Friday, June 04, 2010

First, do no harm...

It's no secret that Obama is an incremental reformer, given to large vision and small steps, inclined by temperament and a personal theory developed over the course of his working life to move the battleship by degrees.  Under pressure in April 2009 to nationalize some of the nation's largest banks, he voiced as a guiding principle of federal intervention: "First, do no harm." Of the sweeping health care reform law, cast by Republicans as a socialist reengineering, Ezra Klein noted, "it is comprehensive reform with an incremental soul" -- leaving employer-based health insurance largely untouched, building the exchanges on private for-profit insurance, implementing cost control largely by incentive and demonstration project.

Today the Times profiles one of the chief architects of the financial reform legislation now on the brink of passage, Obama appointee to the Fed's board of governors Daniel K. Tarullo.  Tarullo, who far more than Obama speaks in what the Times calls "characteristically professorial tones," helped forge the approach to the megabanks that frustrates so many critics: rein them in (a bit) rather than break them up (for now).  His explanation of that approach strikes me as a kind of distillation of the Obama approach to reform, for good and/or ill:
“I am intellectually open to the proposition that the only way to achieve the optimal balance between financial stability and the efficient intermediation of capital flows might be to break up some of the largest institutions,” Mr. Tarullo said. “But given the uncertainties, I would probably be inclined to begin with other measures, such as more stringent capital and liquidity requirements for the largest, most complex firms.”

Does that mean "save radical reform for the next crisis" or tighten the reins (and wield the carving knife) by degrees?

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