So much for “not letting a crisis go to waste.”

The initial read on the Obama Regulatory plan was an enormous disappointment. Both supporters and critics who expected him to take a hard turn to the Left have been left either surprised or disappointed, depending upon their leanings.

To the pragmatic center, including your humble blogger, what stands out is the number of half measures and omitted actions that were viewed as necessary to prevent a replay.

Some very obvious omissions from the plan include:

1) No major changes for the ratings agencies!

This is a giant WTF from the White House. It implies that the team in charge STILL does not understand how the problem occurred.

The ratings agencies are not the only bad actors, but they are a BUT FOR – but for the rating agencies putting a triple A on junk paper, many many funds could not have purchased them, the number of mortgages securitized would have been much less, the insatiable demand on Wall Street for mortgage paper would have also been much lower.

Why is this important?  If mortgages originators couldn’t sell a mass amount of loans, they would not have had the need to give a mortgage to anyone  who could fog a mirror — and that means no Liar Loans, no NINJA loans, and  no huge subprime debacle.

Better Solution:  Take apart the ratings oligopoly! Eliminate the Pay-for-Play/Payola structure.  Strip  Moody’s S&P and Fitch from their uniquely protected status — they have proven they are neither worthy nor competent. Open up ratings to competition –including open source.

2) Turn Derivatives into Ordinary Financial Products:  The Obama team does a series of minor steps for Derivatives, but they don’t go far enough.

Better Solution:  Force derivatives to be traded like option/stocks, etc.  (including custom one off derivatives) Trade them only on Exchanges, full disclosure of counter-parties, transparency and disclosure of open interest, trades, etc.  REQUIRE RESERVES LIKE ANY OTHER INSURANCE PRODUCT.

3) If they are too big to fail, make them smaller.”

That is the famous quote from Nixon Treasury Secretary George Shultz, and it applies to the banks as well as insurers, Fannie & Freddie, etc.

We have a situation where 65% of the depository assets are held by a handful of huge banks – most of whom are less than stable. The remaining 35% is held by the nearly 7,000 small and regional banks that are stable, liquid, solvent and well run.

Better Solution:  Have real competition in the banking sector. Limit the size for the behemoths to 5% or even 2% of total US deposits. Break up the biggest banks (JPM, Citi, Bank of America)

4) The Federal Reserve, Despite its Role in Causing the Crisis, Gets MORE Authority:

Under Greenspan, the Fed did a terrible job of overseeing banking, maintaining lending standards, etc. Why they should be rewarded for this failure with more responsibility is hard to fathom. It is yet another example of rewarding the incompetent.

Better Solution: Have the Fed set monetary policy. They should provide advice to someone else — like the FDIC — who hasn’t shown gross incompetence.

5) Require leverage to be dialed back to its pre-2004 levels. Have we even eliminated the Bears Stearns exemption yet? This was a 2004 SEC decision to exempt five biggest banks from the mere 12-to-1 prior levels.  Note that all 5 are either gone, acquired or turned into holding companies.

Better Solution: 12-to-1 should be enough leverage for anyone . . .

6) Restore Glass Steagall: The repeal of Glass Steagall wasn’t the cause of the collapse, but it certainly contributed to the crisis being much worse.

Better Solution:  Time to (once again) separate the more speculative investment banks from the insured depository banks.

All of which suggests that the status-quo-preserving, sacred-cow-loving, upward-failing duo of Lawrence Summers and Tim Geithner are still in control of economic policy. The more pragmatic David Axelrod and the take-no-prisoners, don’t-give-a-shit-about-Wall-Street Rahm Emmanuel have yet to assert authority over the finance sector.

Category: Bailout Nation, Bailouts, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

108 Responses to “Obama Reform Plan Fails to Fix Whats Broken”

  1. Mannwich says:

    And the won’t assert any real authority any time soon. They know who their real masters are. And besides, truly solving problems is hard. Putting up new drapes on the windows is easier.

  2. Marcus Aurelius says:

    Obama is the new “Casey at the Bat.”

    And I had such high hopes.

  3. ben22 says:

    I noticed yesterday during a replay of a speech he gave about this that he stressed that it was the most sweeping reform that had been done since what was done AFTER the depression.

    He said it with the emphasis like that, as if to imply now that the mess is over we are cleaning things up so that it won’t happen again.


  4. Mannwich says:

    @ben22: I would argue that THIS mess we’re in is far from over. He’d better hope things don’t really fall apart before he’s able to push through his health care legislation or else that’s not going to get done.

  5. GB says:

    Change you can’t believe in.

  6. CNBC Sucks says:

    Ritholtz the Libertarian,

    As a registered Republican, I am happy to announce that our party has finally identified the ideal Republican Presidential candidate for 2012: Barack Hussein Obama.

    CNBC Sucks the Libertarian

  7. dcsos says:

    Obama knows Wall St is already “FIXED”. What more could he do?

  8. dead hobo says:

    Nailed it in one.

    Now it’s up to Congress to act responsibly. Shit.

  9. The more pragmatic David Axelrod and the take-no-prisoners, don’t-give-a-shit-about-Wall Street Rahm Emmanuel have yet to assert authority over the finance sector.

    You are wrong about that. Rahm does give a shit about Wall Street. What do you think he did before winning a seat in the House? He was an investment banker. Yes, probably more of a rain maker, but still an IB. He spoke before the DLC(and is a long time member) yesterday. What do you think the DLC is? Their purpose is to try to make the Democratic party into Rockefeller Republicans.

  10. ben22 says:


    Yeah, I think you are right.

    BO has been running on hope for over a year now. I doubt his ideas towards the market are any different. I see one of two things with him:

    1. He knows exactly how bad this problem is and is doing his best to use his superior speaking ability to calm people down

    2. He’s as clueless as he was when he was taking equity out of his home in Chicago, which could have led to major money issues for his family had he not been elected president.

