Harbus

Issue date: 2/2/09 Section: News

Therefore, Obama's most important task is in establishing the rule of law and property rights, especially as they apply to financial markets. A unified watchdog of the financial markets must be put in place to oversee the flow of capital in our financial markets. The current system in place is inadequate: how else could the Securities and Exchange Commission have missed the $50 billion fraud enacted over decades by Bernie Madoff? How else could the SEC have allowed the "churning process" prevalent in the mortgage brokerage business get so far out of hand that "No Income, No Job, No Asset" loans became commonplace by 2006 and sowed the seeds of an industry that would catapult the economy into a recession? The problem wasn't incompetence on the part of the SEC members. The problem was a structural inability to identify fraud and factors that would undermine faith in our capital markets because of a disjointed and small board of overseers of the US economy.

Fortunately, Obama enjoys political goodwill in his first 100 days and has an ability to enact meaningful legislation that is economically sound but potentially politically unpopular. Obama should aim to restore confidence in financial markets to get the real economy back on track and recognize the dangers of relying on government-based stimulus as a magic bullet.

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