As the government moves forward with plans to put more stringent controls on financial institutions and Wall Street, Robert Reich and Paul Krugman don't think the proposals go far enough. Not so, says Edward L. Yingling, president of the American Bankers Association. Speaking of the reform proposals he says "you don't want to create a system that raises great uncertainty and changes what institutions, risk management executives and lawyers are used to." Really.
Let's check Mr. Yingling's statement. We already have a system that not only has created but perpetuates great uncertainty not only among the American public, but for other economies around the world. If not, how did we get into this mess? If Yingling has an answer to when credit will flow, businesses will recover, jobs will be created, workers will have pensions and will recover the losses they've suffered over the past decade as banks and financial services firms gorged at the trough and took outsize risks, it would be good to hear it. If reducing uncertainty for the public means shaking up Wall Street, gee, that's tough.
Of course we want to change what financial institutions, risk management executives and lawyers are used to. They're used to using shareholder and depositor money to pay themselves big salaries, investment banking fees, and bonuses. They're used to taking risks to increase their personal fortunes knowing that if something goes wrong the government will step in with taxpayer money to rescue them so that they can keep their jobs, lifestyles, and bonuses. What they're used to is way out of line with their past performance and there's every reason to deny them a future that perpetuates their ability to reap outsized rewards for the boom-and-bust cycle that has been punishing the American people for too long.
Krugman thinks the political moment for the radical change that's needed has already passed. In other words, what we're going to see in the way of financial reform is likely to be too little, too late. When President Obama signed into law on May 22 a bill providing for modest reforms in credit card practices, the card issuers had asked Congress for time to get their systems ready. So the bill effective date was pushed back to February 22, 2010. The credit card issuers then turned around and started increasing rates (up an average 23% between December 2008 and July 2009), calling credit lines in, and raising fees. Their greed provoked Congress and there are now efforts underway to freeze things until the law goes into effect, and one proposal to move the effective date forward to December 1, 2009.
George Harrison wrote "I, Me, Mine" about the ego problem that many suffer, and apparently none more so than the denizens of finance and Wall Street. It should be their theme song. Every time we hear their objections to meaningful reform let's just sing "I, me, me, mine" to them.
