For now, Obama continues to side with the Wall Street-friendly Summers and Geithner. With bank profits and bonuses likely to remain high thanks to the same old risky strategies, this issue is not going to sit well with voters next year. Siding with what Wall Street wants (and promotes with lobbyist cash) is as risky as their investments. The bailout of the banks has never been popular with voters and even now the TARP watchdog is warning on the failure to properly oversee the process and explain it to the public. Without a radical departure from the present policies, Democrats will likely pay dearly at the polls. Looking at how much stomach Obama has for radical change, it's easy to see where this is all going. It's hard to argue against Volcker's logic.
Mr. Volcker’s proposal would roll back the nation’s commercial banks to an earlier era, when they were restricted to commercial banking and prohibited from engaging in risky Wall Street activities.
The Obama team, in contrast, would let the giants survive, but would regulate them extensively, so they could not get themselves and the nation into trouble again. While the administration’s proposal languishes, giants like Goldman Sachs have re-engaged in old trading practices, once again earning big profits and planning big bonuses.
Mr. Volcker argues that regulation by itself will not work. Sooner or later, the giants, in pursuit of profits, will get into trouble. The administration should accept this and shield commercial banking from Wall Street’s wild ways.
