Adam Davidson shared his views on President Obama's speech today on Talk of the Nation. Here's reaction from some of our other favorite econ watchers:
Felix Salmon of Reuters keyed in on the Consumer Financial Protection Agency and this quote from the speech: "If taxpayers ever have to step in again to prevent a second Great Depression, the financial industry will have to pay the taxpayer back — every cent."
The financial industry. This is big, and important. Because what it does is it turns the whole industry — every bank, every banker, every hedge fund manager — into a mini-regulator, the eyes and ears of the systemic-risk regulator. All too often, those with eyes to see try to monetize their insights, rather than sounding a more general alarm. But if they ultimately end up paying for the cost of any bailout, they might stop just quietly putting on short positions, and start taking their analysis to the Fed instead. Which, under Obama's plan, will have the ability and authority to put an end to activities which pose major systemic risk.
I'm still pessimistic that any of this is going to actually happen, and I stand by my original criticisms of the plan.
Ezra Klein of The Washington Post dug into the choice of venue:
The anniversary of Lehman's collapse could have been used to remind the public of their anger and the Congress of the potential consequences for inaction. Instead, Obama chose to speak to the traders, asking them to not only cooperate with Congress, but begin the process of reform on their own. He took an opportunity to score some political points in full view of the public and used it instead to start a conversation with the people he means to regulate. The legislative effort seems likely to follow a fairly similar path, which is to say it's going to primarily be a conversation between financial elites and political elites.
More reactions and video of the speech, after the jump.
Megan McArdle of the Atlantic takes issue with the plans for too big to fail institutions:
As for the notion that we will finally put together a system that will make the whole industry pay if its members require a bailout . . . that sounds hopeful, but there's a catch. The problem is, the time at which you realize that you need the money to pay for the massive bailout is the time at which you have a lot of weak companies that could be tipped over the edge by the additional levy, which is why the PBGC has been underfunded for as long as I've been writing about it. The problem is even more acute in the financial system.
Your best shot is at trying to structure firms that can withstand a crisis, and quickly shutter those that can't. The problem with that is that this was the mandate we gave our regulators before September 2008.
Justin Fox of Time felt the speech was, well, nothing new:
Now I'm a big fan of moderation and prudence. And I really liked lines from the speech such as this one:
"[I]t is important to note that the very absence of common-sense regulations able to keep up with a fast-paced financial sector is what created the need for that extraordinary intervention. The lack of sensible rules of the road, so often opposed by those who claim to speak for the free market, led to a rescue far more intrusive than anything any of us, Democrat or Republican, progressive or conservative, would have proposed or predicted."
Will such arguments be enough to put financial reforms back on track? I really can't tell. This kind of complicated stuff is hard to push through Congress, and the Obama team's No. 1 legislative priority is clearly health reform. The moment of greatest urgency on these matters has passed. Normalcy is breeding complacency.
And what did the Planet Money Twitter crowd have to say?
Obama shudv started w/ finance, not health care. Americans have been waiting for action on this, not more talk.
Obama's speech lacked talk on exec comp, the primary contributing factor to creating bad incentives.
I get discouraged when I hear the Prez speak of responsibility while more WS hijinks occur.
Bonus: Obama's speech in word cloud form.
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