Obama Explaining Banking Plan

Is Obama’s Banking Plan A Pony Show?

by Minority Fortune

The financial institutions in this country and around the world have been operating as unstoppable legions for quite some time. Regulations within the industry took a giant leap backward when the Glass-Steagall Act was repealed in 1998. True colors were exposed in the midst of the current economic crisis where banks boldly demanded public bailout funds whilst exercising private interest. Now Obama has stepped forth with a new banking plan that promises to check banks unregulated greed. However, will it really save the day?

The Good

Obama’s banking plan offers to return regulation to the banking industry. Within the plan contains measures to prevent institutions from risky trading practices and getting too big. Furthermore, Geithner seems to think that the measure is too progressive and isn’t too gung ho about it. That’s the first step in a positive direction!

The Bad


While the plan has its good attributes, it won’t be all roses. Globe and Mail pointed out in a recent article that it could lead to a rise in hedge fund and private equity creations. Talented executives could leave their positions at banking institutions and start their own firm in areas where little to no regulation exists. Thus, the organization of financial institutions may shift, but the wealth will not.

The wealthy elite will not simply lie down and comply. They’ll search endlessly for all possible loopholes and have lobbyists work with Congress to get regulations overturned a la Glass-Steagall Act style. Obama’s plan must foresee and forbid these loopholes.

Conclusion

This plan could have the potential to just be a pony show. It will depend on the dissent on Wall Street. If Congress and Wall Street happily welcome the plan, it’s too lax. If it causes much anger amongst them, then it must contain many regulation goodies. However, in any event we must keep our eyes affixed on the actions of both Wall Street and Congress because anything’s possible.

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