Obama's Second Primetime Press Conference

Overall, a pretty strong performance as far as clarity and demeanor.

However, the President's first answer, to a question from Jennifer Loven of the A.P. regarding Secretary Geithner's request for more control over financial institutions, contained a gaping hole in logic that strikes me as both out of character and extremely dangerous. Consider the following statement by Obama:

"Now, understand that AIG is not a bank. It's an insurance company. If it were a bank and it had effectively collapsed, then the FDIC could step in...

I think a lot of people understandably say, "Well, if we're putting all this money in there, and if it's such a big systemic risk to allow AIG to liquidate, why is it that we can't restructure some of these contracts? Why can't we do some of the things that need to be done in a more orderly way?"

And the reason is, is because we have not obtained this authority. We should have obtained it much earlier so that any institution that poses a systemic risk that could bring down the financial system we can handle and we can do it in an orderly fashion that quarantines it from other institutions."

The response is what we have come to expect from Obama: professorial, intended to teach, easy to follow. But, contrary to his usually high standard of logic, this response makes very little sense. First of all, as Obama himself explained on Leno last week, AIG is not simply an insurance company; it is a financial behemoth of nearly unfathomable size and scope. And secondly, his proposal for solving the problem of a company that "poses a systemic risk that could bring down the financial system" treats said company as a given. Obama is offering band-aids, antibiotics, and preventative care as solutions for combating a fatal epidemic; I, personally, would prefer eradication.

What he is basically saying is the following: "We need to be able to regulate too-big-to-fail companies."

What he should be saying is: "We can no longer tolerate the existence of too-big-to-fail companies."

Matt Taibbi drove the point home on Rachel Maddow's show just hours after the above comments were made. He explained in plain terms just how and when insurance companies, investment banks, and commercial banks were allowed to join into unified mega-conglomerates (and choose their own regulators). He outlined what was, in essence, the moment in time when Congress decided it would allow companies to become too-big-to-fail: the passage, in 1999, of the Gramm-Leach-Bliley Act, which repealed the Glass-Steagall Act of 1933.

This Act must be overturned.

I know that Obama's administration is filled with financial insiders whose histories and abilities and affiliations are being questioned. I want very much to give him the benefit of the doubt on said insiders. But it is truly baffling to me how a man of his intellect, no matter what received wisdom is being whispered in his ear by Geithner and Summers, can fail to see the crucial point here: no one company should ever be too vital to fail. It is not enough to try to control these companies. They must, as Taibbi argues (and he cites precedents, too), be disbanded and forbidden from ever again existing.

To allow them to go on is a recipe for further disaster: speculation will always occur; greed will always drive Wall Street; to imagine that the lessons learned today will be remembered tomorrow is foolhardy. We should never knowingly put ourselves in a position that leaves us vulnerable to being held hostage as a nation: not by terrorists, not by hostile foreign governments, and certainly not by our very own companies.