Journalist Fareed Zakaria is the host of a one hour interview show on CNN which comes on at 10am Sundays, with a repeat showing the same day at 1pm.  Called GPS (global public square) it may be the most informative news hour on American television today.

Zakaria was born in Mumbai, India in 1964 but has become a naturalized US citizen.  He is a graduate of Princeton and received a Phd in Political Science from Harvard.  He is Muslim.

As an interviewer, Zakaria is fearless.  And he’s hard to pin down as to his ideology.  Having watched him the past several months, Beezer believes Zakaria is more liberal than conservative, but he has strong conservative tendencies.

As an example, Zakaria pointed out that when both former Treasury Secretary Hank Paulson and former Federal Reserve Chair Alan Greenspan were asked whether the Bush tax cuts of 2003 should be allowed to expire, they responded that raising taxes would not be a good idea right now considering the recession.

How, Zakaria asked, will the government stop running huge deficits?  Particularly when one realizes those tax cuts are the primary culprit in creating the “dark hole” of long term deficits created under Bush.  If Paulson and Greenspan, neither of whom are now employed by government or running for political office, cannot bring themselves to restore the tax rates under Clinton, how can can politicians ever gain the courage to do so, Zakaria asks?   Particularly if the only alternative is to slash middle class entitlements–an action considered politically impossible.

Today’s show featured former Federal Reserve Chair Paul Volcker.  Under questioning by Zakaria, Volcker said that his greatest concern for the future of the United States is the breakdown in the ability to govern.  He said it was the worst he’s seen in more than 40 years of government involvement.

As an example of something he’s never witnessed before, Volcker pointed out that the Senate has held up critical government appointments simply for political purposes.  These are non controversial appointments, Volcker noted, which have been thoroughly vetted.

Most recently GOP Senator Richard Shelby of Alabama has held up 70 government appointments to the Obama administration because he wants some $40 billion in defense contracts channeled to Alabama based facilities.  Volcker is too polite to be specific on a nationally televised show, but Shelby’s actions are what he’s referring to. 

And this after Senate Democrat Ben Nelson decided to vote for health reform only after gaining a concession where Nebraska wouldn’t have to pay the 2.2% share of Medicaid costs that other states would pay.  And Louisiana Senator Mary Landrieu needed $100 million in low income assistance for her state before she would support national health care reform.

Given the public outrage over these shenanigans it should not be surprising that health care reform foundered and financial regulatory reform (favored by Volcker) seems to be foundering as well.

Unlike the old days when back room wheeling and dealing were the lifeblood of compromise, today’s internet doesn’t easily allow for this type of “compromise.”  Those days are gone forever.  Washington needs to put the national public interest first over pork barrel trading for votes, but this kind of principled governance will have to be forced on Congress in particular.

Right now it appears the Democrats are bearing the brunt of the public’s anger.  But will the GOP tactic of total intransigence be successful in the end?  Sooner or later, the GOP will have to respond in detail what they want.  If they don’t come up with believable proposals, the internet will trash them.  And the public at large will respond in kind.

The days of a sleepy media are over.  The back room deals become public thanks to a militant internet.  Legislation as sausage making is probably over for good.  If the old dogs in Congress can’t learn some new tricks, the next Congressional elections are likely to cut very hard on incumbents of both parties.

“There was a moment a year ago when Obama, with his enormous political capital, might have been able to achieve this ambitious agenda, and, building on these successes, go on to deal with America’s other problems. But anger about the bailout, confusion between the bailout (which didn’t restart lending, as it was supposed to do) and the stimulus (which did what it was supposed to do, but was too small), and disappointment about mounting job losses, has vastly circumscribed his room for maneuver.”

So writes Nobel prize winning economist Joseph Stiglitz in an article that appeared recently in the website “Project Syndicate.”  Stiglitz served as chairman of the Council of Economic Advisors from 1995 to 1997 and his most recent book, “Freefall:  America, Free Markets, and the Sinking of the World’s Economy” is a best seller.

Obama recently called upon another economist, former Fed Chair Paul Volcker, to help shore up his support for financial regulatory reform.  It would probably be a good idea if he pulled out Stiglitz too, and used this well respected economist to both instruct Congress (and the public in turn) about how best to resurrect our economy and the nation’s well being along with it.

