Friday, September 18, 2009

Economic Recovery?

With the recent announcement of the Disney/Marvel acquisition and the unsolicited bid by Kraft Foods for Cadbury, it appears the the Mergers and Acquisitions market is finding new footing. Financial periodicals are trumpeting this new acquisition activity as a sign that the broader global markets are recovering and that the near economic meltdown precipitated by the Lehman Brothers-Bear Stears-AIG debacle are becoming distant memories. While the $4 billion Disney acquisition of Marvel and the potential $16.7 billion coupling of Kraft Foods and Cadbury are heartening economic signs, the White House worries whether we are forgetting too soon the financial industry failures that precipitated the still lingering unemployment figures and decimated retirement accounts affecting millions of Americans.

This week, President Obama called together the "captains of industry" to sternly remind them that new regulatory systems need to be implemented in order to protect against recurrence and potential break down of the financial system in the United States. As financial titans return to profitability, President Obama warned:

"'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,' Obama said in a stern bid to boost his regulation proposals.

The president's speech reflected public sentiment that taxpayers were immeasurably harmed from last year's financial collapse — and that, barring change, it could happen again. As investment giants return to profit, millions of Americans are still coping with unemployment, home foreclosures and retirement portfolios that got washed away in the storm."

Some fear that, as reported by the Wall Street Journal, the impetus for regulatory overhaul has dissipated as the economy churns forward. Lobbyists in Washington, D.C. are now fully engaged in fighting against new regulation as the environment for radical overhaul has waned. As discussed on this blog previously, the Obama administration seeks wide ranging reform, including vast oversight being situated within the Federal Reserve.

President Obama chose the one-year anniversary of the collapse of Lehman Brothers to remind America and its financial leaders, that the time for relaxing and a return to status quo was inappropriate. President Obama reminded:

"'Unfortunately, there are some in the financial industry who are misreading this moment,' Obama told a quiet audience of leaders from the investment sector. 'So I want them to hear my words,' Obama said. 'We will not go back to the days of reckless behavior and unchecked excess that was at the heart of this crisis. ... Those on Wall Street cannot resume taking risks without regard for consequences.'"

The next several months will prove crucial as Congress debates and the White House urges regulatory overhaul of the U.S. financial system. If the recent judicial slap down of the Securities and Exchange Commission is any indication (rejecting the SEC/Bank of America settlement) then plenty of fire remains in the belly of some who continue to be sick and tired of financial sector excess and reckless disregard.

- andré douglas pond cummings
University of Utah S.J. Quinney College of Law


  1. How does the Federal Judge rejecting the SEC - BofA/Merrill settlement impact the analysis you provide? Why would a judge reject an SEC settlement?

  2. Professor cummings,

    Excellent post. I worry about Obama's reform agenda going forward. I think with the signs of recovery blooming Congress will forget our recent and traumatic past. Those who don't know their past are doomed to repeat it. Reform is needed. Again, thank you.

  3. Great article Professor Cummings! I believe however, reform will happen only after lobbyist loose their teeth. The dentist; four to six year term limits for Legislatures, Senators and all Congressmen.

  4. Do the elections in MA support how the people generally feel about reform or are there other issues they just dont back from the Democratic party? Also, Republicans talk about a free market being able to fix itself, would these regulations or reforms stand in the way of that recovery?