Fallows On The News: Financial Overhaul

James Fallows, national correspondent for The Atlantic, offers his perspective on the president's push to overhaul the nation's financial regulation system.

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President BARACK OBAMA: Our markets are only free when there are basic safeguards that prevent abuse, that check excesses, that ensure that it is more profitable to play by the rules than to game the system. And that is what the reforms we've been proposing are designed to achieve.

RAZ: The president pushing financial reform this week at Cooper Union in New York City.

Joining me, as he does most weekends, is national correspondent for The Atlantic, James Fallows. Jim, good to have you.

Mr. JAMES FALLOWS (News Analyst, The Atlantic): Thank you, Guy. Nice to be here.

RAZ: In that speech we just heard a clip from, the president was speaking to the titans of industry. He even had the executives from Goldman Sachs in the audience. Does it matter whether or not he can win over Wall Street? I mean, does he need their support to introduce new regulations, new financial regulations?

Mr. FALLOWS: Operationally, he probably will not need it. He could probably get a reform bill through the Democratic-dominated Congress. Certainly he would like it, because the default mode of argument on any issue for President Obama is to find the reasonable middle ground where people from different vantage points can agree.

And it's interesting to contrast this with the way of one of his predecessors, Franklin Delano Roosevelt, when he was running for reelection in 1936, how he talked about his war with the financial industry for a financial reform of those times.

The famous speech he said: Never before in our history have these forces of finance been so united against one candidate as they stand today. They are unanimous in their hate for me and I welcome their hate.

RAZ: He wore it as a badge of honor.

Mr. FALLOWS: Yes. And that's something - it will be very hard to imagine this coming from Barack Obama's lips at the podium.

RAZ: Now Senate Republicans are threatening to block debate over a Democratic-sponsored bill floating on the Senate that would create a whole new set of rules for Wall Street.

I mean, given the sort of the populist appeal of what Democrats are pushing for, can Republicans realistically stop it?

Mr. FALLOWS: Probably a head-to-head showdown in the Senate, where getting the famous 60 votes get to filibuster probably would be more difficult for the Republicans to block this time than it was in some of the previous cases just because the public opinion, again, seems to be more on the president's side.

What's so striking here, again, is that just as this is a test of the president's ability to sort of argue one side of an issue hard versus looking for the common ground to test the Republicans' willingness to stay on their one side of the case, where it seems as if public opinion is so strongly against them on this one.

RAZ: And, Jim, the Republicans are framing their opposition to this in a very deliberate way.

Mr. FALLOWS: Yes, they consistently said this is yet another bailout for the financial industry, which is trying rhetorically and politically to position themselves on the sort of side of those who feel oppressed by the financial industry. Factually, there's not much merit to what they're saying.

RAZ: And, Jim, I'm curious about how Goldman Sachs and its executives are now sort of being cast as the latest villains. This coming week, the Senate subcommittee will grill several current and former Goldman executives about the company's role in the 2008 financial meltdown. What do you make of this? I mean, does this have staying power or is it just similar to the car executives and the other bank chiefs and others.

Mr. FALLOWS: Sure. There's a rotating cast of big CEO suspects whenever something goes wrong. We can think of probably the car executives as the most recent case, and I made a mistake of flying in their private jets when they're coming to ask for public money and all the rest.

But I think this case has the potential to be more lasting, more resonant, more of as sort of hinge in public opinion because with the carmakers, they sort of made a mistake in P.R., but the behavior of this current carmakers was not really germane to the 40-year difficulties of the car industry and having manufactured in the U.S.

Whereas in the case of the financial industry now, the...

RAZ: And specifically Goldman Sachs.

Mr. FALLOWS: And Goldman Sachs in particular. The particular case against them, again, is shown by some memos released only today by a congressional investigating committee is that they knew what they were doing. And as opposed to this fiduciary duty, sort of acting as steward for the economy, stewards for investors, they were just acting in a way of not looking out for their customers' best interest, of knowing they were shortchanging people.

RAZ: That's James Fallows of The Atlantic. You can read his blog at jamesfallows.theatlantic.com. Jim, thanks so much.

Mr. FALLOWS: Thank you, Guy.

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