How To Prevent It From Happening Again...

Eight fresh ideas from a Wall Street veteran, Al Wojnilower, published last month in a CSFI (London-based Centre for the Study of Financial Innovation) book entitled, "Grumpy Old Bankers: Wisdom from Crises Past."

1. Limit rewards for short-term gains;

2. Financial firms should be partnerships (the same prescription, by the way, as Michael Lewis);

3. FDIC-insured banks should be public utilities;

4. Prohibit short-selling; and

5. Restrict Freddie Mac/Fannie Mae to traditional activities.

If such advice is taken, the result may be as follows:

6. US will be the global leader in confidence-boosting regulations, and not participate in a race-to-the-bottom;

7. Make it more difficult to game commodities markets;

8. Real estate bubbles less likely to occur.

(Wojnilower refused to 'bullet-point' his brief article, saying "No point in summarizing the main points; read it all. It is well worth the effort.)

The last point is true, but the summary is here anyways.

The "Loyal" Opposition 2

Some, at least in the GOP, seem to have realized that intellectual bankruptcy will, if continued, give rise to electoral bankruptcy.

Here's some (off-the-record) strategy from Byron York at the DC Examiner:

"You're seeing a major doctrinal shift in how Republicans are going to focus all these debates," the strategist told me. "The key is to focus on winning the issue as opposed to winning the political moment. If you win the issue, people will think you are ready to govern."

I asked him to elaborate a little. "With the political moment, it's how can you find the one thing that gives you the momentary upper hand in terms of the coverage for the next six hours -- as opposed to engaging the electorate in creating a structural change in their opinion on which party is better able to handle an issue."

Whether this "change" in strategy makes it through the next news cycle will have to be examined, although York noted that House Minority Whip Eric Cantor (R-VA) apparently changed the subject rather than continue to talk about the stimulus package.

Worth remembering -- despite all the hot air about how effective the New Deal was or wasn't in combatting the Great Depression, there's one area where it was brutally effective: voting Republicans out of office.

In the 70th Congress (elected in 1928), the GOP had 56 Senate seats, against 39 for the Democrats (1 Farmer-Labor).

In the 71st Congress (elected in 1930), the 96 Senate seats were split 48 GOP, 47 Dem (with 1 Farmer-Labor).

In the 1932 election, 12 Republicans lost their seats, making the split 59 Dem, 36 GOP, 1 Fam-Lab.

By 1937, (i.e., just after the FDR re-election), the number of GOP had been reduced to 16.

Said another way, almost three-quarters of Republican Senators serving when Herbert Hoover became President were unseated within eight years.

The "Loyal" Opposition

Intellectual bankruptcy is not limited to Republicans inside the Washington Beltway.

Last night's rebuttal to the President's Address to Congress by LA Gov. Bobby Jindal (R) provided more of the same.

With the bottom of the economic fall-out from the eight years of the Bush Administration still nowhere in sight, Gov. Jindal had a remarkable policy prescription: the country needs less regulation, less oversight, and in effect, less guvr-mint.

In an courageous attempt at revisionism, it wasn't Bush Administration incompetence that exacerbated Katrina -- it was "some bureaucrat" that required rescuers to have insurance. (One does have to respect Jindal's chutzpah, however; you would think that the GOP would want to leave Katrina well enough alone.)

It's not an out-of-control financial system that brought the country's economy to a stand-still, but rather those who refuse to believe that "Americans can do anything."

And in a time when consumer confidence is at a historic low (according to the Conference Board, the index is at 25, down from 37 a month ago, and one-third the 75 from one year ago), the recipe is more of the same: less government, fewer taxes.

After the electoral losses in 2000 and 2002, many Democrats argued that the party needed to return to its roots. Gov. Howard Dean rode the borrowed line ("I'm from the Democratic wing of the Democratic Party") to early fundraising and poll success in 2003. But Dean eventually flamed out, and it was Bush, not Kerry who was elected in 2004.

Jindal's message last night was eerily reminiscent of Dean's. The GOP problem was not that its policy prescriptions -- less government, less oversight, deficits don't matter -- were wrong, but rather that the GOP abandoned the hymnbook. The argument that the policies themselves are flawed in these times seems to escape both Jindal and the rest of his party.

Obama touched on the point last night:

A surplus became an excuse to transfer wealth to the wealthy instead of an opportunity to invest in our future. Regulations were gutted for the sake of a quick profit at the expense of a healthy market. People bought homes they knew they couldn't afford from banks and lenders who pushed those bad loans anyway. And all the while, critical debates and difficult decisions were put off for some other time on some other day.

Well, that day of reckoning has arrived, and the time to take charge of our future is here.

In fact there's only one group that currently seems able to summon organized opposition to President Obama: Wall Street.

While the POTUS tried to brush off the vagaries of the market with a line ("I understand that, on any given day, Wall Street may be more comforted by an approach that gives bank bailouts with no strings attached and that holds nobody accountable for their reckless decisions, but such an approach won't solve the problem"), the market does have an effect on -- and reflect -- consumer wealth and consumer confidence.

This morning's opening -- DJIA down 150 at mid-day -- seemed to reflect Wall Street's continuing depression. And reflected that even as the President talks up the long-term future, in the short-term there's more pain to go.

Finally, Jindal's delivery was also a problem, as noted by even Fox News. But the style should not be confused with the substance. And the substance was bad enough.