Wall Street’s financial leaders have been paraded before Congress to explain their efforts to restore stability to our financial system. Obama has turned on the populist spigot to demonize Wall Street to justify bigger taxes and fees and hip shot regulation.

Wall Street deserves the scrutiny and reform is needed.  Yet this fiasco was as much a government failure.  Fannie Mae was exempt from regulation by the SEC, FDIC and the Fed.  When Congress was solidly warned about excessive risks taken by the Fannies,they rejected calls to increase oversight, largely along party lines. Little protest is heard from the halls of Congress over some of the huge bonuses paid to Frank Raines and others at Fannie Mae while the system was imploding.

Some recent regulations such as the mark to market rules made this crisis much worse than it would have otherwise been.  Other regulations such as control  of derivatives  by the Commodities Futures Trading Commissions were removed (under Clinton) at a pivotal time. The Fed ’s monetary policy was also a factor.

A hearing to truly understand what happens and what needs to be done would have our Congressmen on the other side of the microphone.

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.

There are those who see our financial problem as a moral failure. In one sense it is, but not in the sense those who wish to frame it in moral tones believe.

To blame greed for the meltdown is simplistic and irrelevant. Greed has been with us forever. Why would it appear in its ugliness now?

I would say that our economic collapse was the fault of a moral supremacy that ignored sound economic principles and common sense.  In an effort to encourage home ownership for the poor, the government demanded that prudent lending standards be forced out of the system. To assure a market the government through Fannie Mae guaranteed mortgages and ridiculous financial instruments to feed the market.

When alarms were being sounded the regulators and legislators were being hounded with political pressure from lobbyists for the very firms they were regulating. Chris Dodd, Hillary Clinton and Barak Obama were among the largest recipients of campaign funds from Fannie Mae.  Barney Frank and many others loudly protested those who warned of a problem, insisting that these programs providing housing for the lower income were somewhat sacrosanct.

It was the unwillingness to understand the limits of government to fulfill our moral wishes that fed this mania.  It was our pursuit of moral justice through government force that led taxpayer funded ACORN to pressure banks to make high risk loans to those who otherwise would not have qualified.

It was not greed or the absence of morality that caused this disaster; it was the ignorance of basic economic principles and the belief that the government can create wealth by making promises it can’t fulfill and that it can erase risk by ignoring it.  In its malfeasance it made the poor worse off and destroyed equity value for millions of the middle class.

If there is a moral failure it is that the government refused to accept its limitations, and that the voters wanted a government that will promise them everything.

The greed of those who wanted a modest house they could not afford caused us more damage than the titans on Wall Street who found a way to get rich delivering the voters their delusion.

In politics, as in comedy, timing is everything.

A program that works in one time or place may not work in another.

Unions were able to raise wages and benefits in our major manufacturers after World War II largely because the manufacturing base of our foreign competitors had been destroyed in the war.  The inflation that gripped our nation from 1960 to 1980 made prices easy to raise and COLA kept wages in pace.

But in the face of competition from the rebuilt allies and in the wake of the moderation of inflation under Reagan, these wage parities came under pressure. Part of controlling inflation included pressure on wages.

Clinton sought health insurance reform when the economy was decreasing its deficit which was soon to disappear.  With the winding down of military expenses to fight the cold war there was money available to achieve large social programs.  Even in a preferable economic situation, the public largely rejected large scale health care reform.

Today the drive for health care reform is happening in the worst economic climate in fifty years, with  record deficits and record unemployment. By a reasonable standard the timing could not be worse.

The promoters fail to see the health care debate in its context.  It cannot be separated from the economic quagmire nor can it be separated from the other very expensive bills like cap and trade and the stimulus bills.

Bold changes make great speech fodder, but it makes for reckless legislation.  The fiscal conservatives from the Clinton presidency which reduced expenses, moderated regulation, and lowered taxes on investment should have a hard time reconciling with the reckless programs being embraced by Obama.  This is why the bills are being bogged down in spite of one party rule.

In order to pay for his ambitious programs Obama needs a strong economy. He should fix that first. But unfortunately every program he has pushed has slowed the economy with paralyzing uncertainty.

In trying to accomplish everything, he risks accomplishing nothing.