Restoring Glass-Steagall

Our Sen. Maria Cantwell wants to bring back the Glass-Steagall act, the 1933 law that prevents investment banks from merging with retail banks. The law was repealed in 1999 under Bill Clinton and the Republican Congress and created such “too big to fail” behemoths as Citicorp.

In general, I like the idea of big, simple regulations as opposed to complex ones as a way to regulate Wall Street. Government is never going to out-smart the financial engineers, so it’s probably better to keep the laws simple and dumb. For example, until the 1980s, interstate banking was largely prohibited. This is kind of silly, if you think about it in a modern context, but at the same time it ensured that no bank became “too big to fail.”

So I’m sympathetic to Cantwell’s approach. Even if you don’t think that the repeal of Glass-Steagall caused the crisis (and I’m not sure it did), this kind of regulation is worth pursuing.

That said, I have a hard time seeing it actually passing. Back in 2008, when the financial world was crashing, the feds engineered a series of shotgun marriages between investment banks (which had lots of sub-prime exposure) and commercial banks (which had large stashes of customer deposits and could better weather the storm). Bank of America buying Merrill Lynch is one example.

Given all the work that was done to arrange these marriages (and the fact that they probably only could have happened in the absence of Glass-Steagall), I have a hard time seeing how Cantwell’s bill becomes a law.

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Wings of Change

Matt Yglesias says it’s Ben Nelson’s fault, not Barack Obama’s, that we haven’t gotten the change we’ve been hoping for with the new administration.

As the theory goes, it doesn’t matter how much leadership or head-knocking or what have you the administration tries to engage in, the fact is that with unified 39-member GOP block in the Senate in opposition, “centrists” like Nelson, Olympia Snowe, Blanche Lincoln, and Joe Lieberman become the pivotal actors, not the President. After all, none of them owe him anything (though Obama did support Lieberman in his fractious primary), and they call have safe seats, so he has little leverage on their actions.

It’s a theory that I largely subscribe to, although lately I’ve been wondering if Obama doesn’t deserve more of the blame. For whatever reason, Obama doesn’t seem to have any coattails, which is odd for a (relatively) popular president. When George Bush was pushing expensive wars and unaffordable tax cuts in 2001-03, the “centrists” couldn’t wait to board the Bush train. The prevailing mindset was, “hey, this is a popular president, let’s get on board with what he’s doing.”

Both had similar job approval ratings. While Bush’s spiked to 90% after 9/11, by late 2002-03, when the Iraq war debate begain in earnest, his approval was in the low 60s, about where Obama was when he started pushing health reform this summer.

Sure, tax cuts for millionaires and wars are popular in this weird country, but so is health care!

I don’t know what it is about Obama. Unlike Bush, he was elected by a clear majority of the voters. Maybe he’s too approachable and not intimidating enough. Maybe the Senate just thinks he’s a young punk and they don’t respect him. Maybe Republicans are just a better opposition party than Democrats (that’s almost certainly true). But for whatever reason, members of congress don’t seem all that eager to hitch their wagons to the guy, which is weird.

Of course, now that his approval rating’s around 50%, maybe it’s more rational to oppose him, but that’s a chicken-and-egg thing. he’d be more popular if he had “gotten more done” (or at least gotten more credit for what he did get done) earlier in his administration.