The Wall Street Reform and Consumer Protection Act (Dodd–Frank) was passed along straight party lines as was The Patient Protection and Affordable Care Act (Obamacare). Passing key legislation along strict party lines sends a message to the other party: “You don’t matter.”

Consider the President’s latest campaign statements. Obama says that Republicans want “Dirtier air, dirtier water, less people with health insurance.” He implies that Republicans are too stupid to understand his new stimulus plan. He says that they “want to gut regulations” and “let Wall Street do whatever it wants.” And Vice President Biden added that Republicans were responsible for the increasing rates of fire, murder, rape and crime in general.

Regardless of whether you are a Republican or a Democrat, consider the charges that the President made. If any president said those things about you and your political beliefs, how anxious would you be to work with him? Furthermore, given that the Republicans now control the House of Representatives and the odds are that they will capture the Senate next fall, what do you think the prospects are of Congress working with the president?

Obama is isolating himself legislatively. He is making charges that will only help him (he hopes) enthuse his base of supporters enough to get re-elected. But the inflammatory statements are the type of rhetoric that will help to thwart bi-partisan legislation.

In terms of working with the opposition party, Obama may prove to be one of the least capable presidents ever. Can he govern that way?

Glass Steagall – German style

In 1999, the 1933 Glass-Steagall Act, restricting the financial operations a company could perform, was repealed and replaced with the Financial Services Modernization Act of 1999 (aka The Gramm–Leach–Bliley Act). Heretofore, investment companies, commercial banks, and insurance companies had to be separate institutions.

Since the great financial meltdown of 2008, it has been recognized by many that the repeal of Glass-Steagall, while not a cause of the melt-down, was a contributor to it. Although the law is not making a come-back, some of its provisions are.

In the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act is the “Volker Rule.” Named for Paul Volker, former Federal Reserve chief, the rule is kind of “Glass-Steagall lite.” While not breaking up financial institutions, the Volker Rule prohibits commercial banks from owning and investing in hedge funds and private equity, and limits the trading they do for their own accounts.

Back in 1999, one of the arguments for the repeal of Glass Steagall was that the same restrictions did not exist in Europe and they were doing just fine. In 1999, everyone was doing just fine but not today.

In a turnabout, last week Sigmar Gabriel, the leader of the center-left German Social Democrats, discussed the German/European financial situation in an interviewwith Der Spiegel. He said, “The correct move would be to split investment banking off from commercial banking. Every mid-sized company which needs a loan will run into difficulties if a bank is threatened with bankruptcy because of bad bets made in its investment banking business.”

Sounds like a German Volker Rule to me.

Quote without comment

Cristina Kirchner, President of Argentina, as quoted in the Wall Street Journal, October 17, 2011: “I don’t know if Obama has read Peron, but let me tell you, it seems like it.”