The GOP is a captured, bought and paid for, party.  It’s masters are the very oligopolic industries that most need reform and that means Obama will never get any political support from that group no matter what he does.  But he need not go it entirely alone.  He needs to continue bringing into the spotlight respected, non government leadership like that represented by Volcker and Stiglitz.  

Both these men are well spoken.  They can address the issues correctly and in a way that the public at large can understand.  They can frame the issues in ways that will unmask the GOP for who they truly are:  Representatives for large, trans-national corporations. 

Again, thanks to that fount of economic thought, Economist’s View for highlighting Stiglitz’s article.

Robert Reich, economics professor and former Secy. of Labor under President Clinton, has written a blog post complaining about the lack of true financial reform when it comes to those too big to fail (TBTF) Wall Street banks.

For Reich the basic reform needed is a restoration of some form of the Glass-Stegall act, a Depression inspired law that separated investment banking from traditional commercial banking.   Glass-Steagall was undone in 1999, Clinton’s last year in office.

Glass-Steagall had the effect of protecting taxpayers from being used as insurors for investment banking losses.  It’s important to understand that investment banking is quite different than commercial banking.   Investment bankers are in the trading businesses (stock, bond, currency, food and oil are main trading arenas) and in raising capital for existing companies and new ventures.   Their bread and butter is much riskier than commercial banking.  And they use leverage, borrowing to finance their operations.  When times are good, investment banks can be real money machines for their shareholders and partners.  But when risks go bad, they can also get into financial trouble fast.

It was the investment banking world where derivatives thrived.  Investment banks created credit default obligations and credit default swaps, derivatives that traded in the hard-to-regulate over the counter market which froze up when real estate values they were based upon plummeted.  It was here that a local real estate bubble crash rippled out into a world wide financial debacle.

While Glass-Steagall was in effect, such bad bets would not have created a “call” on taxpayers to bail out the investment banks.  Commercial banks hurt by a real estate collapse would be hurt as well even with Glass-Steagall, but in their case the Federal Deposit Insurance Corporation (FDIC) would have taken over the worst and sold them off thus protecting depositors and limiting losses to shareholders and bondholders of the insolvent commercial banks.  This process has worked well even during this crisis where a large number of commercial banks have been closed and sold by the FDIC.

Reich is not alone here.  None other than former Fed Chairs Alan Greenspan and Paul Volcker have also called for a reinstatement of laws separating investment banking from commercial banking. 

But such reforms means firms like Bear Stearns and Merrill Lynch would have to be sold by JP Morgan Chase and Bank of America respectively.  And Goldman Sachs, an investment bank declared a commercial bank one Sunday night during the crisis, would have to revert to being an investment bank again and lose its access to Federal Reserve funds as well as its access to FDIC insurance.

Needless to say, Wall Street doesn’t want anything to do with this idea.  Right now the TBTF holding companies have the explicit backing of taxpayer funds to bail them out when the investment bank functions go sour.  That’s what the bailout told them and the rest of the world.  This gives TBTF firms several advantages, among which is the ability to borrow money at lower rates than their competitors.

As things are now, there’s a real fear that as it was before may be true right now: TBTF holding companies dominated by investment bankers are running risks once again and putting the taxpayer on the hook for losses once again. 

Wall Street, particularly Goldman Sachs (“government sachs” to its detractors), in true Oligopoly form has its former employees sprinkled liberally throughout this administration.  And its lobbyists are legion in Congress.

Sadly, their power over this administration and Congress is obvious.  The fundamental reform of once again separating investment bank and commercial bank functions isn’t even being seriously discussed in Washington DC.   

Reich concludes in his article:

“The Street obviously detests the notion that its behemoths should be broken up. That’s why the idea isn’t even on the table. But it should be. No important public interest is served by allowing giant banks to grow too big to fail. Winding them down after they get into trouble is no answer. By then the damage will already have been done.

Whether it’s using the antitrust laws or enacting a new Glass-Steagall Act, the Wall Street giants should be split up — and soon.”