NYT's Interview with Obama

[August1991]

THE PRESIDENT: Well, first of all, I think that we should distinguish between finance as the lifeblood of our economy and finance as a significant industry where we have a comparative advantage — right? So in terms of just growing our economy, we’ve got to have enough credit out there to fund businesses, large and small, to allow consumers the flexibility to make long-term purchases like cars or homes. So that’s not going to change. And I would be concerned if our credit market shrunk in ways that did not allow for the financing of long-term growth.

NYT

Intelligent comments. Too much of an interventionist for my taste. It is naive to believe that the State can do this.

THE PRESIDENT: Canada being a good example. (2) And they’ve actually done a good job in managing through what was a pretty risky period in the financial markets.

...

But when it comes to something like investment banking versus commercial banking, the experience in a country like Canada would indicate that good, strong regulation that focuses less on the legal form of the institution and more on the functions that they’re carrying out is probably the right approach to take.

It is something of meme to say that Canada's banking system is more/better regulated than in the US. The two countries have had very diufferent monetary histories and regulation is not the key difference.

In any case, Canadian regulators did not avoid the bankruptcy of Confederation Life.

[BubberMiley]

In any case, Canadian regulators did not avoid the bankruptcy of Confederation Life.

Uh, they didn't save Eaton's either.

[August1991]

Thread drift ahead.

Uh, they didn't save Eaton's either.

No government agency regulated Eaton's activities to determine its viability.

The OFSI was one of several government agencies supposed to regulate Confederation Life and ensure that it had sufficient liquid capital to operate. These agencies failed for the simple reason that senior Confederation Life managers found ways around the regulators.

As the head of the Office of the Superintendent of Financial Institutions—this country's financial regulator—Julie Dickson pulls the strings on Bay Street. She is Canada's top cop when it comes to ensuring that financial institutions are playing it safe. She is integral to the policy that is being credited with keeping the nation afloat during a financial storm that saw banks just about everywhere else in the world pushed to the brink because they had taken on too much leverage and excessive risk. She's a leading figure among the tiny circle of key officials who are steering the country through the crisis. And in a resolutely low-key way, Dickson is putting her stamp on Canada's financial system. She recently put the big banks on notice that her office will be reviewing their compensation practices.

G&M

Pardon my cynicsm. "Pulls the strings on Bay Street?" The article is interesting but I suspect that the journalist knows about as much about banking regulation as I do and may have even less knowledge of the OFSI's role in the Confederation Life bankruptcy.

-----

The Bank of Canada was created in 1935 and prior to that, Canada had no State role (as regulator, central banker or provider of deposit insurance) in its banking system. And yet, while the Panic of 1873 and the Great Depression (for example) saw thousands of US banks go bust, Canadian banks remained solid and liquid.

The monetary history of the US and Canada are completely different. It is wrong to claim that State regulation explains this difference.

-----

To get back to the interview linked in the OP (and IMHO, it's an enlightening interview), it's clear that Obama is very much an interventionist. He wants to fix things and he thinks that he can use the power of the State to make the US a better society.

I don't share that view of life, the State or society. To begin with, when it comes to government bureaucracy, there is a wide difference between what the central planner/policy maker at the top wants to do and then what eventually happens several years later in a government office when someone fills out a form.

[BubberMiley]

Well done. Thanks for that. It also helps explain why the nifty Confederation Life building on Main Street in my home town doesn't have any people in it.

http://farm1.static.flickr.com/47/13999222...74512fd.jpg?v=0

Edited April 30, 2009 by BubberMiley

[sharkman]

NYT

Intelligent comments. Too much of an interventionist for my taste. It is naive to believe that the State can do this.

It is something of meme to say that Canada's banking system is more/better regulated than in the US. The two countries have had very diufferent monetary histories and regulation is not the key difference.

In any case, Canadian regulators did not avoid the bankruptcy of Confederation Life.

Back to Barak's remarks, he was smart and I'd guess intentionally inaccurate at the same time. Throwing flowers to Canada for stickhandling through the crisis gives the impression we faced the same dragon they did, which is inaccurate. Then to give the credit to our "good strong regulation" for our better result tells you where he wants to go, more regulation in the U.S. But it was regulation in the first place that allowed subprime mortgages to poor people.

As for Canada, just as much credit can be given to the fact that we were sheltered from the blast of mortgage meltdown. We've had to deal with the shock wave, but since we've been running surpluses we were better able to deal with it.

Edited May 1, 2009 by sharkman

[bush_cheney2004]

....Then to give the credit to our "good strong regulation" for our better result tells you where he wants to go, more regulation in the U.S. But it was regulation in the first place that allowed subprime mortgages to poor people.

No matter...Mr. Obama received a reality check this week in the US Senate when his own party helped to torpedo anti-foreclosure legislation that he favored. Like health care, US banking interests will not go down quietly...nor will their monied representatives in Congress.