The Surge We Needed ... by gimleteye

That's the headline of the lead editorial in the Miami Herald today, and this post picks up some comments yesterday about the selection of Ben Bernanke as Time Magazine's "Person of the Year 2009". The Herald concludes, "... if we have learned anything from the current crisis it's that self-regulation doesn't work." But the Herald is guilty-- along with its brethren in the mainstream press-- for ignoring the many ways in which the failure of self-regulation by industry was visible long before the collapse of the economy. The landscape of South Florida is littered with regulations that didn't work by design, promoted by the revolving door between regulators and the regulated. Take wetlands mitigation, or water quality laws: take the entire legacy of the Jeb Bush terms as governor of Florida in which the mantra became group-think of the worst order: that business does a better job protecting the public interest than regulations.

That was the G.O.P. way and it burned holes right through the state of Florida. But in case you think this is just a partisan tirade, I have plenty of anger for the Obama team: Larry Summers, Tim Geithner, and Ben Bernanke. On Day One, what this group should have done is demonstrated to taxpayers that it was going to forcefully put law enforcement and criminal investigations at the heart of the financial and economic crisis. That is where the first surge was needed.

If they had done that, at the same time that they committed trillions to bailing out failed banking and insurance companies and executives who kept billions for themselves-- much the way Congress investigated Wall Street as the Great Depression unwound-- Obama would not appear to be so vulnerable today to charges that nothing has changed on Wall Street.

Obama had a problem, though, that he might have anticipated and forcefully addressed from the first. This is not backseat driving or 20.20 hindsight: the worst legacy of the Bush years was visible from Day One: how white collar crime investigation and enforcement, especially in the area of complex trading of derivatives, didn't exist.

The Bush appointee, Christopher Cox, ran the SEC like a lazy white man's country club. And it wasn't just the SEC. I recall a "60 Minutes" episode showing the entire department to conduct safety analysis for imported toys was manned by one federal investigator in an office converted from a closet. Across the board, the Bush legacy of "shrinking the size of government so it could fit in a bathtub" was effective in one area and one area only: regulation.

That's why when Obama came to office, there was scarcely anyone at Treasury or the Department of Justice who could summon the resources or capacity, quickly, to investigate what happened on Wall Street and the proliferation of fraud that allowed, for instance, one banker in Florida-- R. Allen Stanford-- to take duffel loads of cash from Miami to his Caribbean retreat. Billions and billions.

The surge Obama needed to fund was a surge of law enforcement and talent and capacity to root out the systemic corruption on Wall Street that lead to this ongoing financial crisis. Where was the clamor building up to this moment, from the Miami Herald and its brethren in the mainstream media? Nada. Its executives were themselves caught up in the Wall Street game.

The president was persuaded, apparently, that it was more important to avert a Depression than throw cold water on a sputtering economy-- but he was mislead. Today, public opinion polls tell the results. A year later, there are no results, no strike forces, no fire under Congress to weed out the crooks and either put them in jail or define exactly how we will avoid finding ourselves in the same situation a year or two from now. That is the surge we needed.