Joe Nocera says Barack Obama is no Roosevelt. In the opening paragraph of a scathing critique of the president's proposals for regulatory reform, the New York Times columnist declares that "Roosevelt earned the undying enmity of Wall Street" for his New Deal rules that squeezed all the fun and games out of American capitalism as it had been previously practiced. And in his last paragraph, Nocera warns that "if Mr. Obama hopes to create a regulatory environment that stands for another six decades ... he is going to have make some bankers mad."
Wall Street may not be ready to dub Obama "that man II," but they sure aren't dancing in the aisles at the prospect of new regulation. Quite the opposite, they seem positively glum.
The American Bankers Association still isn't happy with Obama's plans for a new agency to monitor bank-lending practices whose mandate may "go well beyond consumer protection," the group said yesterday in a statement. The group vowed to fight for changes, he said.
"The administration's proposal is so vast and controversial that it will be extremely difficult to enact and will produce great uncertainty in the financial markets," the association's CEO, Edward Yingling, said in the statement. "It needlessly rips apart all the existing regulatory agencies."
...The Washington-based Hedge Fund Association said in a statement that Obama's registration requirements would be "unduly burdensome" on firms with less than $250 million under management and "could have a significant negative impact on the hedge fund industry and U.S. economy."
Meanwhile, reality is sinking in that the Obama administration's plan to boost the amount of capital required at financial institutions, consolidate the regulation of "large, interconnected financial firms" and "create comprehensive regulation" of customized over-the-counter derivatives point toward a less-profitable future.
..."Regulatory reforms will bring about the end of 'light-touch' regulation," Philip Finch, an analyst at UBS AG, wrote in a note to clients. "The future will be one of lower average return on equity," a measure of profits.
Unduly burdensome...less profitable...will produce great uncertainty... It never fails to astonish how incapable of self-awareness Wall Street manages to be. What could be less profitable than recklessly running the entire global economy into a brick wall? Where is the evidence that "light-touch" regulation served the interests of Bear-Stearns or Lehman, not to mention the rest of the country? Maybe the future should be one of "lower average return on equity" if that means avoiding another crisis that runs the unemployment rate above 10 percent and wipes out 14 trillion dollars of household wealth.
Joe Nocera is absolutely correct to say that Obama is no Roosevelt. But it's also worth pointing out, again, that today's Congress is also nothing like the agreeably cooperative body of legislators that bent to Roosevelt's will.
I'd love to agree with Charles Geisst, a historian of finance quoted by Bloomberg, who compared Wall Street's glum reaction to the reform proposals to their distaste for Roosevelt's New Deal.
"I don't think anyone can buy the argument that by regulating too tightly, we'll choke off capitalism," Geisst said. "That argument is as shallow now as it was then."
The argument may be shallow, but I think there are far more legislators in Congress, and economic advisers in the White House, who are willing to wade in those shallow waters today, than was the case in 1932.
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