McCain is no leader on financial reform

John McCain has announced his intention to, if elected, order Treasury to fully insure deposits at our nations banks. His announcement demonstrates his inability to lead this country out if its current banking crisis.

First, he has shown a lack of understanding of the regulatory structure of the US banking system. Treasury is not the agency that insures deposits. The FDIC is. The FDIC is an independent agency, not a division of Treasury (unlike, say, the OCC), and not dependent on taxpayer funding. By choosing the wrong agency to insure deposits, JM has demonstrated his unfitness to manage this crisis.

Second, his proposal is not novel. It is, in fact, already being implemented. Earlier today, the FDIC, in conjuction with Treasury and the Federal Reserve, announced the Temproary Liquidity Guarantee Program. Under the plan, certain newly issued senior unsecured debt issued on or before June 30, 2009, would be fully protected in the event the issuing institution subsequently fails. In addition, any participating depository institution will be able to provide full deposit insurance coverage for non-interest bearing deposit transaction accounts, regardless of dollar amount. This new, temporary guarantee—which expires at the end of 2009—will help stabilize these accounts.

What is important about this? Well, it shows that JM has got no legitimate claim to leadership on this issue. Fully insuring deposits is not novel--it is a mere echo of what the European Banks announced over the last two weeks. That's not leadership. (In fact, all it does is stop the bleeding, preventing depositors from moving their money to the european banks. It is a tough sell to claim leadership when you are merely the last player to enter a race to the bottom.) Next, it shows that, far from leading the US out of crisis, he's not even a participant. In announcing a plan that's already being implemented, he shows us that he has no idea what the regulators are currently doing. He's neither an innovator, or a leader. In fact, the crisis and the government's response to it are moving right along under his radar. That's not leadership. It's ignorance.
http://www.fdic.gov/news/news/press/2008/pr08100.html