By James Pethokoukis
WASHINGTON, June 18 (Reuters) - 'You cannot convene a committee to put out a fire,' Treasury Secretary Timothy Geithner told the Senate Banking Committee today. Now Geithner used the metaphor as a way of explaining why the administration favors making the Federal Reserve the dominant and controlling systemic risk regulator, versus more equally dividing that authority among a council of regulators.
Yet Geithner, in fact, does want a committee to put out a fire. He wants the Senate Banking Committee, as well as the House Financial Services Committee, to quickly churn out financial reform legislation along the lines of the Obama administration's just-released blueprint.
'Time is of the essence,' he emphasized. 'Every financial crisis of the last generation has sparked some effort at reform. But past efforts have begun too late, after the will to act has subsided.' Time for Congress to put out the fire.
And by fashioning a reform that doesn't advocate some of the more radical ideas floating around Washington think tanks -- ones that would directly limit the size of banks and turn them into glorified public utilities or 1950s style institutions -- the White House probably thinks it has a moderate proposal that can pass with relative ease. No fuss, no muss.
But Congress shouldn't be misled into thinking that the Obama plan doesn't make significant or far-reaching changes. The most significant of these, perhaps, is the de facto enshrinement of a 'too big to fail' approach to banking regulation by singling out for special government handling those companies 'whose combination of size, leverage, and interconnectedness' could pose a threat to financial stability if they failed.
Of course, what Uncle Sam is doing is giving an implicit government guarantee. And that might well give them an edge in the marketplace, bringing the horrific Fannie-and-Freddie approach to banking.
Perhaps Congress and the American public might not understand the full consequences if legislation is passed quickly. (Not to mention the issues of threats to Fed independence and the creation of a possibly powerful consumer financial products regulator.)
Just like voters might not fully understand the tremendous costs of healthcare reform if that is passed quickly. (House Speaker Nancy Pelosi has said she wants a full House of Representatives vote by mid-summer, and Obama said he wants a bill to sign by October.)
Just like voters might not fully understand the costs of cap-and-trade legislation to limit carbon emissions. (The administration now wants legislation passed next week.)
Former General Electric CEO Jack Welch nailed it in an interview this morning with CNBC: 'My whole feeling is let's slow down. I mean, we're touching every corner of this economy. We're going from healthcare, 20 percent of the economy, to the environment with cap-and-trade, which touches every corner. And now this. And he's only been in there four or five months. I hope somebody in Congress says: 'Whoa, let's discuss these things and what the implications are'.'
But maybe with a) unemployment rising, b) gas prices rising, c) interest rates rising and d) new polls showing a few cracks in public support for Obamanomics, time really is of the essence for the Obama White House to push through its economic policy agenda.
(Editing by Martin Langfield) Keywords: COLUMN REFORM/ (For more on politics and the economy, check out James Pethokoukis' blog at http://blogs.reuters.com/james-pethokoukis/) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
WASHINGTON, June 18 (Reuters) - 'You cannot convene a committee to put out a fire,' Treasury Secretary Timothy Geithner told the Senate Banking Committee today. Now Geithner used the metaphor as a way of explaining why the administration favors making the Federal Reserve the dominant and controlling systemic risk regulator, versus more equally dividing that authority among a council of regulators.
Yet Geithner, in fact, does want a committee to put out a fire. He wants the Senate Banking Committee, as well as the House Financial Services Committee, to quickly churn out financial reform legislation along the lines of the Obama administration's just-released blueprint.
'Time is of the essence,' he emphasized. 'Every financial crisis of the last generation has sparked some effort at reform. But past efforts have begun too late, after the will to act has subsided.' Time for Congress to put out the fire.
And by fashioning a reform that doesn't advocate some of the more radical ideas floating around Washington think tanks -- ones that would directly limit the size of banks and turn them into glorified public utilities or 1950s style institutions -- the White House probably thinks it has a moderate proposal that can pass with relative ease. No fuss, no muss.
But Congress shouldn't be misled into thinking that the Obama plan doesn't make significant or far-reaching changes. The most significant of these, perhaps, is the de facto enshrinement of a 'too big to fail' approach to banking regulation by singling out for special government handling those companies 'whose combination of size, leverage, and interconnectedness' could pose a threat to financial stability if they failed.
Of course, what Uncle Sam is doing is giving an implicit government guarantee. And that might well give them an edge in the marketplace, bringing the horrific Fannie-and-Freddie approach to banking.
Perhaps Congress and the American public might not understand the full consequences if legislation is passed quickly. (Not to mention the issues of threats to Fed independence and the creation of a possibly powerful consumer financial products regulator.)
Just like voters might not fully understand the tremendous costs of healthcare reform if that is passed quickly. (House Speaker Nancy Pelosi has said she wants a full House of Representatives vote by mid-summer, and Obama said he wants a bill to sign by October.)
Just like voters might not fully understand the costs of cap-and-trade legislation to limit carbon emissions. (The administration now wants legislation passed next week.)
Former General Electric CEO Jack Welch nailed it in an interview this morning with CNBC: 'My whole feeling is let's slow down. I mean, we're touching every corner of this economy. We're going from healthcare, 20 percent of the economy, to the environment with cap-and-trade, which touches every corner. And now this. And he's only been in there four or five months. I hope somebody in Congress says: 'Whoa, let's discuss these things and what the implications are'.'
But maybe with a) unemployment rising, b) gas prices rising, c) interest rates rising and d) new polls showing a few cracks in public support for Obamanomics, time really is of the essence for the Obama White House to push through its economic policy agenda.
(Editing by Martin Langfield) Keywords: COLUMN REFORM/ (For more on politics and the economy, check out James Pethokoukis' blog at http://blogs.reuters.com/james-pethokoukis/) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.