Signs of changes to come in Obama’s “post-modern” political vision
Perhaps the boldest suggestion in President Obama’s inaugural address was the assertion that, in his view, it’s time for Washington to work by different rules.
Take for instance, “The question we ask today is not whether our government is too big or too small, but whether it works. When the answer is ‘yes,’ we intend to move forward. When the answer is ‘no,’ programs will end.” Or, “The stale political arguments that have consumed us for so long will no longer apply.” And of course, “We come to proclaim an end to the petty grievances and false promises, the recriminations and worn out dogmas that for too long have strangled our politics.”
In those few sentences he attempts to wipe away three-plus decades of partisan strife and suggests that if you’re going to be practicing politics with his administration, he’s rewriting the rules of the game.
Like a president’s annual “State of the Union” speech, the presence of each word in an inaugural address occupies a valuable place. A president can’t talk about every subject in so short a time so the implication is that every subject mentioned is a priority. So the line, “This [economic] crisis reminded us that without a watchful eye, the market can spin out of control,” reiterates something he’s been saying for months – he intends to bring “change” to the regulatory world of the financial services industry.
While most national focus these last two weeks has understandably been fixed on the transition of power to new hands, a few other developments that were not as widely watched give some clues as to what an overhaul of the United States’ finance system will entail.
First, the Group of 30, an international organization of economists and financial policymakers, issued a report suggesting 18 recommendations that would set new guidelines on U.S. financial institutions. This report carries extra weight because its primary author is former Federal Reserve Chairman Paul Volcker, a close confidante these last few months to President Obama, who will be serving as a special adviser to the administration on financial matters.
The 18 recommendations, which at least one observer suggests would “insert government regulators into the boardrooms of financial institutions as never before,” include limiting the size of banks, prohibiting banks from managing hedge funds and setting new rules for Fannie Mae and Freddie Mac, credit rating agencies and money-market mutual funds. In short, it’s a blue print for the sort of the top-to-bottom restructuring that the Obama inner circle has been talking about.
Meanwhile, in her testimony before the Senate Banking Committee last week, Mary Schapiro, the President’s pick to chair the Securities and Exchange Commission, laid out her activist vision for a newly energized and unshackled SEC.
Blaming the current crisis on the fact that “our regulatory system has not kept pace with the markets and the needs of investors,” Schapiro called for revamping the way securities are rated, more policing of investment advisers and brokerages, increased oversight of auditors and hedge funds, and suggested not only that her investigators would go after fraud cases “with full force and fervor,” but that she would consider reversing a number of Bush Administration decisions that have limited the ability of SEC staff to bring enforcement cases.
Anyone doubting that all this change is on the way need only remember that, as the Wall Street Journal’s Jerry Seib reports, the financial strategy of the Obama Administration is a stool with three legs.
Leg one is the $800 billion stimulus package. Leg two is the restructuring of how the second half of the $700 billion Wall Street rescue package will be spent. And leg three is the coming legislative package that will radically overhaul federal regulation of the financial services industry, in part, as a quid pro quo that increased transparency will assure nervous members of Congress (and their constituents) that the government will be able to account for how the private sector will spend every dollar of the bailout money.
And right now public opinion appears to be on the side of increased federal regulation of just about everything in the private sector. A recent national survey conducted for The Politico and Allstate Insurance found that only 21% of respondents held a positive view of large corporations while 60% agreed with the suggestion that stricter regulations for business as a whole would help improve the national economy.
Congressional staff and the Obama administration have been hard at work behind the scenes for many weeks now cobbling together the details of what the President will eventually propose. While we won’t likely see the specifics for a few weeks, the above comments from “Obama’s people” suggest where they’re headed.

Political Observations of the Week:
“You have to be a pragmatist. I’m a right of center Senator, but I’m also pragmatic. I have to deal with the art of the possible.”
Sen. Minority Leader Mitch McConnell (R., Kentucky), on dealing with the Democratic-led Congress.

“I think Obama can count on a very long honeymoon. I think he’s got about six months, which is about five and a half months longer than usual.”
Mark McKinnon, GOP media consultant to President George W. Bush.

“Barack Obama gave a speech from the middle. He once again is communicating that he intends to govern from the middle and not from the wing.”
Former Massachusetts Gov. Mitt Romney (R)
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John J. Kohut is an independent political analyst in Washington, D.C. He has been writing about national politics for more than a decade, including stints as an editor at the Cook Political Report and as senior editor at the Rothenberg Political Report.