One year after Obama's election, Rob Johnson, Director of Financial Reform at the Roosevelt Institute, looks at his promise, his tragic flaw, and the need for the President to stand up to powerful industry groups if he is to stem the tide of public cynicism.

Barack Obama was elected to the White House just after the turmoil of TARP and the climax of the crisis of financial markets. People throughout the country had deep suspicions of the government, and justifiably so. After all, the Bush years were a feeding frenzy for cronyism and corporate welfare. The TARP and the AIG scandals emitted a stench that fortified the convictions of those who say government is there to fleece people on behalf of powerful interests. Our president elect, who had so artfully inspired us to suspend our cynicism and believe that under his leadership we could make things better, faced an uphill challenge.

On Inauguration Day, taming the financial crisis was still Job #1. Under the pressure of financial fears, Obama had turned to a team of veterans from the Clinton economics team, most notably Larry Summers and Tim Geithner. They were shovel-ready policy makers, having manned the pumps at the Treasury in the 1990s. Unfortunately, their appointments aroused suspicions that the practice of shoveling money to Wall Street cronies would continue unabated.

Stories of Treasury Secretary Geithner dining with Pete Peterson in New York, or consulting with Robert Rubin in the halls of the Treasury were reassuring signals to the inside players of Too Big to Fail finance. Yet these were tone deaf transmissions that could not be narrowcast only to those financial insiders. An enraged public was paying attention like never before. Business-as-usual was corrosive to the image of the newly elected President -- and the team did not get it. That image, crafted by candidate Obama, included anti lobbying statements and the Cooper Union speech on financial regulation. It was an image that had been heartily embraced by a body politic that was angered by the financial shenanigans of insiders who had used the people's money to limit their own losses and trashed the economy. Obama the candidate conveyed that he understood and would solve the problem. His pragmatism was part of his magnetism.

As AIG bonuses were announced, and defended by the Obama economic team on television, people talked along two tracks that could barely cohere. The melody of the music: Obama is a good guy. Give him a chance. Give him time. Disbelief that his appointees were tone deaf to the concerns outside Wall Street and carrying on financial sector pandering was the discordant harmony.

The President is a wonderful communicator. A charismatic on the scale of JFK, and his poll numbers have ridden above the Congress and exhibit an extraordinary resilience. Yet, it is often observed by the wise old sage types, that one's brilliance stands adjacent to, and in partnership with, one's tragic flaw.

Rather than take on Wall Street with tough action that would demonstrate once and for all that the era of unregulated greed fed by a failed ideology was over, Obama tried to convince the American people that strength was demonstrated in resisting the urge to lash out at the captains of finance rather than in bringing them to heel. One wonders if he really thought this was true. Unfortunately none of us could infer if this was pandering to financial sector power or displaying a stroke of pragmatic genius. But it had a terrible side effect. It did not abruptly and clearly differentiate him from the Bush regime that preceded him and the TARP tainted crony capitalism that was the closing act of Bush's tenure in office. Together with tepid efforts to affix blame onto the Bush/Cheney years for the large fiscal deficits he inherited, Obama, through his choice of appointees and early actions that were too Wall Street friendly, became responsible for the dysfunctional economy rather than the knight in shining armor that would solve the problems and lead us back to prosperity. Many people today, who see the Wall Street rebound and their bonus pool explosion alongside rising unemployment and foreclosures, have lost hope because they see no end in sight for the politics of Wall Street protectionism.

One year after his election, and 10 months after taking office, people are feeling acute stress in a faltering economy. People need actions and will not depend upon mere words, however artfully delivered. Charismatic speeches are losing traction like a boy who cries wolf. People still appear to feel that the President is a good-hearted man in a tough job. But they can rightly ask if he has the nerve to get the job done.

A person with great persuasive power can use it in two ways in politics. It can be used to cultivate the energy of the general interest, to enliven participation to take on the special interests, or it can be used to try and mollify the people and to facilitate the agenda of elites behind the disguise. The former use of persuasive power cannot be successful if it is suspected of being the latter. The public can return to cynicism.

Our President must now resist the temptation to rely on his historic strength, oratory prowess. He and his advisors would do well to decide which subset of the powerful industry groups they will abandon as they navigate the remainder of Obama's term. This is not something they have done well in the health care debate where all the industry groups were taken care of, while the population's concerns were largely left behind the door.

To turn things around, after the elections in New Jersey and Virginia last night sent a shot across his bow, Obama must choose those enemies in the money politics world in order to give himself space to create benefits for the people who elected him. The people, particularly the young people, who are the ones he inspired to believe that under his leadership we could transform this nation into a hopeful nation built on personal responsibility and fair play, are waiting for actions, not words. As a nation we are stagnant now and the pain is increasing. The imbalances in our society are there for all to see and I sense that the pressure for action will not abate in the months ahead. If our President tries to talk his way out of this challenge without taking the risk of meaningful economic and financial reform, he will likely be viewed as a leader who was, in Tavis Smiley's words, Tragically Charismatic.