    At my young age I realized something last night seeing him on Bloomberg that many of you I’m sure already got a long time ago. He was asked if he thought unemployment would go up and his response was yes and then he gave some pretty specific figures and time frames. I thought to myself, what makes him at all qualified to give these projections other than he has been president for a few months. Two years ago did anyone really think it would be smart to listen to his views on the economy or unemployment? Seems that most of the smartest people in the economic/financial arena are still very much on the outside looking in.

    What about Krugman you say? Well, I’ve said this before about him, his views on things, at least to me, seem to be far more about politics than anything else.

  11. Mannwich says:

    @ben22: I think he knows full well how bad things are (as do his advisors), but he is unwilling to take bold, drastic action to truly fix things because he knows it would likely be a political shitstorm for he and the Dems. The irony is it will likely be a political shitstorm anyway before all is said and done because people like me will likely be so disillusioned with him by 2012, they either won’t vote or may vote for, God forbid, the GOP candidate (probably someone like Newt or Palin, God help us all). O has always been a consensus-seeker, which works well in normal times. These aren’t normal times. We’re in crisis mode and these times call for bold action that will probably piss off some very powerful people in the process. This is why I’m not optimistic about his health care reform. If this is how he responds to the financial crisis, I can envision his health care reforms being more of the same – - finding consensus and taking half-measures when bold action is called for.

  12. CNBC Sucks says:

    Uh, Calvin, I wouldn’t compare Democrats to Rockefeller Republicans. Them Rockefeller Republicans were already rich. Beware of the poor, ambitious, and unscrupulous politician.

    It is the downfall of the progressive and pragmatist wings of the Republican Party why things are so screwed up.

  13. dead hobo says:

    Mannwich Says:
    June 18th, 2009 at 11:11 am

    @ben22: I think he knows full well how bad things are (as do his advisors), but he is unwilling to take bold, drastic action to truly fix things because he knows it would likely be a political shitstorm for he and the Dems.

    Even with almost total power, the Dems are gutless and useless. If it weren’t for the fact Republicans prefer to pander to the nutball element of the conservatives, the Dems would be a forgotten element.

  14. Marcus Aurelius says:

    ben 22 and Mannwich:

    Obama would do well to take a page from the TR handbook, and pick up a big stick. It wouldn’t take much to make the “very powerful people” back down. I don’t think he’ll do it, because he’s too genteel. We’d have been better served by Kucinich/Paul (or Paul/Kucinich).

  15. ben22 says:


    I guess we’ll wait and see how that plays out (healthcare). I don’t have much to say about the healthcare stuff because I don’t much about it and can’t offer an educated opinion. The market has kept me more than busy the last two years.

    Also, forgot to tell you Happy Birthday. Hope you had a good one.

  16. Mannwich says:

    @dead hobo: Totally agree. One thing about the GOP – they aren’t afraid of taking bold action, even if it’s blatantly stupid bold action. The Dems, on the other hand, are totally gutless, calculating, triangulating weasels who almost never take bold action on anything because they’re afraid of the GOP calling them out on it.

    So we’re left with one party that panders to the nutjob wing of its party and another that has no spine whatsoever. Third party, anyone? It’s obvious what is needed is either a viable third party and/or a complete overhaul of our political system.

  17. Mannwich says:

    @ben22: Thanks a lot. Had a really nice day. The wife surprised me with a party out at a sake bar in town. One of the few sake bars (Moto-I) in the U.S. that brews its own sake. Sat up on the roofdeck. Great evening. Woke up with a bit of a headache this morning though. I’m such a lightweight these days.

  18. cvienne says:

    I wonder when all is said and done if he’ll go on a “Grand Apology Tour” (part deux)…

    This time apologizing to the American People the lack of leadership in a time of crisis…

    Or, he could change his ways and start being what a President should be…I’d stand up for him if he were to do that!

  19. CNBC Sucks says:

    Mannwich, there is absolutely nothing wrong with “calculating”. I don’t think Democrats are calculating.

    My personal experience over the last six months as I have gotten involved with Democrats in government, politicians, staff, etc. is that they are every bit as full of themselves if not more than the Republicans I used to work with. That was a bad first indicator.

    I am not writing Obama off yet, but he sure is pushing Republican policies (PPIP, nuclear, general bailouts for corporate America) to levels undreamed of by the most rightwing of rightwing nut jobs.

  20. bruerr says:

    I would add, no 3rd party accounting firm:

    When dealing with the Savings and Loan problems, regulators at least made an example of some firms.

    Granted some bad actors were not prosecuted like they should have been (more favoritism) but at least some firms were exposed for what they were doing that was socially irresponsible; resulted in making example of what is NOT desired. [See Home State Savings Bank of Cincinnati, Midwest Federal Savings & Loan of Minneapolis, Minnesota, Lincoln Savings and Loan, Silverado Savings and Loan, Imprudent real estate lending: many banks lent far more money than was prudent. (]

    “The banking problems of the ’80s and ’90s came primarily, … from unsound real estate lending.” Page 57, paragraph 4

    “It is instructive to note that the real estate boom and lending fiasco appears to have started in the United States….U.S. banks tried leveraged buyouts (LBOs) and Latin American loans. But the largest growth in lending was in new loans for commercial real estate.”
    _ _ _

    Under Paulson and Geithner, and by way of omission involving federal reserve oversight, we do not even have a 3rd party accounting firm reviewing:

    a) the loan books of financial institutions who said they needed money,
    b) their compensation history and bonus records (in the ten years prior to 2008), nor
    c) the shareholder registries to see who has owned bank shares (for example are there any federal reserve board of governors who have benefited from the corporate practice of extracting cash from institution’s balance sheet, to pay dividends, in prior ten year period, so that firm would have no cash in the 11th year, or claim to be undercapitalized in some way, out of money).

    They want to rewrite the law, and oh in the meanwhile, forsake scrutiny of where positive cash flow coming into the firm in the last 10 years, went out?

