The Obama Mantra: "Things Are Going To Get Worse"

The influence of Rockefeller operative Paul Volcker on President-elect Barack Obama is coming through loud and clear.

Twice during the opening moments of his interview Sunday on NBC's "Meet the Press." Barack Obama said the economic situation "is going to get worse before it gets better."

"It's going to be a tough period," Volcker said in a speech at the Urban Land Institute in late October. And Obama just named him to head his an economc advisory team.

What will it mean if Volcker has Obama's ear?

It likely will mean that Ben Bernanke will not be renamed Fed chairman when his term runs out in 2010, if he lasts that long. Volcker has been a long-time behind the scenes critic of Bernanke.

It will also mean more regulation of the financial industry, including hedge funds. Look for more power to shift to money center banks. Any changes will benefit Citi, Goldman Sachs, JPMorgan Chase and the like. Volcker has this absurd notion that the mortgage crisis was caused because there wasn't enough regulation. Here's the LA Times on his views:

Volcker feels that tremendous changes in the financial system have eclipsed government regulators, allowing excesses to go unchecked and subjecting the economy to ever greater shocks. Over time, the U.S. has moved from a system of highly regulated banks that funded the economy to a system of highly engineered financial markets that operated outside the scope of regulators.

For the true facts of the Housing Crisis be sure to read Larry White's column, which I first linked to below.

Volcker is correct in that financial engineering also played a role in the crisis, but as I argue here, it is absurd to think that government has the all knowing crystal ball that will direct the economy in the right direction.

Volcker and Obama, though, are going to use the mantra, "Things are going to get worse," to add more regulation and, thus, in a sense they are correct. Things are going to get worse by the new burdens that more financial regulation will create.

It will be crony capitalism at its worst, championed as though it was designed by wise men of high integrity. Volcker's integrity is probably self-delusional, Obama is just slick. What a team.