Obama's False Reform

The most disturbing thing about Barack Obama's call for financial reform was the way the president falsified our predicament. He tried to make it sound as though everyone was implicated in the breakdown and therefore no one was really to blame. "A culture of irresponsibility took root, from Wall Street to Washington to Main Street," Obama asserted. "And a regulatory regime basically crafted in the wake of a twentieth-century economic crisis--the Great Depression--was overwhelmed by the speed, scope and sophistication of a twenty-first-century global economy."

That is not what happened, to put it charitably. The regulatory system was not overwhelmed by historic forces; it was systematically gutted and dismantled by the government at the behest of banking interests. If Obama wants details, he can consult his economic advisers--including Larry Summers and Tim Geithner--who participated directly in unwinding prudential rules and regulations. Cheers were led by the Federal Reserve, with heavy lifting by both political parties.

If Obama were to tell the truth now about what went wrong, he would face a far larger problem trying to clean up the mess. Instead, he has opted for smooth talk and fuzzy reforms that in effect evade the nasty complexities of our situation. He might get away with this in the short run--Congress doesn't much want to face the music either. But Obama's so-called reform is "kicking the can down the road," as he likes to say about other problems. In the long run, it will haunt the country, because it fails to confront the true nature of the disorders.

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