A sign of desperation from the Obama White House: senior adviser David Plouffe now says public anger over Wall Street will be a big part of the President's 2012 strategy. "We intend to make it one of the central elements of the campaign next year," Plouffe told the Washington Post. "One of the main elements of the contrast will be that the President passed Wall Street reform and our opponent and the other party want to repeal it." True enough. The President did sign the watered-down, overly complicated and difficult-to-enforce Dodd-Frank reform package last year, and the Republicans, at the bankers' behest, are trying to gut it. And it is also true that the Occupy Wall Street (OWS) protests reflect a general belief--ranging across the political spectrum from Tea Partyers to anarchists and a great many average folks in between--that the big banks have raped and pillaged the American economy.
But there are problems with the President's new populist tack. The first is the OWS movement itself, which includes a generous measure of weirdos, ideologues and free-range troublemakers. A recent, unscientific New York magazine poll of 100 demonstrators found that 34% believed the U.S. government is no better than al-Qaeda. I wouldn't be at all surprised if the OWS protesters managed, before long, to destroy the credibility of a worthy political complaint in a spasm of puerile extremism. The other problem is the President's credibility as an anti--Wall Street crusader. He has none.
Ron Suskind's new book about the Obama economic policy, Confidence Men, has drawn a lather of complaints from the Administration and some journalists--and some of the dust is justified. There are more than a few careless mistakes in the book. I mean, how hard would it be to check the proper spelling of legendary banker Walter Wriston's name? But Suskind has gotten the most important thing right: Obama was faced with a fairly stark economic-policy choice after he was elected, and he chose wrong.
The President could have taken the painful path of real Wall Street reform, espoused by former Federal Reserve Chairman Paul Volcker--who might have been Obama's Treasury Secretary--and the consumer-credit reformer Elizabeth Warren. This would have meant restructuring the big banks. It would have meant reimposing real regulatory reforms--like the Glass-Steagall Act, which prohibited traditional banks from engaging in most of the fancy Wall Street derivatives gambling. And it might even have meant imposing a tax on Wall Street transactions, especially financial derivatives, in order to discourage the speculative churning that helped collapse the market. It would have meant that the big banks paid a price for their bailouts.