Unfinished Business

by Fred L. Johnson III

President Barack Obama’s 2012 reelection victory presents him with the opportunity to continue the fight he’s been waging for the middle class ever since his inauguration. On that day, now four years ago, Obama inherited a financial catastrophe that had been over thirty years in the making. During those years, the federal government had steadily retreated from its regulatory responsibilities while Wall Street financial institutions bloated into behemoths eventually deemed “too big to fail.” Compounding those developments was the pervasive culture of reckless risk and spectacular corruption in the financial sector that produced a crisis of economic ruin not seen since the Great Depression of the 1930s.

With actions resembling Franklin Delano Roosevelt’s bold legislative response to the economic emergency of his day, President Obama took measures to alleviate the harm caused by decades of Wall Street greed and government inaction. Passage of the Lilly Ledbetter Fair Pay Act, health care and credit card reform, preventing the collapse of the auto industry, kicking banks out of federal student loan programs and expanding Pell grants, and the signing into law of the Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) comprised just a few of the Obama administration’s efforts to ensure that government was working for all Americans, not just the upper one percent. While achieving this impressive legislative record, President Obama experienced firsthand the bruising implacability of those who meant to defeat his efforts.

In his second term, the president should not possess any illusions regarding the extent to which his opponents are prepared to go or the harm they are willing to inflict upon the middle class in ensuring that the economy continues providing astronomical benefits to a very few.

With a second term before him, President Obama is now positioned to help move the American economy into becoming an engine of free-market opportunity for all rather than allowing it to remain as a private playground for pirates. To reach this objective, Mr. Obama must, first and foremost, insist that the lagging implementation of the Dodd-Frank Act’s provisions be expedited.

Those charged with enforcing that and other financial reform legislation will need reassurance that they have both the authority and the power to be more than regulatory lapdogs. As Rolling Stone columnist Matt Taibbi wrote on February 15, 2011, “virtually every major bank and financial company on Wall Street” during the financial crisis was “embroiled in obscene criminal scandals . . . and nobody went to jail.” In a May 21, 2012, New York Times editorial, noted scholar and senior finance fellow at the Milken Institute, James R. Barth, observed that the “major regulatory failure of the past three decades” was due to “lack of enforcement of existing regulations.”

President Obama’s full-throated support for the aggressive prosecution of those who broke the law as they wrecked the economy would send a strong and overdue message. Violators would know that, whether mugging a single person on the street or pilfering millions from a boardroom, they would forfeit any reward for their malfeasance.

This kind of decisive action is essential since “too big to fail” institutions not only remain, but they have gotten bigger. In the October 28, 2012, Slate article “Keep It Simple, Stupid,” Simon Johnson commented that such institutions are simply “too large and too complex to manage.” Most alarming for taxpayers, whose rage boiled over from having to bail out these institutional perpetrators, is that they cannot be managed in a manner that “keeps taxpayers out of harm’s way.”

With Capitol Hill awash in money from financial institutions, compounded by Congress’s bizarre adolescent dysfunction, few should doubt that middleclass taxpayers remain at risk. The forces seeking to shape government into a tool for the exclusive benefit of plutocrats have been relentless. Starting on January 20, 2013, President Obama must be equally determined to focus his energy on completing his work to restore the strength of the American middle class rather than fulfilling the agenda of powerbrokers and ideologues in either party.

Fred L. Johnson III teaches history at Hope College in Holland, Michigan.