Guest post by Fatima Hassan
As we begin to emerge from the deepest financial crisis since the Great Depression, we must look to the past for lessons learned and the foundations of boldness, which pulled us through one of history’s darkest hours. Joe Nocera’s article in The New York Times yesterday was an ode to President Franklin Roosevelt, but more importantly a lesson for policymakers today.
Like Obama, FDR’s presidency was distinguished by his overwhelming backing from the American public. His resilience and popularity allowed Roosevelt to set out a series of ‘radical regulatory reforms’ that completely overhauled Wall Street. As a result Roosevelt was loathed by the financial industry, but refused to waver. It was Wall Street’s failed practices that led America into the Great Depression and it was Wall Street’s responsibility to change – not the American peoples.
But where is this unyielding leadership today?
Last night Mervyn King, Governor of the Bank of England, attributed the crisis to a lack of trust within the financial industry - not to systemic failures within the industry itself. And even more alarming are King’s calls for the Bank of England to be given greater powers as a result of its ‘role’ in ensuring long-term stability. But how can the Bank of England be granted greater powers, when it fails to see the industry’s risky business practices as the root of the problem?
Of course the financial industry will be angry at the finger pointing and dubious about their role in tipping the iceberg on the recession – no one wants to be associated with this mess let alone be the cause of it.
It’s clear that the financial industry has failed to realise its role in creating a “culture of irresponsibility” as referenced by Obama. But there is also a failure on the parts of policymakers to evoke Roosevelt’s sweeping reforms, which held the financial industry to account and offered clear guidance. but also offered clear guidance as well.
Don’t get me wrong. I think President Obama’s done a fantastic job. In fact I think he’s been handed a poisoned chalice by his predecessor. But like FDR, Obama has a public mandate to overhaul the systemic failures both in rhetoric and in policy, and his proposals outlined on Tuesday fall short of making such assertions. Where are the proposals to regulate risk-taking institutions? Where are the structural reforms to ensure the financial industry is provided with a framework for moving forward?
Even in Britain, where much of the financial burden has fallen on the shoulders of the taxpayer, Brown has fallen short of reforming the system. It was public money that bailed out the banks and it was the banks that failed the public. For some, the financial crisis has been used as a tool for party politics rather than addressing endemic failures within the industry. Financial insiders and the public are still waiting for a coherent response from the government.
As progressives, Obama and Brown need to ride on the coattails of public anger and move forward. Of course reforms will upset the industry, but it was the industry that failed us all. Taking some lessons from FDR along the way may help…“The only limit to our realisation of tomorrow will be our doubts of today. Let us move forward with strong and active faith”.