The Hedgehog and the Fox

British political philosopher Isaiah Berlin immortalized the distinction in politics and literature between the hedgehog and the fox. The hedgehog knows one thing, and is bold, direct, and uncompromising. The fox knows many things, and is crafty, subtle, and nuanced.

Joe Nocera and others have criticized President Obama for timidity and even confusion in the patchwork program for financial regulatory reform delivered yesterday to the nation and to Congress. Nocera refers, by contrast, to Roosevelt's construction of an entirely new financial regulatory regime in the 1930s, one that functioned well for more than six decades. Roosevelt succeeded, Nocera implies, because he was a hedgehog with a big idea, a hedgehog not afraid to kick some big banker ass.

However, another interpretation - which fits with Obama's judicious, careful temperament and his WWLD (What would Lincoln do?) instinct - is that Obama is displaying foxiness. Obama was not elected to be an ass-kicker. He is not trying to accomplish one thing - mitigation of all financial risk - with a sweeping reform plan that imposes a single discipline on the financial system. Instead, his plan seeks to accomplish many smaller things, each with a more targeted risk-mitigation goal: the reduction of systemic risk, the management of rating agency interest conflicts, protections for consumers of financial products, and regulation of financially engineered securities.

Those who criticize the plan for its pragmatism and narrowness of aspiration are correct in their characterizations, but wrong to be critical. Obama will push forward this plan at two levels. He will wrap the plan in uplifting rhetoric that challenges our institutions to act on the basis of values, not naked greed. At the same time, Obama believes we will be best served by a proposal that can fly politically and that can be effective in many small ways rather than one large way. By parcelizing regulatory risk, Obama has adopted hedging (not hedgehogging) principles that suit his personality and give us a reasonable chance to restore the nation's financial system.