To start, Obama’s adoption of the Volker Ruler, weakens Tim Geithner’s influence.
For much of last year, Paul Volcker wandered the country arguing for tougher restraints on big banks while the Obama administration pursued a more moderate regulatory agenda driven by Treasury Secretary Timothy F. Geithner.
Thursday morning at the White House, it seemed as if the two men had swapped places. A beaming Volcker stood at Obama's right as the president endorsed his proposal and branded it the "Volcker Rule." Geithner stood farther away, compelled to accommodate a stance he once considered less effective than his own.
The moment was the product of Volcker's persistence and a desire by the White House to impose sharper checks on the financial industry than Geithner had been advocating, according to some government sources and political analysts. It was Obama's most visible break yet from the reform philosophy that Geithner and his allies had been promoting earlier.
Senior administration officials say there is now broad consensus within the White House and the Treasury for the plan advanced by Volcker, who leads an outside economic advisory group for the president. At its heart, Volcker's plan restricts banks from making speculative investments that do not benefit their customers. He has argued that such speculative activity played a key role in the financial crisis. The administration also wants to limit the ability of the largest banks to use borrowed money to fund expansion plans.
The proposals, which require congressional approval, are the most explicit restrictions the administration has tried to impose on the banking industry. It will help to have Volcker, a legendary former Federal Reserve chairman who garners respect on both sides of the aisle, on Obama's side as the White House makes a final push for a financial reform bill on Capitol Hill, a senior official noted.
Advocates of Volcker's ideas were delighted. "This is a complete change of policy that was announced today. It's a fundamental shift," said Simon Johnson, a professor at MIT's Sloan School of Management. "This is coming from the political side. There are classic signs of major policy changes under pressure . . . but in a new and much more sensible direction."
Industry officials, however, said they were startled and disheartened that Geithner was overruled, in part because they supported the more moderate approach Geithner proposed last year... [emphasis added]
Inserted from <Washington Post>
industry officials Banksters are disheartened, this is the most obvious indication that Volker’s plan is better for Main Street than Wall Street.
Obama still maintains his mistaken support for Bernanke, but his confirmation is now in doubt.'
Federal Reserve Board Chairman Ben Bernanke's prospects for a second term became shakier Friday as two Senate Democrats, furious at his stewardship during the nation's economic crisis, said they'd oppose him.
Both President Barack Obama and Senate Majority Leader Harry Reid renewed their support for Bernanke on Friday, but his performance since becoming chairman in early 2006 has become a rallying point for some lawmakers being bombarded by constituents frustrated about the economy's sluggish pace of recovery.
The Senate had been expected to act on the nomination this week, but there was no vote.
Reid's endorsement of Bernanke in a statement late Friday reflected the difficult politics of the confirmation, especially for senators who, like Reid, a Nevada Democrat, face uncertain re-election prospects.
"I made it clear that to merit confirmation, Chairman Bernanke must redouble his efforts to ensure families can access the credit they need to buy or keep their home, send their children to college or start a small business," Reid said, referring to a meeting he had Thursday with Bernanke.
"My support is not unconditional," Reid added. "I know Chairman Bernanke is committed to transparency and accountability, and that is why I will hold him to the highest standards of both."
However, he also credited for Bernanke for helping "steer us away" from a depression. "Conventional wisdom rarely credits those who averted disaster," the senator said, "but that's precisely what Chairman Bernanke did."
Skepticism about Bernanke, however, seemed to be growing on Capitol Hill.
Sen. Barbara Boxer, D-Calif., was among those who said she'd oppose a second term for Bernanke.
"It is time for a change," she said. "It is time for Main Street to have a champion at the Fed.
"Dr. Bernanke played a lead role in crafting the Bush administration's economic policies, which led to the current economic crisis. Our next Federal Reserve Chairman must represent a clean break from the failed policies of the past."
Also coming out against Bernanke Friday was Sen. Russ Feingold, D-Wis.
"Under the watch of Ben Bernanke, the Federal Reserve permitted grossly irresponsible financial activities that led to the worst financial crisis since the Great Depression," he said.
The possibility that Bernanke might not be confirmed — he previously was thought to be a shoo-in — came as unease spread among the nation's bankers and investors over Obama's announcement Thursday that the administration would seek to limit the kinds of investments the nation's largest banks could make.
For a second day, the Dow Jones Industrial Average lost more than 200 points, dropping nearly 217 points, to end the day 10172.98. The Dow dropped 213 points on Thursday... [emphasis added]
Inserted from <McClatchy DC>
The rabid right is screaming that the dip on Wall Street reflects weakening in the economy. It does not. It reflects only fear among the greedy. What they either do not understand or refuse to acknowledge is that Wall Street is not the economy. Main street is the economy. Wall Street’s job is to be the economy's facilitator. Instead, they have become its predator. Geithner, Bernanke and Summers have used their influence to maintain that predatory relationship. They need to go. How about replacing Bernanke with Paul Volker, Geithner with Elizabeth Warren, and Summers with Joseph Stiglitz?