Obama pushes bank reform, but Americans worry it won't happen
A majority of Americans are worried that Washington will end up doing too little to prevent another financial crisis.
That's the message in a new nationwide poll this week, which comes as President Obama is pushing hard to keep hopes of bank reforms alive.
Historically, the momentum for such reforms often fades when the economy shows signs of returning to normal after a crisis. Although the economy still faces big challenges, credit markets have seen a lot less panic and more stability in recent months.
"Normalcy cannot lead to complacency," Mr. Obama told Wall Street executives Monday.
In the new poll, by ABC News and The Washington Post, a significant swath of Americans appears to share that view. About half of US adults say they lack confidence that the government is taking the steps needed to make a repeat of the financial crisis less likely. Most of those people feel strongly on the matter, saying they are "not at all" confident.
Nearly half of those surveyed express some confidence that policies will improve the financial system. But few in that camp feel "very confident."
So far, much of the response to the financial crisis has been by necessity an emergency response – using the firetrucks rather than improving fire codes. The Federal Reserve and Treasury have deployed trillions of dollars in loans, loan guarantees, and other supports to financial firms that lost investor confidence last fall.
"As severe as the economic impact has been ... the outcome could have been decidedly worse," Federal Reserve Chairman Ben Bernanke said this week. He, too, is pushing for reforms to keep such a crisis from happening again.
In the House, Rep. Barney Frank (D) of Massachusetts is chairing a spate of hearings on Obama's proposals this month and next. But it's not clear if the Senate will be able to vote on the issue this fall.
The sense of financial panic has certainly eased, but the case for reforms, many economists say, remains strong. First, many businesses and consumers say they're having a tough time accessing credit – something that could slow an economic recovery.
Second, getting out of the current mess is no guarantee that it won't happen again.
The ABC News/Washington Post poll also asked whether Americans believe businesses will change their own ways to make future crises less likely. Some 57 percent of Americans said they're not confident that will happen, while 41 percent are very or somewhat confident.
Obama has proposed:
• A new consumer protection agency for financial products. Although many people understood the risky mortgages they were taking, many did not, he says.
• Larger cushions of capital for the largest financial firms, whose failure can spread wider havoc.
• A new "resolution regime," so the government can restructure complex firms in an orderly way when they fail, without using taxpayer money. Such a system was lacking in the case of Lehman Brothers (a disorderly failure) and AIG (a costly bailout).
• Closer oversight of complex products known as derivatives.
A controversial issue is whether to give the Federal Reserve an enlarged regulatory role to guard against risks in the system.
Mr. Bernanke says his agency has the expertise, while critics say the Fed failed to use that expertise during the buildup to the crisis.
Another hot issue is bankers' pay packages. According to many economists, bankers had incentives that skewed them toward taking too much risk. European Union leaders called for a crackdown on banker pay this week, ahead of the Group of 20 financial summit in Pittsburgh next week.
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