*This piece was produced in partnership with Huffington Post.

Rob Johnson is a Senior Fellow and the Director of the Project on Global Finance at the Roosevelt Institute.

Rob Johnson, Director of the Economic Policy Initiative of the Roosevelt Institute, is on the ground in Chicago, where thousands of Americans have gathered to protest bank abuse. Johnson reflects on the reform needed, and ask the provocative question: Should women regulate finance?

"There were times when I thought I couldn't last for long

But now I think I'm able to carry on

It's been a long, been a long time coming

But I know a change is gonna come, oh yes it will"

~~Sam Cooke: A Change is Gonna Come

Opening night at the Showdown in Chicago. Senator Durbin from Illinois gave a rousing speech about unfairness, bailouts, credit care usury and bonus audacity. He emphasized the need to be respectful but to unyielding in our demands for balanced reform. He spoke of how each marcher is there and represents the pain and hopes of individuals who were abused by foreclosure, subprime treachery and more. The only surprising element was the muted applause in Chicago for the President of the United States. Only on the third time that Durbin referenced the name Obama to arouse the crowd did he get the applause he was looking for.

Sheila Bair, FDIC chairperson, will address the crowd tomorrow. That is great to see. After watching the great episode on PBS Frontlline entitled "The Warning" about OTC derivatives, I am beginning to wonder if the essential reform we should be seeking is to have only women regulate finance. Imagine if Janet Yellin had run the Fed, Elizabeth Warren ran the CFPA, Sheila Bair stayed in place at the FDIC and Brookley Born had stayed to run the CFTC. (Though Gary Gensler is doing great work at the CFTC now) They are all highly competent and god knows we would be better off. Every one of these people is first rate competent and does not seem to be missing the capacity of judgement that so many of the men have lacked in the last 20 years.

The question most asked here is "how long can this go on? Bailouts for the ones who created the mess, bankers acting like they earned it, foreclosures and bankruptcies and unemployment rising, and the Congressional Committees pretending to reform the financial regulatory system while they load up on money from the financial lobbyists.

My answer is that no one knows how long. We know that it will change. We will not see a nation that lives on 30 percent credit card rates. We will not see Wall Street wages forever at a 40 percent premium to wages throughout the economy adjusted for skill and experience. We will not pretend that only financial repackagers work hard and are deserving.

The question is when and how, not if, it will change. What hangs in the balance is how much blood will be spilt, disruption needs to occur, homes will be lost, jobs will be lost and municipal functions will be closed down before our political system becomes responsive. We are seeing an ugly chapter in our country, one that Herman Melville in his poem Clarel foresaw as a dark age of democracy. As one of our great theologians once exclaimed,

But today, because we have so cruelly separated freedom from virtue, because we define freedom in a morally inferior way, our country is stalled in what Herman Melville call the "Dark Ages of Democracy," a time when as he predicted, the New Jerusalem would turn into Babylon, and Americans would feel "the arrest of hope's advance." (William Sloane Coffin)

I am grateful that the Showdown in Chicago is happening. What I wish is that professional financiers and economists would join Dean Baker, Bob Kuttner and myself here. This is not left and right, this is right and wrong. Financiers and economists can all see that something is terribly wrong with the financial system. We have embarked on an era of Wall Street Protectionism. Government cronyism conferring gifts upon the Too Big to Fail. While they are not in Chicago the voices of Paul Volcker, George Soros, Mervyn King, and even Alan Greenspan are speaking out. I am grateful for their efforts and courage. Others with financial experience and expertise can see that the market system is being abused. It is time to give up on rational apathy, as Mancur Olson called it in Logic of Collective Action and contribute to the solution.

A series of demands need to be formulated as the pressure rises.

My first cut would look like this:

Bailouts and TBTF

You get bailed out and the public dilutes your equity and top management compensation evaporates. Letters of resignation are given to the authorities. No negotiated terms. Mandatory equity dilution. If you get rescued the public owns some upside. No crony deals between Fed or Treasury officials and management. Anything less is taxpayer abuse.

Foreclosure Modification

Recognize reality. Principal reductions. Burden sharing. 20 percent is less than the costs of foreclosure.

Usury and Credit.

As the Industrial Areas Foundation says, 10 percent is enough.

Derivatives Reform

Simple transparent and exchange traded. Regulated capital levels on exchanges.

The efforts that will be required to overcome this Babylon might as well get started here and now. It is my hope that there will be showdowns in Cleveland, Detroit, Miami, Denver, Oakland and more. Things will change. Finance has seen its peak. The question is when and how the change will occur.

Rob Johnson is a Senior Fellow and the Director of the Project on Global Finance at the Roosevelt Institute.