Tuesday, April 27, 2010

Two Curious Political Calculations

by Richard Crews
The ways of Washington and the ways of Wall Street are mysterious.

Apparently "derivatives"--mixed bags of investments based on stocks, bonds, mortgages, credit insurance, and side bets--are too complicated to be regulated by the federal government. Wall Street financiers tell Congress that even simple steps like requiring banks (and quasi-banks) to keep enough cash on hand to assure they can afford the derivatives they love to shuffle or developing some exchange or clearing function that would require the general (financial) world be told what's going on and guarantee that some grown-up is sure they can be paid for would be too restrictive and stifling. The economists and financial experts in Washington simply can't understand the problems. The Wall Street financial institutions can't either, but that is beside the point.

So the real question is, whom do you trust?

The answer, of course, is NEITHER. So the answer--like the "checks and balances" designed to keep mischievous branches of government operating out in the daylight--is, put BOTH in positions to watchdog one another. This is not easy. But with a lot of head-scratching (and hand-wringing) on both sides, it can be done.

The other strange political calculation that is emerging from Washington these days is, if financial reform goes first, that kills immigration reform for this year. If this makes sense to you, please let me know. The only thing I can figure is that the Republicans expect to get so much soup on their ties double-dealing and double-talking to keep Wall Street strong (and their campaign coffers brimming) while appearing to want to regulate it (voting against Wall Street is a very popular American pastime these days) that if financial reform goes first, they (the Republicans) simply won't have enough political capital left to stall and abort immigration reform.

Get it? (I don't.)