Later today, Treasury Secretary Timothy Geithner will announce new regulations for the financial services sector. The regulations are important in themselves but also because they represent the third nail in the coffin of Reaganomics. Whatever else you may think about President Barack Obama (and the Notre Dame controversy has certainly gotten many of you riled up about the President!) we can applaud him for his systematic pulling down of the architecture of unrestricted laissez-faire economics that has served as the nation’s most prominent false god lo these past 30 years.
To be clear, this is not exactly a partisan issue. The worst example of deregulation, the repeal of the Glass-Steagall Act, took place on Bill Clinton’s watch and the first major deregulation of an industry was begun by Jimmy Carter when he deregulated the airline industry. But, it was Ronald Reagan who really re-introduced a devotion to laissez-faire economics. He centered his economic policies on three policy objectives: de-regulation, lower taxes for the wealthy, and union busting.
Readers of this blog know that I am profoundly committed to raising marginal tax rates on the wealthy. I am too young to remember actually, but my imagination remembers fondly, that in the 1950s, under that crazy leftie Dwight Eisenhower, the highest tax rate was 92 percent. That is not a typo. Last week I made the argument for supporting the Employee Free Choice Act which will level the playing field for workers wishing to organize. Pope John Paul II called the right to organize "a fundamental human right" and the Church’s support for labor unions goes back more than one hundred years to Pope Leo XIII’s seminal encyclical "Rerum Novarum."
Deregulation of the financial sector does not strike most people as a moral issue but the events of the past year show why it is. Unlike the airline industry, the financial services industry is working with other people’s money. In this culture, which all too often reduces man to a kind of "homo economicus," it is easy to forget that this particular investment is actually a person’s life savings. Once we forget that, it is easy to turn Wall Street into a casino: chips never feel like money, do they?
The details of the Obama administration’s plans are not easy to read unless you are an economist and I am not. Uniform requirements for risk-taking sound like a good idea to me, but I am sure there is a way to make the regulations more onerous rather than they are protective. Still, the premise of the reforms is sound and deeply moral: We are human beings and are not powerless before the impersonal laws of the market. Franklin Delano Roosevelt said in his first Inaugural Address: "Yes, the money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of that restoration lies in the extent to which we apply social values more noble than mere monetary profit." Indeed and Amen.