered in the financial crisis. That means, for example, that the chairman of the CFTC, Gary Gensler, should be renominated, or nominated to be the chairman of the SEC.
Second, the president has to put his money where his mouth is. That’s all Wall Street will ever understand; words and good intentions mean nothing to that crowd. The president has to fully fund all the financial regulatory agencies so that they have a fighting chance in the ongoing war that the industry is waging to kill or weaken reform. Right now it is not a fair fight. All the might, power, connections and wealth of the financial industry and its allies, lobbyists, lawyers and front groups are being brought to bear on regulators, who are understaffed, underpaid, underequipped and overworked. They all need to be fully funded immediately. Yes, that costs money at a time of budget cutting, but debt to GDP was less than 65 percent before the financial collapse and almost 73 percent after. Financial reform doesn’t just protect Main Street and prevent untold human suffering; it saves billions of dollars, if not trillions.
Third, the president must put the government’s best lawyers from the Department of Justice into the fight against the industry’s court attacks on reform. This front in the war against financial regulation is potentially lethal, because they are seeking the judicial nullification of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as set forth in detail here. The industry is sparing no expense on lawyers, the agencies are overwhelmed, and the president must respond in kind — and quickly.
Fourth, the president should make highly visible, well-publicized personal visits to the financial reform agencies and tell them how important they and their work are. He has to say that he expects them to get the unfinished job of financial reform done, and that he and his entire administration fully support them and look forward to them completing the job of protecting the American people, the taxpayers and the U.S. treasury. They are under attack and have been for years. The president needs to make it clear to them and Wall Street that he has the reform agencies’ back.
Lastly, he has to designate one of his senior White House staffers (maybe a deputy director of the National Economic Council) as the point person responsible for making sure all this actually happens. This is the only way for the president to take responsibility and ownership of financial reform.
If the president does all this, then the goal of a safer, sounder financial system, one that is less prone to crisis and failure and eliminates or dramatically reduces the need for taxpayer bailouts, is achievable. Passing the Dodd-Frank Act in his first term was a historic achievement, but it was only a start. It wasn’t perfect, but it has all the tools necessary to get the job done if Wall Street’s ongoing attempts to kill or weaken it are defeated as soundly as was their champion, Mitt Romney. This is what the American people voted for last November. This is the president’s clear mandate. Clear and direct presidential leadership and action are now required to turn campaign promises and words in enduring results. Now is the time.