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By coincidence or deliberation, the stunning victory by a Republican candidate, in the election for the seat of the deceased Senator Edward Kennedy, did not stop President Barack Obama from proposing additional financial reform measures.
Last June, the President proposed the creation of a financial consumer protection agency, more supervision over financial entities capable of endangering the whole system, more regulation of derivatives and increases in bank capital. However, the legislative process was moving slowly and some of the elements of the proposal, particularly the consumer protection agency, were in danger of being discarded.
Instead of retreating, President Obama has chosen to propose additional reform measures, starting with a new tax on the assets of the 50 biggest banks, to recoup in 12 years almost $120 billion used to rescue these banks.
This was followed by a proposal sponsored by the respected former central bank chairman Paul Volcker, now head of the presidential Economic Recovery Advisory Board, to return to the separation between commercial and investment banking. The objective is to prohibit banks from using their own resources to speculate in the markets and from investing in hedge funds and private equity funds. Finally, administration officials said the creation of a consumer protection agency was non negotiable.
The banks have displayed, through intense lobbying, strong opposition against some of the elements of the reform. Therefore, if 2009 was the year of health reform, 2010 promises to be the year of financial reform. However, on this issue the public appears to be siding with the government. A recent Washington Post-ABC News poll revealed that 76 percent of those polled blame the banks for the economic situation and 73 percent support taxes on bonuses of more that $1 million.
Isaac Cohen is Former Director, Washington Office of the United Nations Economic Commission for Latin America and the Caribbean (ECLAC). He also serves as a commentator on economic and financial issues for CNN en Espanol TV and radio.
