President Obama’s administration has turned its focus to the issue of increased regulation of big banks. Adopting a combative tone, Obama says about banks: "So if these folks want a fight, it's a fight I'm ready to have."
The president’s proposed course of action would limit the scope of what banks could invest in (“The President and his economic team will work with Congress to ensure that no bank or financial institution that contains a bank will own, invest in or sponsor a hedge fund or a private equity fund, or proprietary trading operations unrelated to serving customers for its own profit.”), and would limit the size of banks (“The President also announced a new proposal to limit the consolidation of our financial sector. The President’s proposal will place broader limits on the excessive growth of the market share of liabilities at the largest financial firms, to supplement existing caps on the market share of deposits.”).
One does not have to be a dyed-in-the-wool cynic to assume this new presidential emphasis has political overtones. (One probably does not go wrong in assuming that most actions taken by elected representatives in Washington have political overtones.)
In this instance, it is a reasonably safe assumption that Obama’s advisers were eager to divert attention from things like the Massachusetts senate race. And to take advantage of what was perceived to be a populist anger out among the populace. It's also reasonable to assume that Obama's team reviewed available poll evidence before taking the anti-bank actions.
They no doubt recognized that attacking “big banks” would generally be in sync with existing American attitudes. Data show that there is no love lost on the part of the average American for banks at this juncture in history. Particularly big banks.
Banks as a business sector are seen positively by 28% of Americans; negatively by 51%.
- Only 19% of Americans have very high or high opinions of the honesty and ethics of bankers (nurses top the list with 83%).
- Only 22% of Americans have a great deal or quite a lot of confidence in banks (the military tops the list with an 82% confidence rating). When it comes to “big” business, the confidence rating is 16%.
There is, however, a looming paradox of sorts bound up in the administration's strategy. Look again at what the administration is proposing: Using big government to control what big banks are allowed to do. This is, in essence, pitting big against big.
The problem for the administration is that Americans do not appear at the moment to have any more positive sentiments about big government than they do toward big business/big banks.
- Asked if big business, big government, or big labor poses the biggest threat to America, Americans routinely respond "big government" -- by a high margin.
- I mentioned above that only 28% of Americans have a positive image of banks, while 51% have a negative image. Well, Americans have slightly more negative views of the federal government. In these same rankings, 29% of Americans have a positive image of the federal government, while 54% have a negative image.
Remember also that a number of measures of public opinion this year show that Americans have become increasingly concerned that government is attempting to do too much that should be left to business.
As I put it a few months ago: “New Gallup data show that 57% of Americans say the government is trying to do too many things that should be left to businesses and individuals, and 45% say there is too much government regulation of business. Both reflect the highest such readings in more than a decade.”
The Wall Street Journal’s analysis of their new Wall Street Journal/NBC News poll concludes: “For the first time, a majority of Americans--53%--disapprove of the government's increased role in the economy since the financial crisis, up from 44% in March.”
And there is no doubt that a good deal of the opposition to the healthcare reform legislation revolved around fears of big government involvement in that sphere of American life.
So. On the one hand, the Obama administration is on target with its assumption that Americans will more than likely react favorably to negative statements about big banks. (It’s important that Obama continue to use the word "big," since Americans are much more likely to like “small” anything). On the other hand, the Obama administration may run into problems with average Americans with its proposal that the aforementioned big bank excesses be controlled by direct big government involvement.
Herein lies the paradox for the administration/Democratic leaders as they shift into this new populist territory. They are, apparently, making the assumption that the negatives associated with big banks will outweigh the negatives associated with big government. Whether this assumption is valid is unclear.