It's becoming a standard play for President Obama. Just as he gave a high-profile speech to seal the deal on the health care overhaul earlier this year, he came to New York City on Thursday to set up the winning shot for financial reform. With Goldman Sachs
' Lloyd Blankfein seated in the third row, President Obama could have scored easy points in his big speech at Cooper Union
by making the titans of Wall Street squirm, and suffer for their greed and recklessness. The headlines even said the president "scolded" bankers.
Not really. What he did do was tell them that their fortunes would ebb and flow along with those of the nation's consumers, and that it's therefore in Wall Street's interest to support the Democrats' financial reform bill that it has so loudly opposed. As the president put it: "Ultimately, there is no dividing line between Main Street and Wall Street. We will rise or we will fall together as one nation."
I'd like to think this is true.
Yet one only has to look at the Goldman Sachs scandal to see how the story looks from Blankfein's seat in the third row. While it did take a hit on its notorious failed Abacus derivatives deal, Goldman has done extremely well for itself under the present, broken system. And make no mistake, it will suffer under the proposed new regulations, including curbs on executive pay and regulations on derivatives trading. Banking, Wall Street-style, is a brutal, Darwinian business where gains are mostly made not through productive investment in the nation's economy but through bets and "arbitrage," anticipating and exploiting wiggles in the values of various indexes and instruments. Combine those with leverage, heavy borrowing by those bankers, and the brew can get dangerously potent. But for every Lehman and Bear Stearns that went down on bad bets, we have a Goldman for whom such chaos is the best business opportunity in a generation.
What does that mean for you, the homeowner? I'm convinced the president is on your side in pushing for things like the Consumer Financial Protection Agency
; that he's trying to do the right thing for the nation as a whole, to keep its economy strong, stable and globally competitive; and that he's attempting to speak to whatever scraps of conscience Wall Street may have left. But don't think for a minute that Blankfein and Co. actually believe it --or that the president even does. Instead, Obama is making the same smart play he did on health care reform. He speaks to the opposition as if it is responsible and ready to do the right thing for the greater good. That puts the ball in their court. They can play that role. Or they can become the wall standing between you and some basic sense of safety and security in the banking and home mortgage system.
That was never more clear than when the president voiced his support on Thursday for a consumer financial protection agency. "Unless your business model depends on bilking people," he jabbed, "there is nothing to fear from these new rules."
Anyone in the mortgage business care to disagree?