The president talked and joked easily with America from Jay Leno’s couch last night, as close to a fire side chat as it gets in these times. Leno is no Jon Stewart and largely gave the president the floor. Still Obama spent most of his time on AIG and the financial crisis, suggesting that his future approach to regulation might be in line with a recent US Senate proposal for a Financial Products Safety Commission proposed by Senators Dick Durbin and Chuck Schumer.
Obama didn’t mention the commission but he pulled out the soundbite used by its backers, including TARP overseer and author of the Commission idea Elizabeth Warren. The president said that we have protections when a toaster explodes, but not when a credit card or other financial product explodes. In announcing legislation for the Financial Products Safety Commission in Washington last week, that was the line repeatedly used. Leno cleverly injected that banks and credit card companies used to lend you money for you to give it back, now they give you money so you can never pay it back.
The meritorious Commission proposal is hard to argue with given the global woes wrought by the unregulated mortgage market. The bigger goal, though, getting consumers to feel safe and to spend, won’t be achieved absent a larger commitment from the White House. If consumers are to have confidence again, Americans need a consumer advocate at a much higher level in the West Wing. Like in the cabinet. And they need stronger regulation than a Commission can offer.
The fact that neither Treasury Secretary Geithner nor chief economic advisor Larry Summers did more than defend the AIG bonuses on the Sunday talk show circuit proves the need for a consumer advocate closer to the president. Obama has not even appointed a Special Assistant for Consumer Affairs, despite a push from consumer advocates.
Obama described the AIG debacle on Leno as stemming from the problem of an insurance company adding a massive hedge fund. This leaves some hope for a return to the type of regulation of derivatives trading that the New York Times hinted at in its apt Dealbook commentary yesterday.