A Crisis Wasted

It looks like the brain trust in the Obama White House has made a tactical error in pushing health care reform ahead of reform of the financial system.

Key advisor to the President, Rohm Emmanuel, likes to say one should "never waste a crisis." But it looks like the White House has done just that.

There was a narrow window of opportunity earlier this year to effect a full regulatory reform of Wall Street, the banking industry and other financial institutions which caused the economic crisis.

It should have been made a top priority to get financial reforms done in the first six months of the new Obama Administration, but it wasn't. I suspect that it was not a top priority due the influence of economic advisors like Tim Geithner and Larry Summers who are stout defenders of the status quo.

Instead of reform, what we got was the usual, well-financed lobbying efforts by the finance industry. They own Congress completely, so they have throttled any hope of reform of the financial industry.

Instead of reform, what we have seen are literally trillions of taxpayer dollars being transferred to the Wall Street elite - inept, corrupt, incompetent bankers - to keep the status quo.

Wall Street is back to business as usual - making "bets" which are leveraged at outrageous and dangerous 40-to-1 ratios. The only difference is that now Goldman Sachs and others are using taxpayer money to place these "bets" instead of using their own money.

Reforms that should have occurred include the following:

1) The reinstatement of the Glass-Stegall Act, which separated normal, conservative banking practices of decades ago from the "Casino" where all types of leveraged bets are made.

2) Overturning the SEC exemption which allows Goldman Sachs and other "casino" firms to exceed the "traditional", conservative leverage level of 12-to-1.

3) Repeal the Commodity Futures Modernization Act of 2000 which really opened the flodgates to Wall Street's "casino" gambling - it prevented the regulation of swaps and other derivative products by the SEC and the CFTC.

4) Stop the practice of continuing to reward high-risk trades and traders, regardless of profitability and add in clawback provisions to bonuses.

Such reforms would have fulfilled the campaign promise of CHANGE. And it may have then created legislative momentum for health care reform.

It could have provided a healthy outlet for the "tea parties" anger and raucous town hall meetings. This may even led to a "throw the bums out" mentality in the mid-term elections which would have gotten rid of many of the people in power who are quite pleased with the status quo.

Presient Obama should have been able to force the greatest set of Wall Street and banking regulatory reforms since the Great Depression of the 1930s. Instead, it looks like this country has missed the greatest opportunity to clean up Wall Street in five generations.