    Is bank claiming to be undercapitalized, giving money to profitable subsidiary entities, or sister firms? How much? How much does the mother firm give to its children, annually, in the last 7 years, that it would come now in the 8th year and say it is out of cash?
    _ _ _

    I have the impression that by writing “new” laws, fed board of governors or Treasury or advisers of same, are trying to skirt some important laws in existence.

    Rewriting “new” law in the middle of the crisis, is a questionable practice in my mind.


  21. call me ahab says:

    Marcus is right- if Obama wanted to change things up he could carry a big stick and do what is necessary- a populist is what is needed right now- someone looking out for the common man and against the special interests-

    does not bode well- could very well be a very strong conservative winning in 2012 promising to kick ass and take names-

    something many people would love to hear- we’ll see how the mid terms go

  22. constantnormal says:

    @Mannwich — 11:22 am

    “Third party, anyone?”

    What’ll we call it? We can’t use “The Big Picture Party”, how about “The Big Party” (aka TBP) ?

    Happy birthday — as the saying goes, “another day older …”

  23. Brendan says:

    I pretty much agree with everything being said here, both in the post and comments, and that doesn’t happen too often! All those reforms are needed, especially #3. The benefits of gargantuan banks are practically nil in an age of the internet, ACH, ATM networks, large corporations having in-house banking, etc. The costs are obvious.

    And yes, the Dems are spineless – that problem is endemic. I’m sure part of the problem (along with good ol’ fashioned corruption) is that politicians aren’t economists, so the bank lobbyists tell them how the world will end if they make bold changes to the banking system, and they buy into it. I don’t totally agree with the calls that we shouldn’t have bailed the banks and auto makers out. Had we let GM sink 6 months ago instead of last month, would that have led to panic? What about B of A? I really think we were about to sink and the bailouts gave time to patch enough holes to regather and start making some more cool and collected decisions. The problem is that now is the time to be bold (which isn’t the same as being rash). Consumer confidence is much higher (in fact, when you boil it down, this is about psychology as much as it is about economics), the dollar looks to be in much less threat, but we’re still acting like it’s 6 months ago with these baby steps that, I fear, will never make it to real reform.

  24. bruerr says:

    Meant to say, I would add:

    7) Yes to Third Party Accounting Firms. Independent firms to scrutinize:

    a) the loan books of financial institutions who said they needed money,
    b) their compensation history and bonus records (in the ten years prior to 2008), and
    c) each firm’s shareholder registries to see who has owned bank shares (for example are there any federal reserve board of governors who have benefited from the corporate practice of extracting cash from institution’s balance sheet, to pay dividends, in prior ten year period, so that firm would have no cash in the 11th year, or claim to be undercapitalized in some way, out of money).

    To borrow from Tony Blair, its not the law that is the problem, it is the people.

    To date: The federal reserve board of governors, neither Treasury office, and neither of the last two administrations, have made an example of any firm.

    From a regulatory perspective, this is not the way to reign in socially irresponsible business practices. To serve as deterrent for the future, regulators have to bring violations of contract law to bear. Make examples of over-reaching or too much favoritism. Make examples of what is not tolerated.

    If you dont want bad lending in the future, make examples of bad lending practices. Spell it out. Put offenders in jail. This serves out a needed deterrent.

    If you don’t want firms being over leveraged, make a broad, area-wide display of board of directors who have mis-managed their firm and acted irresponsibly to become over leveraged.

    If you are too weak to present authority and prosecute wrong doing, then dont try to rewrite the law (to give yourself an appearance of being authoritative and “responsible”).

    If your regulatory officers cant uphold contract law, business 101, it is time to hire new regulatory officers. Make an example of what you dont want.

    If you cant uphold important statutes dealing with undercapitalized banks (12 USC 1831 o), you have no business trying to rewrite the law.


  25. Christopher says:

    I think the healthcare reform is DOA. From where I stand that’s probably a good thing overall.

    O has been a huge disappointment thus far. “Casey at the bat” indeed.

    I honestly believe O was our last good chance at pulling the national economy out of its death spiral.
    I honestly believe it’s now too late.

    I was talking to my neighbor yesterday about his 15 yr old daughter. He said she went from being a nice kid to someone is seemingly angry at everything. I can certainly empathize with that kid. I can’t even imagine growing up to all this right now. I’d probably be in a cell somewhere.

    TV channels full of violence, disrespect to women, blatant authoritarianism, military/cop worship, mind numbing marketing……who could blame a 15 year old for being pissed off??

    I digress. I fear this nation is going to a very dark place. And right now I don’t see ANY LEADERSHIP FROM DC WHATSOEVER. Just more of the same ole patronage driven gladhanding bullshit.

    As someone posted yesterday so eloquently.

    “We’re fucked.”

  26. Thor says:

    Guys – has it occurred to you that he does indeed know how bad it is, has some very good, sweeping ideas of how to fix some of it but it being shot down flat by congress? What I’m seeing here looks a little bit like a blame game on Obama without giving him the benefit of the doubt.

    He can propose anything he wants, running it through congress is an entirely different matter. Take regulation – I’ve heard that part of the reason they can’t get rid of the dozens of regulatory agencies is because so many of them are overseen by congressional committees and these congressmen would never allow the elimination of a sub-committee that they are a member of.

    I don’t think the president works in a vacuum – Washington is full of dirty politicians, lobbyists, etc. Health Care reform? Forget it, it’s already dead. You can see it now, it’ll be killed like every other piece of decent legislation to run through DC in the last 50 years.

  27. DL says:

    Why should anyone expect Obama to give a sh*t what happens after November 2012…?

