Wall Street is a big target – blamed for the 2007-'08 financial crisis that led to the Great Recession, hedge fund managers living the life of Gatsby while millions lose their homes, and banks moving trillions of dollars around the globe in mystifying ways. What to do?
To Mitt Romney, with a Wall Street pedigree himself, efforts to rein in the financiers with regulation piled on regulation are an attack on “economic freedom.” President Obama, who often referred to the pin-striped set as “fat cats,” cites a need for regulations that make it “more profitable to play by the rules than to game the system.”
In July 2010, President Obama signed into law this 848-page effort by Congress to prevent another breakdown in the financial system. The legislation required banks to increase their capital, enacted mortgage reform, gave greater oversight of Wall Street to various federal agencies, and set up a Bureau of Consumer Financial Protection, among other provisions. Complying with the law will cost the eight largest US banks $22 billion to $34 billion annually, according to a recent analysis by Standard & Poor’s.
The two presidential candidates differ on the degree of regulation needed to prevent a future banking system collapse.
As he signed the law, Mr. Obama said his goal was a set of reforms “to empower consumers and investors, to bring the shadowy deals that caused this crisis into the light of day, and to put a stop to taxpayer bailouts once and for all."
Romney says “some of the concepts” in the legislation “have a place.” However, he says that, as president, he would work to repeal the law, replacing it with a mostly unspecified but “streamlined regulatory framework."
To Romney, this law is an example of an overbearing federal government. For example, a Romney aide says small community banks “have taken the brunt of the overregulation.” The aide, speaking on background, says small banks don’t have the capability to deal with the cost and complexity of the law. “They are spending more on figuring out the rules and regulations versus lending to people,” he says.
Obama has said he is not antibanker nor even anti-Wall Street, although he has sometimes lambasted the dealmakers. On the day he signed the Dodd-Frank law, he commented that the financial industry is central America’s ability to grow, compete, and prosper. “There are a lot of banks that understand and fulfill this vital role, and there are a whole lot of bankers who want to do right – and do right – by their customers. This reform will help foster innovation, not hamper it.”
Gov. Jack Markell (D) of Delaware, acting as a surrogate for Obama, says the president’s position has to be viewed within the context of what the nation went through after the mortgage meltdown. Governor Markell recalls two separate meetings that he and other governors who are members of the National Governors Association had in February 2009 with Federal Reserve Chairman Ben Bernanke and Treasury Secretary Timothy Geithner.
“They were the most sobering meetings I ever had because each said. separately, ‘We think we can get the economy going again, but our primary concern is what happens to the financial markets. How do we get them unfrozen?’ ”
Thus, Markell says, Obama’s support for the legislation was to make sure “we were not going back to the kinds of problems that got us into trouble in the first place.”
1 of 3