We clearly need financial reform. Yet Obama’s reckless, populist, anti-business pronouncements only serve to harden the prevailing attitude that business growth and job generation is just too risky.
Financial reform should be thoroughly vetted and discussed in the appropriate House and Senate committees. Piecemeal pronouncements only add to the uncertainty that is killing this economy. The 550 point drop in the Dow last week following his pronouncement should be of concern, although it is never totally clear what moves the market.
The objective is not just to reduce risk, but to isolate it. We want to protect critical banking and credit functions from the raw speculation. Yet it is hard to return to the days before the Glass-Stegall bill, separating banking and investment activities, was overturned under Clinton.
There is no substitute for better regulations. Higher capital requirements to reduce leverage and better control of private contracts and derivatives that increase leverage and systemic risk are likely to come.
But let them come after the careful deliberation and consideration of the necessary functions our financial system provides. Reckless announcements from the president in the critically weak economy we still face is destructive and counterproductive.
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