Even acknowledging the truism that making laws is like making sausage, often leading any observer toward becoming a vegetarian, if not a vegan, some legislation stands out as especially unpleasant. With that in mind, what conclusions can we draw about the financial reregulation bill now making its way through Congress?

First, the bill does virtually nothing to confront the single greatest structural problem we face: the continued growth of too big to fail, or TBTF, institutions. Indeed, over the course of the crisis we have gone in the wrong direction, with the banking industry now more concentrated than it was several years ago. There is no reason to believe that this trend will change or that the federal guarantees of TBTF institutions will be withdrawn.

Second, the bill by and large reinvests regulators with the same discretion they had—and failed to use—before the crisis. The theory underlying the bill is simple: “Trust us—next time we will do better.” Indeed, in virtually every case, the very same people are still in the positions they had before the cataclysm. Isn’t it comforting to know that the systemic risk council—that critical group that is supposed to be akin to the canary in the mine, warning of impending danger—will be led by the same people (Timothy Geithner and Ben Bernanke) who failed or refused to see the omens of this crisis as it swept through the economy?

Third, those few ideas that promise structural reform and did make it into the bill—namely, the so-called Volcker Rule and changes in derivatives practices—are horrendously watered-down and compromised. And they derived their support from outside the White House, as the alignment between Geithner and Larry Summers vigorously opposed these ideas until the political pressures became unbearable.

The US economic bail-out programme has done little to ensure that financial crises do not occur in the future, a key watchdog report has said.

While conceding that “some aspects of the financial system are more stable”, it said that a number of the bail-out’s key goals “have simply not been met”.

Most notably, banks are still too big and lending has not increased.

The $700bn (£440bn) Troubled Asset Relief Program (Tarp) was approved by Congress at the end of 2008.

It has been widely credited with playing a vital role in turning round the fortunes of the US economy, which returned to growth during the second half of last year after a long and deep recession.

This conventional wisdom about Obama’s first year isn’t just premature—it’s sure to be flipped on its head by the anniversary of his inauguration on Jan. 20. If, as seems increasingly likely, Obama wins passage of a health care reform a bill by that date, he will deliver his first State of the Union address having accomplished more than any other postwar American president at a comparable point in his presidency. This isn’t an ideological point or one that depends on agreement with his policies. It’s a neutral assessment of his emerging record—how many big, transformational things Obama is likely to have made happen in his first 12 months in office.

Oct 29th 2009
From The Economist print edition
He has achieved more than his critics claim, but the meat is yet to come

Measured against the expectations of those who bought pictures of him riding a unicorn, Mr Obama’s presidency has been a failure. Measured by a more reasonable yardstick, however, it has seen solid successes. For a start, the financial system appears to have stabilised. Continuing where Mr Bush left off, Mr Obama intervened to prop up ailing banks and insurers, thereby probably averting catastrophe. The bail-out may cost him votes, but it was necessary. And though the economy is still in a terrible state, it could now be through the worst.

How else could future generations judge us if the U.S. and the world stay anywhere near our current emissions path, warm most of the inland United States 10 to 15°F by century’s end, with sea levels 3 to 7 feet higher, rising perhaps an inch or two a year, with the Southwest from Kansas to California a permanent dust bowl, and much of the ocean a hot, acidic dead zone — impacts that could be irreversible for 1,000 years if we don’t reverse emissions soon and sharply. This will require an unbroken — and indeed escalating — response by our political leadership throughout this century. The same is true for the very important, but still secondary, issue of avoiding the worst impacts of peak oil.

It also requires a President to be able to use the mandate for reform soon after the election.

This situation reminds me of how the Clinton administration began its first terms with the intent of introducing health care reform. Hillary Clinton was to preside over that initiative. However, the “Whitewater scandal” and an unco-operative Congress quenched that reform.

I agree that the economic crisis will weaken the Obama administration’s ability to undertake reforms in other areas as concerns over jobs and economic stability are paramount.