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Obama 2.0 begins by listening to Paul Volcker

By Mitch Perry on Thu, Jan 21, 2010 at 9:34 am

Volcker is chairman of the president’s Economic Recovery Advisory Board, but he's been mostly sidelined during Obama's first year in office. In fact, there has been numerous articles on the Internet bemoaning that fact, as critics have blasted the administration for playing too cozy with Wall Street after the 2008 financial meltdown.

A blog post written by TPMcafe.com last fall perhaps said it all, entitled, "The Incredibly Shrinking Paul Volcker, or The White House Don't Need No Stinking Old-School Economics". Then there was a piece in the Wall Street Journal printed just last Friday that asked,"Paul Volcker is talking. But is anyone listening?"

Of course, when asked if he had lost clout in the White House late last year, the former Fed Chair from 1979-1987 countered that he never really had much to begin with.

The question is now: Will it pass Congress? Progressives who have been critical of Obama and his economic team will want to watch to see how strong Obama pushes for this. Then again, as everybody bashes the President in the wake of the "wake-up call" that was the Boston Massacre Tuesday night, one has to believe that the President realizes that somethings he's been doing simply haven't been working, for whatever reason. We'll watch today's announcement with much anticipation. (The announcement is scheduled for 11:40 a.m.)

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Financial reform gets a new look today when President Obama announces today a proposal on new limits to the size and investments of large banks.

The NY Times Jackie Calmes reports that, for the first time, the President will get behind an effort led by former Federal Reserve Chairman Paul Volcker on limiting the scope of these major bank's activities - banks like Citgroup, Bank of America, JP Morgan Chase, and Wells Fargo. From the story:

The heart of my argument,” Mr. Volcker said, “is who we are going to save and who we are not going to save. And I don't want to save what is not at the heart of commercial banking."

Mr. Volcker has been trying for weeks to drum up support — on Wall Street and in Washington — for restrictions similar to those passed in the Glass-Steagall Act in 1933. That law separated commercial banking and investment banking, so that the investment arm could no longer use a depositor’s money to purchase stocks, sometimes drawing money from a savings account, for example, without the depositor’s knowledge.