Jonathan Chait

Obama's Joke May Be On Himself

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President Obama today quoted this article in his Wall Street speech:

Through the great banking houses of Manhattan last week ran wild-eyed alarm. Big bankers stared at one another in anger and astonishment. A bill just passed by both houses of Congress would rivet upon their institutions what they considered a monstrous system of guaranteeing bank deposits. Such a system, they felt, would not only rob them of their pride of profession but would reduce all U. S. banking to its lowest level. They saw their deposits which they had spent a lifetime to build up and protect with their good names confiscated by the Government to pay for the mistakes and dishonesty of every smalltown bankster.

The audience laughed when Obama pointed out that the article appeared in Time in 1933. Obama's point was that bankers were overreacting to a necessary reform. That's not completely true. The Glass-Steagall Act did save the banking system, but it wasn't necessarily good for bankers themselves:

Bank regulation made banking a "boring" industry with healthy but reasonable incomes. Deregulation has helped turn into into a monster that produces nearly half of all corporate profits. If Obama is saying his reform won't hurt the interests of bankers, then he's saying that it won't work as well as it should.

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