Up is down, down is up
Obama Aspires to a 'Light Touch,' Not a Heavy Hand
By GERALD F. SEIB
As he prepares to release the most extensive proposals to change financial regulations since the 1930s, President Barack Obama is a bit anxious.
Anxious, that is, for people –– and specifically for his conservative critics –– to know he isn't the heavy-handed meddler some suspect.
"I think the irony … is that I actually would like to see a relatively light touch when it comes to the government," he said Tuesday in a White House interview.
It is a counterintuitive case to make when his government is a majority shareholder of General Motors, and when he will propose Wednesday new oversight of big financial institutions, new capital requirements for banks and a new consumer-protection agency for small investors.
Does the plan go too far or fall short? Which is precisely why Mr. Obama went to great pains to explain that there is a philosophy behind the changes he is about to propose to the nation's financial plumbing. Indeed, he says, it is the same philosophy that applies to his broader view of the government's role in the economy:
"You set up some rules of the road, ensure transparency and openness, guard against huge systemic risk that will lead...government potentially having to step in to avoid a depression, and then let entrepreneurs and individual businesses compete and do what they do.
"And so it's puzzling to me sometimes to hear the standard conservative critique of what we're doing, when essentially every step we're taking involves cleaning up the mess that we found when we arrived here at 1600 Pennsylvania Avenue."
The president and his aides have reached a point of potential political peril, where the massive interventions they have made to deal with the recession and virtual collapse of Detroit –– to be followed soon by an attempt to overhaul the U.S. health system –– can be seen as the opening stages of a reordering of the American economy.
To deflate that impression, Mr. Obama's chief White House economic adviser, Lawrence Summers, was in New York a few days ago to give a speech saying essentially: No, we aren't socialists.
For his part, Mr. Obama often returns to a particular set of words to explain what he's trying to do to the financial system: rules of the road, openness and transparency. If everybody knows what's going on in the marketplace, Mr. Obama argues, they will make the right decisions. The goal, he says in effect, is to make sure that in the new economy, everybody can see everything.
"On a whole host of these issues, we want to do the minimum possible to assure that every stakeholder in the marketplace –– consumers, workers, investors, entrepreneurs –– have a clear set of rules of the road, they know what they're getting themselves into, they're making decisions based on the pursuit of profits," he said. "But we are not setting up so few rules that you have the kind of situation that we saw last year where we really were on the verge of a financial meltdown."
President Barack Obama is interviewed at the White House in Washington on Tuesday.
Of course, it's hard to know what the right amount of rule-making really is, which is why the plan the president puts out Wednesday will draw fire from both his right and left.
The Federal Reserve will get more powers to oversee big financial institutions, large firms will have to raise more capital and meet higher liquidity standards, hedge funds will face higher scrutiny, and a new agency will be set up to protect consumers and small investors.
As soon as his plan is out, though, the president will have the Goldilocks problem. Some will think his proposals too hot, some too cold. Only some will think them just right.
The right rules, he said, will allow a recovery that isn't built on speculative bubbles –– and that don't stifle financial marketplace innovations that have helped lots of small guys in recent years.
"The question for us is how do we create the foundation for a more sustainable model of economic growth, one that doesn't impinge on the dynamism of the free market, the innovative products that are critical and the entrepreneurship that creates jobs, but also recognizes that the levels of debt and a model that's premised on an endless supply of foreign dollars is not one that is going to be sustainable over the long term?"
The Fed will be a big player in answering that question. President Obama was lavish in his praise of Fed Chairman Ben Bernanke –– who "has handled his position extraordinarily well under extraordinary circumstances" –– but wouldn't say whether he would reappoint him to a new term early next year.
Even as he does more on the economy, Mr. Obama says his real desire is to do less.
He intervened on behalf of GM and Chrysler, he says, because his only options were to continue to send them taxpayer money without strings attached, or see them liquidate. "The only real regulatory approach I've been interested in is raising fuel-efficiency standards so we can wean ourselves off dependency on foreign oil," he says. "Beyond that, the last thing I want is to be running a car company..."
Or, he insists, the American economy.