McCain and the Political Mainstream: Substance is “Rhetoric,” Policies are just “Speeches”

March 27th, 2008 Posted in Of Interest

Obama gives an extremely detailed (as well as elqouent) economic policy speech (see below) that should put McCain to shame. That doesn’t prevent the McCain campaign from engaging in the following chutzpah:

“No amount of rhetoric can hide Senator Obama’s clear record of embracing the liberal tax and spend, big government policies that hit hardworking American families at a time when they’re most vulnerable, and are certain to move America backward.”

This is one of those Orwellian reversals we’ve gotten used to with Bush (the “Clean Air” act): detailed policy prescriptions are just “rhetoric,” because accusations of “rhetoric” are the stale and failed campaign strategy McCain inherited from Clinton. Meanwhile, the response itself includes no substantive rebuttals, and (like McCain’s policy speech) is entirely rhetorical: “liberal tax and spend, big government.” What’s so offensive about such political word-games (which are de rigeur for typical Democrats and Republicans) is not just the particular positions they cloak (in this case, tax-cuts for the rich) but their intellectual dishonesty. Here’s a new principle for post-Obama politicians: thou shalt give an intellectual honest characterization of your opponent’s position, even in disagreement.

How pathetic that when a politician comes along whose hallmark is honesty, speaking to people as adults, attempting to focus on issues rather than personal attacks and identity politics, all of this should be summed up by the political mainstream as “rhetoric”; while the typical modus operandi, vague labels like “ready on day one” or “liberal tax and spend” are treated as the staples of experience.

Obama:

But there are several core principles for reform that I will pursue as President.

First, if you can borrow from the government, you should be subject to government oversight and supervision. Secretary Paulson admitted this in his remarks yesterday. The Federal Reserve should have basic supervisory authority over any institution to which it may make credit available as a lender of last resort. When the Fed steps in, it is providing lenders an insurance policy underwritten by the American taxpayer. In return, taxpayers have every right to expect that these institutions are not taking excessive risks. The nature of regulation should depend on the degree and extent of the Fed’s exposure. But at the very least, these new regulations should include liquidity and capital requirements.

Second, there needs to be general reform of the requirements to which all regulated financial institutions are subjected. Capital requirements should be strengthened, particularly for complex financial instruments like some of the mortgage securities that led to our current crisis. We must develop and rigorously manage liquidity risk. We must investigate rating agencies and potential conflicts of interest with the people they are rating. And transparency requirements must demand full disclosure by financial institutions to shareholders and counterparties.

As we reform our regulatory system at home, we must work with international arrangements like the Basel Committee on Banking Supervision, the International Accounting Standards Board, and the Financial Stability Forum to address the same problems abroad. The goal must be ensuring that financial institutions around the world are subject to similar rules of the road – both to make the system stable, and to keep our financial institutions competitive.

Third, we need to streamline a framework of overlapping and competing regulatory agencies. Reshuffling bureaucracies should not be an end in itself. But the large, complex institutions that dominate the financial landscape do not fit into categories created decades ago. Different institutions compete in multiple markets – our regulatory system should not pretend otherwise. A streamlined system will provide better oversight, and be less costly for regulated institutions.

Fourth, we need to regulate institutions for what they do, not what they are. Over the last few years, commercial banks and thrift institutions were subject to guidelines on subprime mortgages that did not apply to mortgage brokers and companies. It makes no sense for the Fed to tighten mortgage guidelines for banks when two-thirds of subprime mortgages don’t originate from banks. This regulatory framework has failed to protect homeowners, and it is now clear that it made no sense for our financial system. When it comes to protecting the American people, it should make no difference what kind of institution they are dealing with.

Fifth, we must remain vigilant and crack down on trading activity that crosses the line to market manipulation. Reports have circulated in recent days that some traders may have intentionally spread rumors that Bear Stearns was in financial distress while making market bets against the company. The SEC should investigate and punish this kind of market manipulation, and report its conclusions to Congress.

Sixth, we need a process that identifies systemic risks to the financial system. Too often, we deal with threats to the financial system that weren’t anticipated by regulators. That’s why we should create a financial market oversight commission, which would meet regularly and provide advice to the President, Congress, and regulators on the state of our financial markets and the risks that face them. These expert views could help anticipate risks before they erupt into a crisis.

These six principles should guide the legal reforms needed to establish a 21st century regulatory system. But the change we need goes beyond laws and regulation – we need a shift in the cultures of our financial institutions and our regulatory agencies.

[youtube=http://www.youtube.com/watch?v=cSuT5zN2SPI]