Obama Is From Mars, Wall Street Is From Venus

[NJmaverick]

Thirty-eight hours after Scott Brown’s smack-upside-the-head victory in the race for Ted Kennedy’s former Senate seat, Barack Obama took the podium in the Diplomatic Reception Room at the White House. Hovering behind him was Paul Volcker, the former Fed chair and (for months, largely ignored) Obama economic adviser; far off to the side stood Treasury Secretary Tim Geithner. In the wake of Brown’s win, the prospect of passing health-care reform—and the rest of Obama’s first-term agenda—suddenly seemed dim. So the president had decided to pursue the obvious, logical course: He had decided to change the subject.

The topic to which Obama now shifted was financial reform, in particular to the matter of speculative, big-casino activity by the nation’s banks. “I’m proposing a simple and common-sense reform, which we’re calling the Volcker Rule—after this tall guy behind me,” Obama declared. “Banks will no longer be allowed to own, invest, or sponsor hedge funds, private-equity funds, or proprietary trading operations for their own profit, unrelated to serving their customers. If financial firms want to trade for profit, that’s something they’re free to do. Indeed, doing so—responsibly—is a good thing for the markets and the economy. But these firms should not be allowed to run these hedge funds and private-equities funds while running a bank backed by the American people.”

As Obama spoke, Volcker, whose jowly countenance usually runs the full spectrum from mournful to hangdog, beamed like a 3-year-old who’d just been handed a brand-new toy firetruck; Geithner wore the expression of a kid whose puppy had been run over by a real one. Kremlinologists instantly deconstructed the tableau, speculating that Geithner, long leery of the premise of the Volcker Rule, had lost an internal power struggle. That he’d fallen out of favor with Obama. That, as an A-list economics writer put it, “His days must now be numbered.”

In fact, Geithner had, by then, made his peace with the Volcker Rule. After being overruled by his boss, he had been tasked with designing the proposal so it would be sound policy—and though Geithner still doubted it would do much good, he was now convinced it wouldn’t do much damage, either. He also saw the political upside to endorsing the idea. For months, Volcker had been waging a public campaign on behalf of his scheme, suggesting that the administration was being too soft on Wall Street, lending ammunition to those on the left who felt the same. At least now, the secretary reasoned, the old man would pipe down.

http://nymag.com/news/politics/66188/