  28. Thor says:

    Ahab – Marcus is right- if Obama wanted to change things up he could carry a big stick and do what is necessary-

    No, he can’t – he’s the President of the US, not a dictator. Congress can, has, and will, kill anything they don’t like. He’s not Bush/Rove, he doesn’t have the Democrats in a vice-grip of control like the Republicans did. Hell, I was just listening to a story on NPR that GM was planning to close a parts factory in Mass and Barney Frank called the president of GM personally and had that idea nixed. Nancy Pelosi? Don’t get me started, don’t forget, I’m from SF, I’ve watched this botox addicted soulless shark claw her way from city politics all the way up.

  29. Marcus Aurelius says:


    that’s why he should both pick up a big stick and use his oratorical skills to rant and rail from the bully pulpit.

  30. Thor says:

    Marcus – yeah I know. And sorry for sounding shrill. I just think we should give the guy a little bit more time. Yeah, he hasn’t made the best decisions so far, but the guys only been in office 4 months. I was a devout democrat in 2000, I wasn’t too happy with the way Bush made his way into the White House, but once he was there I gave the guy the benefit of the doubt, believe it or not, I didn’t sour on him until the Iraq War started going downhill.

    The guy is not God, give him some time, I just find it hard to make up my mind about what kind of a president he is after 4 months.

  31. Marcus Aurelius says:


    Posted that last comment before I saw your most recent reply.

    As someone else pointed out – the Dems are spineless, so they’ll run, and the R camp is too stupid to mount an effective intellectual/ideological challenge. With the electorate behind him, Obama could cow them all, if he chose to do so. I don’t know if he even sees this opportunity. Pity.

  32. cvienne says:

    @Thor (12:26)

    “What I’m seeing here looks a little bit like a blame game on Obama without giving him the benefit of the doubt.”

    Frankly – I DON’T blame him…& perhaps he does have a pretty good idea of what’s going on…

    Let’s look at a few things that have transpired…

    1. Just after the inauguration, he was on the microphone constantly about how dire the situation was (he was being honest – he was using words like ‘catastrophe’)…But then I think someone got in his ear and said “you can’t be President and be that negative – it SCARES people”…

    2. So about March he changed his tone…He even called EQUITIES a buy (trader IN CHIEF)…Some fancy maneuvers here and there by Treasury & Fed, talk of “green shoots” by the MSM, and whammo…a stock market rally and upticks in consumer confidence…So apparently that WORKED (for awhile)…

    The problem now is this…If he REALLY does understand the problem he has to thread the needle a little…He’s seen that a positive VOICE is helpful…but he ought to let HC & Cap & Trade die a quiet death in Congress…They might be noble initiatives on their own merits, but NOW IS NOT THE TIME…If he pushes through with such costly initiatives, he’s NOT going to be perceived as someone who has his finger on the pulse of America…

    If I think I know what’s coming…I’d be husbanding EVERY DOLLAR I could to take care of some issues that are going to crop up when the economy REALLY melts down…

  33. Thor says:

    “the guy, the guy, the guy” sheesh

    sorry everyone, I didn’t sleep well and traffic was rotten this morning so I’m cranky!

  34. Marcus Aurelius says:

    As i said – I had such high hopes. I haven’t bailed on him yet, but I must admit, I’m getting discouraged.

  35. Wes Schott says:


    send ‘em the book, a copy to all of the key WH staff

    i finished it a couple of days ago

    really stiches the whole story together nicely – and the last chapter is especially good – namin’ names

    more power to the Fed? WTF?

  36. call me ahab says:


    dude- I am going to have to disagree with you- Obama was swept in under the change mantra- a populist- and instead has protected big interests at every turn-

    I don’t have to give him more time- if you want to- that’s your business- but don’t be an apologist for his administration

  37. Thor says:

    cvienne: I agree with you, especially your first point. I remember in February there was talk that he was far too dour and was making the situation worse. Now I think the opposite has happened but if I had to guess as to what’s changed I would think the following.

    He went into the White House with all of these grand ideas and plans for “change”, he had fairly decent knowledge of what the problems facing the economy were. Once there I wouldn’t be at all surprised if he was sat down by different power players in both the economy and congress and told the following: “Look Mister President, I know you have an agenda, and I know you have a basic understanding of what kind of crisis our country is in right now, but let us tell you how things REALLY are and what we’re REALLY faced with.

  38. Thor says:

    Ahab – and I respect your opinion. I just need more time.

  39. cvienne says:


    If what I think is going to happen with the economy, Americans are going to need an understanding and soothing voice…

    He could be that voice…

    But he needs to dispense with all these grand ideas of being some sort of superhero and initiating sweeping change & reform…

    It would cost him his agenda…but I would respect him for the effort…

  40. [...] and Moody’s are largely unaffected by the proposals. (Big Picture, [...]

  41. Marc1 says:

    Could someone please explain the wisdom of giving the Federal Reserve regulatory power? So a co-op owned and controlled by big banks will now regulate the big banks in addition to having the power to print money and give it to the big banks?

  42. I-Man says:

    Amen Brother Ritholtz!!!

    You nailed it on this one.

  43. Tao Jonesing says:


    Thanks for this. I’ve read other analyses of the proposal, but yours is the best. I agree with your counter-proposals 100%. I think you may be giving the Fed too much benefit of the doubt, though, when you assume that they’ve merely been incompetent (as opposed to malfeasant). Given the revolving door between the Fed and Wall Street, something needs to be done to increase the Fed’s transparency, which is currently non-existent.

  44. Thor says:

    cvienne: Yup I agree. I’m just a little surprised that people are outraged that he ran on one platform and is leading with another one. That’s how politics work, or have we already forgotten Bush II’s “I will be bi-partisan” or Bush I’s “No new taxes” or Clintons “I will reform health care”

    Campaign promises are one thing, enacting them within the modern American political system is quite another. It’s like all the Republicans screaming about run-away deficits. Where was that outrage the last 8 years. Politics is a dirty, dishonest, self serving business – it always has been, and always will be. Anyone who doesn’t understand that and thought that things would change all that much with Obama being elected is sorely out of touch with reality.

