Will Obama Clean Up Wall Street?

William Cohan has written an interesting article over at Bloomberg.

Despite the fact that Goldman Sachs Group Inc. (GS), JPMorgan Chase & Co. (JPM) and Citigroup Inc. (C) were among Obama’s top 10 financial backers in 2008, we were hopeful we would see a change in the system whereby bankers, traders and executives were rewarded every day to take huge, asynchronous risks with other people’s money. (Sweep Wall Street Clean)

The key to “cleaning up Wall Street” is to make the risk-reward equation symmetrical

Recent events have shown that Wall Street sees no downside to reckless gambling. They rake it in when they win, and We The People pay when they shoot craps. That needs to change. Making the top management of all companies personally liable for losses would be a great first step. You want to see the community police itself? The specter of having to hock the Ferrari and sell the homes in The Hamptons and in Aspen tends to focus one’s mind, as does the prospect of going to jail for financial malfeasance.

We used to hold the bankers responsible in America. It’s why they were jumping out of windows during the crash of 1929.  

That is my recommendation. Here are Cohan’s:

Erskine Bowles for Treasury Chief

For Treasury secretary, the best choice is Erskine Bowles, who has distinguished himself as co-chairman of the National Commission on Fiscal Responsibility and Reform. Although it is true that Bowles was chief of staff to President Bill Clinton, and thus rubbed elbows with Rubin and Altman, he isn’t in that Rubin orbit. He understands Wall Street -- he founded a small eponymous investment bank and a private-equity firm, Carousel Capital, and was a partner at private-equity giant Forstmann Little & Co. -- and did a fine job serving as president of the sprawling University of North Carolina system.

More important, he has spent the past year shaping his commission’s report -- despite Obama’s having ignored it -- into legislation that Congress can take up immediately to try to resolve the budget deficit and the looming fiscal cliff, the more than $600 billion in tax increases and spending cuts scheduled for next year. He has a proven record of bipartisanship, working well with Alan Simpson and the other Republicans on the commission. Appointing Bowles to Treasury would show that Obama is serious about getting the country’s fiscal house in order and finding a more productive relationship with Wall Street. (Sweep Wall Street Clean)

Eliot Spitzer for SEC Chairman

To address the vacuum of accountability on Wall Street, Obama should appoint former New York Governor Eliot Spitzer as the new chairman of the SEC. I’m not joking.. Having prosecuted Wall Street misdeeds as New York attorney general a decade ago, he knows where the bodies are buried and won’t be afraid to dig them up. As a cable-television host, he has proved to be the news media’s most aggressive and informed critic of Wall Street. (Sweep Wall Street Clean)

I agree with him. If Obama is serious about cleaning up Wall Street, he’ll appoint these two men.