The Tough Task of Financial Regulatory Reform: Those Ungrateful Banks

This week the Dow surged past 10,000 points. JPMorgan Chase and Citigroup reported earnings that exceeded analyst’s estimates. These are all positive indicators. However, structural and regulatory problems that caused the current financial crisis have remained unaddressed to this point.

The Obama Administration has proposed major overhauls to the financial regulatory system. In the past year taxpayer’s have provided vast sums of money to bailout banks. For the most part, these bailed out banks have been restored to profitability and are providing record compensation for their executives. In the midst of President Obama’s push to reform and overhaul financial regulations, guess who’s pushing back the hardest? If you said banks, you’re correct. Yes, the very industry that the federal government saved is lobbying the hardest to thwart overhaul and regulation of their industry.

This week, the Obama Administration voiced frustration with the banking industry. Administration officials noted that the banking industry is returning to a sounder footing because of government bailout, and that lobbying efforts to kill regulation run counter to the nation’s longer term interests. Valerie Jarrett, a senior advisor to President Obama noted: “We are disappointed by the lobbying of anyone in the financial industry against regulatory reform, considering the obvious need for change on that front.”

The banking industry misses the point. Some banks are reporting record compensation and a return to pre-financial crisis meltdown profits. This is the picture on Wall Street. On Main Street, unemployment is close to 10%. Foreclosures over the last year have jumped close to 30%. If Main Street is hurting Wall Street should be more conscious of that fact. Quite honestly, Wall Street, and banks and the financial services industry in particular, should be more thankful and grateful for the lifeline extended to them by taxpayer’s.

Keep an eye on the Sunday morning talk shows. The Obama Administration has promised to send a tough message to the financial services industry regarding the industry’s pushback on regulation. We shall see.