  45. How the Common Man Sees It says:

    I suggest everyone print this post out, sign it and mail it to your house reps. There should be enough geographic diversity reading this blog that every one of them gets covered and a physical letter should carry a little more weight with them.

  46. Tao Jonesing says:


    If folks had watched who Obama chose as his economic advisors during the campaign, they wouldn’t be at all surprised by his approach to economic issues now. As far as I am concerned, Obama is leading exactly the way he campaigned. Then again, the “change” that Obama promised was not rooted in economic issues but in social issues.

    Sometimes I am surprised by how many people seem to believe that being a leader means that you get to do whatever you want. Julius Caesar ultimately learned differently. In a society as diverse and heterogeneous as ours, with as many entrenched interests that there are in government, to even get a chance to lead and create positive change, you have to focus on improving the margins incrementally. You do that often enough, and you cumulatively get sweeping change through baby steps.

  47. Christopher says:

    “Politics is a dirty, dishonest, self serving business – it always has been, and always will be. Anyone who doesn’t understand that and thought that things would change all that much with Obama being elected is sorely out of touch with reality.”

    The reality is “politics as usual” is driving the USA economy off the fucking cliff.

    I guess I thought O was smart enough to realize that enough was enough.

    So far all I see is a fresh new bartender with a some different jokes.
    Fuck me for expecting something different I guess. Joke’s on us.

  48. Mannwich says:

    “Politics is a dirty, dishonest, self serving business – it always has been, and always will be. Anyone who doesn’t understand that and thought that things would change all that much with Obama being elected is sorely out of touch with reality.”

    Sounds like the soft bigotry of low expectations to me. Quite frankly, I’m tired of it.

  49. call me ahab says:

    tao Says-

    “Then again, the “change” that Obama promised was not rooted in economic issues but in social issues.”

    please elaborate- explain the social changes that Obama wants- explain how his continuation of Bush policies is change- explain how his handling of the current economic and finanacial difficulties are any different than Bush- explain incremental change and what you perceive to be a long enough time frame- 4 years, 10 years, 20 years- and explain how this then becomes sweeping change- which-

    by its very name- defines an abrupt departure from the past way of doing things- not incremental baby steps

  50. Christopher says:


    I hear what you’re saying, and I agree to a point.

    Do you think O really had an accurate complete picture of the situation before winning the election??
    I’m guessing that TBP gets much bigger after becoming the President elect.

    “Politics” is getting elected.
    And then there is “governing”. What politicians are supposed to be doing between elections.
    I don’t see that happening.

    My point is, regardless of what agenda O had in mind, to gladhand the agencies/people/banks who got us into this calamity, after having full access and the bully pulpit of the Presidency, is not excusable in any way.

    The only issue that matters right now is the economy. I suspect most here agree. The rest is noise.

  51. drey says:

    “I haven’t bailed on him yet, but I must admit, I’m getting discouraged.”

    Consider me bailed, and I can no longer give him the benefit of the doubt on his economy policies, beginning with the appointment of Geithner who was a big part of the problem, continuing with the poorly orchestrated bailouts, and now this half-assed nibbling around the edges of important structural issues which he clearly doesn’t fathom…

    I think BO is a good man, and I think he’s got bigger stones than your average politico, but in a supreme irony he was swept into office by, and in the middle of, the one type of crisis he didn’t have the tools to address. Too bad because as far as the geopolitics go he has awesome potential and may yet turn out to be great.

  52. Transor Z says:

    OT (Sorry, just add me to the “Amens” above, Barry. Good post.):

    My WTF quote for today in bold below re: Initial Claims. Somebody actually wrote this:

    Continuing claims show special progress, down a sizable 148,000 to 6.687 million to end a very long streak of increases dating back to the very beginning of the year. Also improving was the unemployment rate for insured workers, down 1 tenth to 5.0 percent and offering a signal that the overall unemployment rate, at 9.4 percent, may also be coming down in what would be a major development for the economic outlook and global markets.


    Talk about a statement in the vein of “Chocolate rations have been increased from 4 oz to 3 oz.”

  53. DeDude says:

    Agree, this is very disappointing. Big finance is still in control of our government. Not as blatantly and completely as it would have been with the Republicans, but much more than it should have been in an administration that wants to be know for acting according to facts and realities.

  54. Thor says:

    manwich – Sounds like the soft bigotry of low expectations to me. Quite frankly, I’m tired of it.

    It’s reality, I’m sorry you see it as low expectations but expecting things to change exactly the way you want them to, in the time frame you want them to change is naive. Sorry buddy, it’s the way the world works, it’s not bigotry or low expectations, it’s reality.

  55. Mannwich says:

    @Thor: First of all, I’m not your “buddy”. Second of all, Mr. O ran on a platform of “change”. Silly me to expect things to actually change. What exactly has changed? The only thing that I see changing for the better is our foreign policy, so kudos to him on that. Well done so far.

    I’m not expecting things to change exactly the way I want them, but I AM expecting our leaders to actually LEAD in a way that represents MY interests, at least a little. Saving failing, corrupt, and criminal enterprises/people from failure/imprisonment does not constitute the kind of “change” that I was/am looking for. That’s MY reality, so please stick a fork in it. You have your low expectations and I’ll keep my expectations a bit higher and simply won’t engage in the process any longer. Laugh all you want but that’s my own little act of civil disobedience. Other measures are likely to come.

  56. Onlooker from Troy says:

    Transor Z

    Re: UE claims. Until proven otherwise I have to assume that the drop in cont claims is simply due to people dropping of the rolls. It’s been a long time now since this started and they’re just either running out of eligibility or giving up. Same goes for the hope that the downtick in UE for insured workers. The other stats don’t support an impending drop in UE (initial claims, etc.). It just seems so obvious and any decent financial reporter would actually dig into that instead of just making simple minded conclusions as in that article.

    Am I missing something here?

