The 2008 global banking crisis and its catastrophic wider economic costs (which we are still enduring) called for a radical legislative and regulatory response. Alas, that is not what was delivered by the financial reform act passed by the United States Senate this week.
There are some sensible elements in the new legislation. The creation of a new agency to protect ordinary borrowers from predatory lending should help to prevent a repeat of the sub-prime debacle which saw dirt-poor Americans force-fed giant loans which they could never feasibly pay off.
But what is lacking will define this act. There is no cap on the size of the banks. There is no mandated split between retail and investment banking. There is little more than lip service paid to the plan of the former Federal Reserve chairman, Paul Volcker, to force banks to spin off their internal hedge funds. And banks will continue their derivatives trading operations pretty much as before. The fact that the share price of Wall Street banks rose sharply when the contours of this legislation came into focus tells us all we need to know about the radicalism of this reform. The result is that moral hazard remains. Half a dozen "too big to fail" banks dominate the landscape. In this context, President Obama's claim that there will be no further bail-outs of Wall Street is simply not credible. The "living wills" required of banks and the resolution authority will not do the job of imposing market discipline. And the new capital requirements will do relatively little to promote stability when all financial institutions have a clear incentive to grow larger and take ever bigger risks.
One hope lies is the section of the act that requires regulators to break up institutions that pose a threat to wider economic stability. Yet this relies on regulators being pro-active. We simply cannot say whether officials will have the courage to use these powers when the next credit boom shows signs of getting out of hand. Such are the incentives and structure of the US financial system that another disaster seems likely to be only a matter of time. To that extent, the act cannot be considered a success.
And yet success is a relative measure. All the indications are that a financial reform act under a Republican administration or a Republican-dominated Congress would have been even kinder to the vested interests of Wall Street. Whatever the shortcomings of the act, its passing is a significant political victory for the White House. And it underscores the fact that Mr Obama has been remarkably successful in terms of implementing his legislative programme. First there was the stimulus act, which according to the non-partisan Congressional Budget Office created more than one million jobs. Then there was the healthcare act, which although too watered down for many of Mr Obama's supporters, was nevertheless a landmark achievement. And now the President has delivered financial reform.
The popularity of Mr Obama has, of course, taken terrible blows in the process. But the Republicans' cynical opposition and ideological extremism have not succeeded in derailing this presidency. Mr Obama now has a reputation for getting things done. And the Democrats now have a powerful platform on which to stand in November's mid-term elections. Whatever there might be for progressives to lament in President Obama's legislative record, that alone is something to cheer.