All of you have probably heard about the special election in Massachusetts to cover Kennedy’s vacant seat in the Senate. It is quite literally all over the news and is being taken as a backlash against the infamous health care bill. The latest news is that Obama and other Democrat leaders are thinking about downsizing the bill:

Shorn by Massachusetts voters of their pivotal 60th Senate vote and much of their political momentum, the White House and congressional leaders are considering a more modest version of Obama's top legislative priority. It could focus on curbing insurance company practices like denying coverage to sick people and on helping low-earning people and small businesses afford coverage, officials said.

That is a little better, really, except that Obama chalks it up to less communication with his countrymen:

"If there's one thing that I regret this year is that we were so busy just getting stuff done and dealing with the immediate crises that were in front of us that I think we lost some of that sense of speaking directly to the American people," Obama told ABC News.

He hasn’t learned anything. All he is doing is giving in to the current “emotions” that he finally sees. In his favor, he has tried to smooth over some of the waves by asking senate leaders not to push through any changes before the new Massachusetts senator can arrive in Washington. At the same time that the Democrats have been forcing this health care overhaul of theirs, they have also shown their distaste for big banks. Obama is expected sometime today to outline some new restrictions he wants on them:

"The proposal will include size and complexity limits specifically on proprietary trading and the White House will work closely with the House and Senate to work this into legislation," a senior administration official said.
Proprietary trading refers to a firm making bets on financial markets with its own money, rather than executing a trade for a client.
The White House has blamed the practice for reckless gambling on the U.S. property market which resulted in massive losses that almost destroyed the financial system in 2008.
This forced taxpayers to provide a $700 billion bank bailout to prevent the most severe U.S. recession since the 1930s from getting even worse.

Interestingly, it seems that the bank bailout probably wasn’t necessary after all. Obama still blames the banks for making baskets of loans. That deserves a little explanation. When you put money into a bank, they lend it to other people who need money. You can watch the movie It’s a Wonderful Life (relevant clip) for a good understanding of how that works. Sometimes the banks sell the mortgage of that loan to other banks. What they are really doing is selling the interest that will be paid back. These loans that are sold are put into groups. The idea is that if you have enough loans, there is no chance that everyone will default on them at the same time. This formula was intended to remove almost all of the risk from the investors. The problem that we ran into was that the recession was big enough that quite a few of those baskets did fail. So many people were unable to pay for their mortgages that the banks began to lose money. When the banks lost money, then all the people who had lent them money (ie. put money in the bank) were in trouble. Again, It’s a Wonderful Life demonstrates this process pretty well. What does this have to do with anything? The health care bill that has been pushed is, in its essence, a basket of health insurance policies. There is no way that enough people could be sick or unemployed to kill the system, right? Wrong. The housing recession was not seen ahead of time either – except by the “quacks” (read: Libertarians). It’s just a bad idea. Obama seems to see that the investment strategy is not fail-proof when it comes to banks, but he can not see it when we talk about healthcare. If you happen to know Obama, could you please pass this on to him? Thanks. ^_^