  57. Thor says:

    Manwich – Ah, and therein lies the crux of your argument. “I AM expecting our leaders to actually LEAD in a way that represents MY interests, at least a little”

    YOUR interests, what YOU think is best, what YOU would do.

    That says it all. Good luck with that.

  58. Mannwich says:

    @Thor: You’re beginning to sound a lot like a guy named ottovbs, who no longer posts here anymore.

    I’m expecting our leaders to do the RIGHT thing – - to LEAD and not only represent the elite’s interests, but the country’s interests. If that makes me a silly idealist, then so be it. It’s cynical attitudes like yours that keep things from truly changing. If We the People (in large masses) don’t expect and demand more, then nothing will change. You’re right about that, so why bother even getting all worked up over it then? Why even bother posting on this blog?

  59. Mannwich says:

    @Thor: I recall your post the other day saying you admired people who just lived their lives and didn’t get caught up in all of the details of this crisis. Well, my counterpoint to that is more people NEED to pay attention and get caught up in the details of the crisis for things to truly change for the betterment of the country. It has to happen from the grass roots or else it won’t happen. Nothing will change and those same people will bitch, whine and moan (like partisan GOP voters/O-haters who complain about the deficit now, but said NADA for the last 6-8 years while they ran up the tab in historic proportions) about their situation. Well, the time to say something about it is now, not later when the shit really hits the fan.

  60. call me ahab says:


    I voiced the same suspicion on the another thread- something doesn’t seem right- instead of improving employment-I suspect it is-

    the dropping off from the unemployment rolls- and now to be included to the growing list of uncounted folks

  61. Thor says:

    Mannwich – We simply disagree ok? Let it go.

  62. Mannwich says:

    @Thor: Fair enough. Let’s move on then. I’M now getting cranky in my muggy, warm basement office hovel if you couldn’t tell.

  63. Thor says:

    No hard feelings? ;-)

  64. Mannwich says:

    Of course not! The high intensity banter here TBP is all good.

  65. The Curmudgeon says:

    @Transor Z…reading the press releases coming out of media outlets about this or that economic metric that supposedly looks good but only because it is less bad (or much of the time is not even statistically significant within the margin of error) reminds me of reading Supreme Court cases back in law school when the court (especially the Warren Court) would try to explain how, for instance, a prohibition against discrimination on the basis of race contained in the 1964 Civil Rights Act actually compels discrimination, i.e., affirmative action.

    There is no way of following the logic (or perhaps I should say, illogic) unless you know the context.

  66. cvienne says:


    Hey Thor – Did you wish manny a Happy Birthday yet…

    If you do so right now, the rift will be settled! ;-)

  67. Onlooker from Troy says:


    And yet the only place it seems that you can find that analysis is in the blogosphere. Nowhere have I seen a reporter in the MSM pose that simple question and therefore demonstrate the slightest bit of critical thinking. I looked at the WSJ, NYT, Marketwatch. Not one.

  68. ben22 says:

    I’d just remember this quote from Obama:

    “On this day, we gather because we have chosen hope over fear, unity of purpose
    over conflict and discord.” – President Barack Obama, Inaugural Address

    E Pluribus Unum describes an action: Many uniting into one. An accurate translation of the motto is “Out of many, one” –

    Seems to me that the policy actions that have been enacted by a few, have only and will ultimately only benefit a few and simply put, Obama is not living up to the quote he made above nor does he live up to the motto of E Pluribus Unum. The “many” are now part of 1 Bailout Nation.

    We can call that modern politics or we can call it what it is: Corruption.

    I don’t think saying “that’s just politics” helps but it’s the easy thing to say.


    I think what Manny was trying to say (correct me if I’m wrong Manny) when he was saying I, was that he wants leadership to do what is right for common people, not a select few. He’s not a bank CEO or politician coming up for re-election, so his I is a better representation of the common “we” as far as I’m concerned. I don’t see anything wrong with that. Do you think that any of your co-workers at P90X are any better off based on policy actions to deal with this crisis? Do you think that common people are at the heart of these policy decisions?

    From my perch, the current sentiment that things are getting better might be masking a bigger issue that I notice when I talk to people. That is that we are now more divided than we were just six months ago.

  69. Thor says:

    Manwich – Happy Birthday!

  70. Tao Jonesing says:


    1. I cannot tell you precisely the types of social change that Obama promised to bring about because he never really said; his entire “change” message was center/left populist in nature, and therefore designed to appeal to emotion instead of reason

    2. Obama’s continuation of Bush’s economic policies are demonstrably NOT change, but then again, I don’t recall him ever promising to change those policies; some people may have believed that his vague message of change and hope implied changes to those policies, but you just had to look at who he was surrounding himself to realize that just was not the case.

    3. Again, Obama’s handling of the economic issues are NOT any different than Bush’s. I’d argue that U.S. economic policy has been largely unchanged since Reagan, and I think change is desparately needed; If Obama does not deliver, he deserves to be dinged for his failure to deliever, not on his failure to fulfill a promise he never made.

    4. My comments about how leaders are forced to create sweeping change through incremental changes were not meant to refer what Obama is doing with economic policy because there clearly is no “change” there, incremental or sweeping. All that I was saying is that creating sweeping change is a lot harder and take a lot longer than people seem to think. If you want to bone up on how sweeping change is created in large enterprises, the topic has been studied extensively in business schools (see John Kotter).

  71. Mannwich says:

    @ben22: You actually put it better than I did. No worries though. I get what Thor is saying and I understand the difference between idealism and reality (I am, after all, 39, not 29), but I guess I was expecting a little more from O on this front. He seemed to talk a different game, which is why I’m so irritated with his policies thus far, which seem no different from W’s, at least domestically. I think the foreign policy stuff so far has been very good, actually.

    @Thor: Thanks man. The wife surprised me big-time yesterday and we had a great day, and life is good for us, but I can’t help but feel the country is still on the wrong track. Can’t shake that nagging feeling.

  72. [...] implies that the team in charge still does not understand how the problem occurred,” Ritholtz writes on his [...]

