David Leonhardt writes this morning in the NY Times about a "progressive agenda" to remake Washington. In gushing terms, Leonhardt compares Obama's legislative agenda to that of FDR. Leonhardt is probably generally unaware of what happened in the 1930s after FDRs program became law. The economy entered an historic period of stagnation that persisted longer than any time in American history. That was, in no small part, due to the "progressive agenda of FDR." By 1939, the unemployment rate, seven years after FDR's initial election, was 20 percent -- quite an accomplishment.
You wonder if Leonhardt is aware of that history. If so, he might not be gushing so happily about the future. The FinReg is an absurd piece of legislation. It doesn't address any of the causes of the 2008 crisis -- not a single one. It enshrines, as permanent policy, "too big to fail." Now, under FinReg, no firm is too small not to be "too big to fail." The taxpayers will now guarantee any business that the Treasury, the White House, or the FDIC think should be saved in the public interest. This is the "Hugo Chavez" program glommed on to the USA. The power that this invests in the White House is without precedent in US history. No one needs to approve, or even be told, about a White House takeover of a major US industry. That's what FinReg is all about.
FinReg is also an absurd act of revenge. Lawmakers are striking out at Wall Street. Too bad if the American economy gets caught in the crossfire. The Securities Acts of 1933 and 1934, which were passed by large bi-partisan votes in both Houses of Congress, have been basically been overturned by Sarbanes-Oxley and FinReg. Gone is the "full disclosure" approach to regulating the financial services industry to be replaced by arbitrary rule by political figures. That can't bode well for the US economy.
Already several industries are bracing for the impact of FinReg. Andrew Martin details the concerns of the car dealerships and other business that will be forced to reduce credit to their customers because of FinRreg. See Martin's article in today's NY Times. Perhaps David Leonhardt should take a look at that article to see where this is headed.
The Obama agenda is about punishing his political enemies. Unfortunately, Obama's political enemies are the majority of American citizens. That doesn't deter Obama. He figures they will learn to love him.
The prospect of a double dip recession is growing. Leonhardt should study what actually happened in the 1930s, as opposed to what he thinks actually happened. FDRs policies led to a decade of stagnation and the highest unemployment levels in US history. I would not rule out a repeat of the 1930s based upon the policies of the Obama White House.
