Excuse Me, Now?

President Obama's speech on financial reform laid out the basis for a new regulatory structure, but this part puzzled me to no end.

So restoring a willingness to take responsibility -- even when it's hard to do -- is at the heart of what we must do. Here on Wall Street, you have a responsibility. The reforms I've laid out will pass and these changes will become law. But one of the most important ways to rebuild the system stronger than it was before is to rebuild trust stronger than before -- and you don't have to wait for a new law to do that. You don't have to wait to use plain language in your dealings with consumers. You don't have to wait for legislation to put the 2009 bonuses of your senior executives up for a shareholder vote. You don't have to wait for a law to overhaul your pay system so that folks are rewarded for long-term performance instead of short-term gains.

The fact is, many of the firms that are now returning to prosperity owe a debt to the American people. They were not the cause of this crisis, and yet American taxpayers, through their government, had to take extraordinary action to stabilize the financial industry. They shouldered the burden of the bailout and they are still bearing the burden of the fallout -- in lost jobs and lost homes and lost opportunities. It is neither right nor responsible after you've recovered with the help of your government to shirk your obligation to the goal of wider recovery, a more stable system, and a more broadly shared prosperity.

So I want to urge you to demonstrate that you take this obligation to heart. To put greater effort into helping families who need their mortgages modified under my administration's homeownership plan. To help small business owners who desperately need loans and who are bearing the brunt of the decline in available credit. To help communities that would benefit from the financing you could provide, or the community development institutions you could support. To come up with creative approaches to improve financial education and to bring banking to those who live and work entirely outside of the banking system. And, of course, to embrace serious financial reform, not resist it.

Yeah, same with the health insurance industry. You don't see them rushing to accept anyone regardless of pre-existing condition or renouncing the dumping of sick patients. The way our system works, for-profit companies don't change their ways unless forced to by law. Is this some rhetorical trick that benefits nobody in the end, or is the President really asking Wall Street nicely to reform themsleves, trim their sails and stop taking risks with our money?

Financial titans are not going to play fair because somebody tells them to. That's what makes them FINANCIAL TITANS. The only way to hold Wall Street responsible is through holding them directly responsible and investigating every nook and cranny of their dirty dealings. The President is not powerless to simply beg and grovel for responsibility. He has significant tools at his disposal. Turning the Justice Department loose on the fraudsters isn't a bad start. Or empowering the Angelides Commission to really attack the root causes. Point being, if you want any kind of significant regulatory reform to pass, you'd better get tough on Wall Street instead of engaging them as some kind of buddy.

Still, the measure is proving more troublesome than expected in the House, where top Democrats had initially thought it would pass easily.

Unease among Democrats prompted House Financial Services Chairman Barney Frank (D-Mass.) to postpone a markup on the Consumer Financial Protection Agency proposal scheduled before the August recess. It’s now expected to occur in early October.

Industry efforts to kill the CFPA seem to be having an effect. And moderate Democrats still aren’t entirely on board. “Distinct parts [of the bill] are real problems for a lot of people,” including the enforcement powers granted to the agency and the lack of state pre-emption, said a Democratic aide.

Maybe the thinking in the White House is to turn over regulatory reform to Richard Shelby the way other progressive policy agenda items have been turned over to Republicans and moderates.

What happened in the financial market should have been a wake-up call. As Phil Angelides said, "If this shock doesn't do it, I don't know what would." But that requires leadership to see the changes through. And it's frankly lacking at the top.

...Arianna nails it.

And that's the way it is with our leaders. They stand on the bridge making theatrical gestures they claim will steer us in a new direction while, down in the control room, the autopilot, programmed by politicians in the pocket of special interests, continues to guide the ship of state along its predetermined course [...]

I don't dispute for a minute that his heart is in the right place, and that he means it when he says "the old ways that led to this crisis cannot stand" and touts "the need for change and change now."

But we've been hearing similarly great sentiments for months now -- and they've had the same impact as my friend's ten year-old yanking on the cruise ship wheel. None. President Obama won't be able to change the course our financial system is on unless he goes down into the boiler room and disengages the autopilot -- which means taking on the bankers and their hordes of lobbyists who continue to dictate policy in DC.

I'd give Obama a little more agency here - the Presidency carries tremendous power - but basically this is right.