  73. Transor Z says:


    The only way to truly lower U while maintaing a constant ~615k initial claims rate is by adding jobs. With wages and hours decreasing, industrial production down, retail sales missing targets by a lot, that seems pretty unlikely, don’t it? I don’t think you’re missing anything.

    To the extent this is more “green shoots” propaganda/spin, they seem perfectly happy trying to get mileage from the anomaly of discouraged workers/expired benefits.

    @TC: Yeah, I think the communications hack NASDAQ assigned to this release should have taken the course “Subtraction: Addition’s Tricky Friend” as an undergrad. :)

    Hey, you’re not saying the Warren court had a political agenda, are you? SCOTUS is above politics. They interpret the law as it was written, not as they wish it to be. Otherwise, they’d just be nine unelected, unaccountable dudes and dudettes in black robes . . .

  74. Thor says:

    Ben22 – yeah, I think I got caught up in the debate a little too much. I didn’t mean to give the impression that I think we should all just sit back and do nothing with regard to politicians not looking out for our best interests. Point I was trying to make was that not every politician is going to be able to meet the needs of every constituent and not all of us are going to agree on whether or not any given politician is doing a good job. Take a look at congress- I would argue that the biggest problem we have in this country right now is special interests in congress. I won’t go into details on that because I think it speaks for itself. Their approval rating is now 36%, unless I’m mistaken that’s a huge improvement. Now I ask you this – if their approval rating is that terrible, how in the heck do these people get re-elected? I think the answer to that is that most people think that congress as a whole is doing a terrible job but that their own congressmen are doing a good job.

    That said – I don’t think any real change is going to come in this country until things get bad enough to kick most of this bunch out of congress. Even then, how much real change can we expect by electing new people when lobbying is such an issue? How do we get real change when the banks hold such sway over government?
    I don’t know the answer to that and I suppose Mannwich hit a nerve by calling me out. I think if I truly looked deeply into my own psyche what’s really down there is a feeling of impotence and powerlessness . . . . Perhaps my way of dealing with that is to try to affect change on the things in my life that I actually have control over . . .

    As to P90X – the company I work for is – P90X is just one of the many exercise videos we make. My co-workers would not be the best group to answer your question because we’re actually doing very well (hired 70 people this year alone) Infomercials are very counter-cyclical, the worse the economy does, the more people sit at home and watch TV, the more they see our commercials. We’re also focused on weight loss and fitness which as I’m sure cvienne can agree, is a pretty good business to be in these days.

  75. Tao Jonesing says:


    Obama has been on the job for less than five full months. These things take time. Let’s see where everything stands in January.

    To be clear, I am very troubled by the lack of real reform and what I see as wrong-headed pandering to Wall Street. I want sweeping change that results in capitalists around the world investing in America’s production instead of its debt, but that is not going to happen when Wall Street is the primary engine driving this country’s GDP.

    So, I’m not excusing Obama, but the time has not come yet to judge him. He’s still in the probationary period of his empolyment as far as I’m concerned. Unfortunately, I won’t be surprised if I am disappointed in the end. I just have no idea if he has any commitment to changing economic policy, which has gone unchanged since at least Reagan.

  76. willid3 says:

    the one change i would add was eliminating the ability to buy a CDS/CDO on some thing you don’t own. its like buying insurance on your neighbors house. you have no incentive to help them put out a fire if one were to happen.

    while i think he (O) has been some what slow to make changes, he seems to be more pragmatic.

    some will say he’s to slow, but if he went faster, then more would say he is going to fast.

    so how do you get a middle ground?

    and it might also be that rumor was true that the Bush administration changed a lot of appointment type jobs into regular civil service jobs. and it will take time to clean up these infiltrators.

  77. Mannwich says:

    @Thor: I think Congress’ approval rating is something like 18%, if I’m not mistaken, or least that’s what it was last year.

    I agree with you though – Congress has been, and remains, a much bigger problem right now. The president can only do so much (although he/she can carry a big stick if he so chooses…Bush did it).

  78. call me ahab says:


    your post @ 1:30 speci

    “Then again, the “change” that Obama promised was not rooted in economic issues but in social issues.
    fically says-”

    and then you say @ 3:06-

    “I cannot tell you precisely the types of social change that Obama promised to bring about because he never really said”

    and then you say-

    his entire “change” message was center/left populist in nature, and therefore designed to appeal to emotion instead of reason

    so where in there exactly was there anything about social change?- A poulist by definition is (from Websters)-

    1: a member of a political party claiming to represent the common people

    and the defintion of populism (from American Heritage)


    a A political philosophy supporting the rights and power of the people in their struggle against the privileged elite.
    The movement organized around this philosophy.

  79. call me ahab says:


    your post @ 1:30 speci

    “Then again, the “change” that Obama promised was not rooted in economic issues but in social issues.
    fically says-”

    and then you say @ 3:06-

    “I cannot tell you precisely the types of social change that Obama promised to bring about because he never really said”

    and then you say-

    his entire “change” message was center/left populist in nature, and therefore designed to appeal to emotion instead of reason

    so where in there exactly was there anything about social change?- A poulist by definition is (from Websters)-

    1: a member of a political party claiming to represent the common people

    and the defintion of populism (from American Heritage)


    a A political philosophy supporting the rights and power of the people in their struggle against the privileged elite.
    The movement organized around this philosophy.

  80. call me ahab says:


    so to finish my point- a populist supports the rights of the common people over the privileged elite- if that is not about economics- I don’t know what is

  81. willid3 says:

    this makes the point that we didn’t have so much a failure of lack of rules as much as the lack rules being enforced. and how do we stop that from happening? do we penalize the bosses at the regulatory agencies when they fail?

