In his New York Times column today, Nobel Prize-winning economist Paul Krugman criticized Obama for going easy on the bankers. Krugman’s complaints are part of a broader frustration among progressives that Obama is too close to Wall Street and big banks. But this particular column had an unusual booster: Obama’s 2008 presidential opponent John McCain.
In fact, it shouldn’t be that surprising. Toward the end of the 2008 campaign, McCain attacked the close relationship between the government and Wall Street banks, calling for an independent commission to investigate the “casino on Wall Street of greedy, corporate excess” and the “old-boy network and Washington corruption” that prevented the government from effectively regulating the banks. Obama opted not to appoint an independent commission, preferring to focus on a way to quickly stimulate the economy.
Krugman’s most recent column attacked Obama’s argument that it was necessary to go easy on the banks in order to save the economy. Among other things, Obama has pushed states’ attorneys general not to investigate evidence of foreclosure fraud, but instead to settle with big banks for a couple billion dollars and a promise they’ll stop. Obama seems to be concerned that a thorough investigation of major mortgage lenders’ unethical foreclosure policies—Bank of America and others allegedly evict people from homes without bothering to check whether they’ve actually defaulted on their mortgages!—will upset the banks and make them less likely to give loans to would-be homeowners. But, Krugman points out, ignoring the problem will just lead to more foreclosures, which will depress housing prices—in addition to ruining countless lives.
It may not be a surprise that McCain—who loves to (occasionally) beat the drum of economic populism—agrees with Krugman that the government isn’t hard enough on the banks. But it should be a wake-up call for Obama, who now faces populist anger from both liberals and conservatives. Most of Obama’s economic policies may be much smarter and more appealing than Republican ridiculousness like extending the Bush tax cuts for the wealthy and privatizing Medicare, but Americans on both the Left and Right may not be happy that he’s refused to take a hard line against the banks that started the financial crisis in the first place.