That's How It's Done

Barney Frank is my hero of the day. I've always admired the fact that he is perfectly willing to use his superior intellect and encyclopedic knowledge of politics, process, and policy to just dismantle his opponents. He understands that sometimes politics is about listening, engaging your opponents, and compromise, and sometimes it is just about beating them. I'm a big fan of respectfully participating in civil dialogue, and I have been disappointed on countless occasions by my fellow liberals' refusal or inability to thoughtfully consider conservative or Republican arguments.

But there are limits to how long you can keep turning the other cheek when the other side insists on slapping you in the face. There is a time to disagree without being disagreeable. Conservatives doe not consider this to be one of those moments. So liberals are starting to recognize that there is a moment to be dismissive and argumentative, and this is one of those moments. There is a time to listen, and there is a time for flat-out ridicule. This is a time to be harsh, and call idiots what they are.

Obama himself is, as always, calm, cool, collected, and rational. I still think there are lots of Republicans and conservatives who are worth listening to, and who are capable of responding with intelligence and grace. But the inmates have taken over the asylum, and demagogues are framing the debate on the other side.

This is how it's done:

Well, at least we're talking about new financial regulations now

The Treasury announced a slew of new regulations for financial institutions. I'm not enough of an economist or policy wonk to really judge how well they would work, but I am skeptical, for at least a couple of reasons. First, obviously, I don't have a lot of faith in any kind of proposal on regulations of the financial industry from this administration. Second, this came up very quickly after the Bear Stearns debacle. It's clearly been in the works for a while, but it also seems to me that at this point it's probably more of a PR thing than a serious proposal. Bush & Paulson & Co. know they have to at least LOOK like they are doing something. Sounds like the key players aren't buying:

As Treasury Secretary Henry M. Paulson Jr. on Monday formally laid out an ambitious plan to overhaul the regulatory apparatus that oversees the country’s financial system, senior lawmakers and lobbyists from industries opposed to the plan predicted that most of it would be dead on arrival.

Paul Krugman is not impressed. No surprise there.

"it’s all about creating the appearance of responding to the current crisis, without actually doing anything substantive."

The key issue is actually fairly straightforward. Banks, like Citibank, Wells Fargo, etc., the kind where people put money into a normal checking account, are regulated by the federal government. In return, the government guarantees deposits, up to certain limits. This is a result of all the bank failures during the Great Depression. The federal government is kind of like a parent: you live in my house, I pay for the roof over your head, you play by my rules.
Investment banks, on the other hand, don't have the same kind of regulatory oversight. So they can make deals and buy and sell stocks and bonds and commodities and derivatives and all kinds of exotic financial instruments without the constraints that regular banks have. But they're not guaranteed by the feds like the banks. More freedom, but more risk.
Bear Stearns changed that, because Bear Stearns's survival, such as it was, was backstopped by the government. So now the investment banks, or at least one, are moving back in with the parents. They very well need the money that only the federal government can provide. And they clearly need the kind of supervision that only the government can provide. Will that happen under the current regime? Krugman, of course, is not optimistic, given the track record:

"The Bush administration, however, has spent the last seven years trying to do away with government oversight of the financial industry."

I'm going to be following this. There are a couple of political implications up front: Chris Dodd is the key player in the Senate, and Barney Frank in the House. I'm very glad both of them are on the case, I have a great deal of respect for both. Dodd is an interesting player, because, as the Senator from Connecticut, Wall Street is in his backyard, and there are a lot of Wall Street types among his constituents. So he might come across as a Wall Street guy. But he won a lot of street cred taking on Bush over wireless wiretapping, so liberals will probably have faith in him. And you just have to listen to Barney Frank talk policy to realize he's brilliant.