  82. drollere says:

    i agree with BR’s post that the things he claims should be in the proposals should be in the proposals, but it would be much more constructive at this point to clarify what is in the obama proposals than to protest what is not in them.

    what, specifically, is in the proposals? i still can’t get a clear picture, because news, financial and blog commentary cherrypicks the contents of the proposals to score adversarial points.

    two chill pills to ingest here:

    1. there is this thing called congress, which is divided into two parts. each part has to look at the proposals; laugh, scowl, jape and prance; sit in committee and holler; mark up, revise, send to the floor; members on the floor laugh, scowl, jape and prance; amendments are introduced; bills pass or fail; bills go into reconciliation; a final bill passes or fails; bill goes to the president, who laughs, scowls, japes and prances, but signs.

    2. this is this thing called administration, which takes law, writes it into regulation, memos the regulations for comment and approval, distributes the regulation, enforces the regulation as budgets make practical, revises the regulation to reflect experience with the regulatory effort and impact on businesses, adopts an enforcement posture that balances law with perceived need.

    the most effective course here is to identify the key concerns, contact your elected congressional representatives and the leaders in congress, to bring your concerns to their attention.

    BP could do a great service by crystallizing the half dozen essential improvements to the proposals, but the context here has to be what is politically feasible.

  83. cvienne says:


    It sounds like a big ROMAN TOGA PARTY!

  84. Thor says:

    Cvienne – Right again for the market – can’t remember, were you predicting 922 for the close? Pretty damn close either way. How do you think tomorrow looks?

  85. batmando says:

    @ How the Common Man Sees It Says:
    June 18th, 2009 at 1:20 pm
    I suggest everyone print this post out, sign it and mail it to your house reps.
    I’ll do it, but really beyond that, what’s a body to do that would have any impact whatsoever?

    In response to a Democratic Party solicitation recently, I replied I’d next consider donating only after Summers and Geithner are gone.

  86. Mannwich says:

    It may be nothing but I noticed the NAZ closed in the red today, just barely. Canary in the coal mine? The tech rally appears to be on its last legs.

  87. cvienne says:

    @Thor (4:16)

    I think I-Man & leftback have some better ideas than I do right now…

    I’m just working off of their MOJO…

    I’d like karen to chime in but I think she’s having MAC problems today :-(

    Help her out greg!

  88. cvienne says:

    @batmando (4:21)

    It’s getting downright SCARY for me to think that BO has to appoint a new Fed chief come next January (and I haven’t heard a peep)…

    If Summers gets the appointment, I’ll lose all hope…Until then, I’m still TRYING to pull for O…

  89. nick K says:

    You know how in Terminator the machines took over? I think we just created ‘cyborg’ banks that were meant to serve us, and now its the other way…

  90. philipat says:

    The Americans will always do the right thing………. after they`ve exhausted all the alternatives”.

    Let’s hope Churchill was right.

  91. cvienne says:


    That’s kind of like Sun-Tzu’s philosophy in “The Art of War”…

    back an army into an INDEFENSIBLE position…and they will FIGHT TO THE DEATH…

  92. gringotts says:

    How about have private insurance companies insure banks based on actual risk level? The one size fit all that only rewards risky behavior and punishes the less risky doesn’t seem to be working.

    We could also ditch the fractional banking system and require banks to keep 100% of deposits (except for time deposits of course). That would solve all these problems.

  93. DL says:

    On his show today, Larry Kudlow made reference to this post

    Kudlow’s exact phrase:

    “Barry Ritholtz’s excellent blog”

  94. [...] Obama Reform Plan Fails to Fix What’s Broken [...]

  95. [...] listen to Barry Ritholtz*  and others such as Alan Blinder who actually understand what is happening. In particular, see [...]

  96. says:

    If memory serves…last time the Dems tried to politicize health care, it was defeated and largely blamed by Clintons on the ‘insurance industry’. Fact is, insurance customers call their agents for assistance and/or opinion on EVERYTHING. Hillary had a clause in the proposed bill that said insurance agents cannot talk to their clients about the government’s health care options. Anyhoo, BJ and Hill went on to have laws and regs passed that targeted those agents “who are so clever they should be able to find another line of work”, per Hill. One law in effect specifically states that people convicted of a felony cannot work in the industry. Even though the regulatory jurisdiction of insurance belongs to the States.
    They also went on to have their Comptroller of the Currency, part of Treasury, settle a decades-long issue involving rights of banks to sell insurance. In ‘Barnett banks V. State of Florida’, their regulatory sub-agency decided that banks can invade the protected territory of agents in towns more than 5000 people. Something Congress was lobbied on for generations. Then, they illegally allowed the merger of Citibank and Travelers Insurance Company(see Jamie Dimon, Sandy Weill, NY Fed’s Tim Geithner) and topped it all off by taking down the firewalls of Glass Steagall which separated commercial and investment banks and INSURANCE COMPANIES. They gave more power to the banks by handing over the insurance sales and UNDERWRITING protected domains to the banks, basically gutting the insurance industry. That underwriting privelege spawned the exotic and toxic hedge products that continue to plague the financial world(CDSs). Now the ‘solution’ among other blame-fix posturing is to federally regulate insurance? What did ‘insurance’ have to do with it? Don’t say AIG; they’re a hedge fund disguised as a conglomerate, who dodged US regs by trading their instruments from London. Which begs another question; Why didn’t Britain bail them out?

  97. Tao Jonesing says:


    I just can’t agree to engage with you because I don’t agree that what Obama ran on was economics. Point me to something that Obama actually said that shows he won the election based on economics, and I will engage with you.

    To be clear, the only reason I voted for Obama, who I viewed to be a repeat of Dubya in many ways, was because Palin was McCain’s running mate. If the old guy had the sense to pull Colin Powell in as his running mate, I would have voted for him.

  98. [...] for Beginners und hier die kritik am Oabama plan, der ich mich voll und ganz schliesse: Obama Reform Plan Fails to Fix Whats Broken __________________ Die G7 bringen Billionen zur Rettung des Finanzsystems auf. Gleichzeitig [...]