David Brooks, a New York Times columnist and big fan of Barack Obama (in at least some ways), wrote this a couple of days after the President gave his speech on Afghanistan last December:
"The Obama White House revolves around a culture of debate. He leads long, analytic discussions, which bring competing arguments to the fore. …
His governing style, in short, is biased toward complexity. …
The advantage of the Obama governing style is that his argument-based organization is a learning organization. …
It is in Obama’s nature to lead a government by symposium. Embrace the complexity. Learn to live with the dispassion."
As I said, Mr. Brooks is a big fan of President Obama.
But compare Mr. Brooks’ description of how the President decides issues with these excerpts from an article in last Friday’s Wall Street Journal on the Administration’s new policy on banks:
"But the president continued to endure criticism that he was coddling Wall Street. In talks with his financial team, Mr. Obama started letting his frustration show, asking why he was on the wrong side of the ‘too big to fail’ debate. …
In December, Mr. Obama decided he wanted to be on what he saw as ‘the right side’ of the debate, according to an administration official."
The Wall Street Journal also noted that, in addition to Paul Volcker’s support for the new policy, "[o]ne of Mr. Obama’s top political advisers, David Axelrod, was also pressing to get tougher on big banks."
So instead of a "culture of debate" and "government by symposium," the President apparently decided his policy on structural reform of the banking system based on wanting to be on "the right side" of the debate. Instead of carefully considering all of the facts and circumstances to determine the best idea, it looks like President Obama decided on his policy based on what he wanted his political position to be – because he was tired of being on "the wrong side of the ‘too big to fail’ debate".*
Also, while the administration officials quoted in The Wall Street Journal tried to make it sound like this policy shift has been a long time in the making, Megan McArdle shows there are lots of questions that have not been thought through. While Mr. Brooks talked about "long, analytic discussions" (at least with respect to Afghanistan), it looks like a large part of this policy shift was done on the fly with the hope they can figure out the answers before the questions get asked.
Even more concerning was this comment by Ms. McArdle:
"I have only a hazy understanding of how the liability limits [i.e., limits on the how many liabilities any institution can have so no institution can cause the system to collapse] will be enforced, and after talking to administration officials, I’m not sure that they really know either; they seem to be waiting to see what the legislators and regulators say."
This is not reassuring. Deferring to Congress resulted in a stimulus bill only three Republicans voted for and competing House and Senate health bills only one Republican voted for. Reforming the banking system is hard enough without relying on the sausage factory that is Congress to do the job.
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* I note that I agree with the idea of separating commercial banking from proprietary trading. As Megan McArdle phrased it, the idea is "to decouple the key operation the government insures – the funneling of credit from those with money to those who want to borrow it – from making bets on market outcomes that can go badly wrong." That sounds like a good idea.
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