Transcripts

Commentary-President Obama is Right & Wrong About the Economy

SUSIE GHARIB: The president, the TARP and a banking conundrum -- all that and more in tonight's commentary. Here's Chrystia Freeland, U.S. managing editor of "The Financial Times."

CHRYSTIA FREELAND, US MANAGING EDITOR, FINANCIAL TIMES: In a big speech on the economy last week, President Barack Obama assured Americans that he understood their moral objections to the bank bailout and then proceeded to explain why in practice recapitalizing Wall Street was essential to Main Street's economic recovery. Unless the bankers get their billions, you won't be able to get that mortgage or home equity loan. Ultimately, the president is right, of course. But in the short-term, he's also wrong - or at least guilty of oversimplifying a complex financial dynamic which is probably his knottiest political challenge. The tricky truth is that there is a contradiction between what's necessary to shore up Americas banks and what's necessary to shore up Americas households. From the moment Congress approved the $700 billion TARP last fall, lawmakers began demanding that bankers hand over the loot to ordinary people. But government regulators have been insisting on the opposite - requiring banks to lower leverage and increase their capital cushions. That is, after all, the whole point of the looming stress tests. Simultaneously satisfying the populist demands of Nancy Pelosi and the prudential ones of Ben Bernanke will be a high-wire act even for the financial wizards on Wall Streets and for the rhetorical one in the White House. The president used the biblical metaphor of the house upon the rock to describe his vision for the American economy. But to build it, he will need to reconcile the complexity of 21st century finance with the sound bite simplicity of 21st century cyber-democracy. I'm Chrystia Freeland.