Reich make two points that are inaccurate.
First, the President never, ever suggested "fixing Social Security by raising the retirement age." Never!
Second, Reich mentions that we need to "resurrect" Glass-Steagall and break up the big bank.
The issue with that is that Glass-Steagall needed to be updated anyway and it was never a solution for breaking up the biggest banks. They came into existence before the full repeal because of other de-regulation over the last three decades.
Glass-Steagall wasn't about the systemic risk posed by the size of commericial banks. It was about
separating commercial banking from investment banking:
Banking Act of 1933 (P.L. 73-66, 48 STAT. 162).
Also known as the Glass-Steagall Act. Established the FDIC as a temporary agency. Separated commercial banking from investment banking, establishing them as separate lines of commerce. Krugman:
Too big to fail FAILI’m a big advocate of much strengthened financial regulation. One argument I don’t buy, however, is that we should try to shrink financial institutions down to the point where nobody is too big to fail. Basically, it’s just not possible.
The point is that finance is deeply interconnected, so that even a moderately large player can take down the system if it implodes. Remember, it was Lehman — not Citi or B of A — that brought the world to the brink.
<...>
They certainly were worried about systemic risk in 1982, when I had something of a front-row seat. There were fears that the Latin debt crisis would take down one or more money center banks — Citi, or Chase, say. And policy was shaped in part by the desire to make sure that didn’t happen. Bear in mind that this was in the days before the repeal of Glass-Steagal, before finance got so big and wild; the New Deal regulations were mostly still in place. Yet even then major banks were too big to fail.
So I think of the pursuit of a world in which everyone is small enough to fail as the pursuit of a golden age that never was. Regulate and supervise, then rescue if necessary; there’s no way to make this automatic.
When has there ever been a law that allows the break up big banks that pose a systemic risk? Answer, never. The Volcker rule does exactly what Glass Steagall did---separate commercial banking from investment banking.
In addition, look at the
new liquidation powers given to the FDIC that were not covered by Glass-Steagall.
Something the current reform does for the first time ever,
regulate hedge funds:
Raising Standards and Regulating Hedge Funds- Fills Regulatory Gaps: Ends the “shadow” financial system by requiring hedge funds and private equity advisors to register with the SEC as investment advisers and provide information about their trades and portfolios necessary to assess systemic risk. This data will be shared with the systemic risk regulator and the SEC will report to Congress annually on how it uses this data to protect investors and market integrity.
- Greater State Supervision: Raises the assets threshold for federal regulation of investment advisers from $30 million to $100 million, a move expected to significantly increase the number of advisors under state supervision. States have proven to be strong regulators in this area and subjecting more entities to state supervision will allow the SEC to focus its resources on newly registered hedge funds.
So the current bill separates commercial from investment banking and in addition, regulates hedge funds for the first time and empowers the FDIC to deal with large complex institutions that pose a systemic risks, which Glass-Steagall did not address.
Still, Reich is basically saying that the President's proposal to create 2 million jobs is not nearly enough, and continues the theme of wanting policies to go much further than the current ones.
For example he mentions the tax rates. Here is a good piece:
How Obama’s tax hikes would really impact the rich, in three easy charts<...>
Under Clinton, the top 1 percent paid 33.4 percent; under Bush it paid 29.8 percent; and under Obama it would go back up to 35.3 percent, less than two points than under Clinton.
Meanwhile, under Clinton, the top 0.1 percent paid 36.9 percent; under Bush it paid 32.8 percent; and under Obama it would go back up to 39.7 percent. By contrast, every other group would be paying lower rates under Obama’s proposals than under Clinton. (A table detailing these numbers is right here.)
<...>
Also, here's a table with the
after-tax incomes.
It's good to point out where policies need to be strengthened, but one also has to take reality into account. Reich attempts to do that here:
I’m not criticizing the President. Without energized, mobilized, and organized progressives, even the best people in Washington can’t overcome the monied interests.
Well, let's see if OWS can move Congressional Republicans to embrace the President's jobs proposal and more.
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