Bruce Bartlett is a man of strong opinions. A supply-side economist even before the Reagan Revolution, he served in two Republican administrations and then as a policy wonk and gadfly at conservative think tanks. But in recent years he's gotten fed up with Republicans who've turned supply-side economics into a crude and sometimes cynical faith in tax cuts as the solution to whatever ails us. Meanwhile, many conservatives have gotten fed up with him: his highly critical book on George W. Bush got him fired from the conservative think tank he was working at a couple of years ago.

I spoke with him recently about his new book The New American Economy, which among other things suggests that we could learn a thing or two from economist John Maynard Keynes — yep, the guy who thought government spending was the only way to pull economies out of deep depressions. The interview, which appears in the November issue of Money, has just been posted online.

We were only able to fit a portion of our wide-ranging discussion into the tight confines of the print magazine, so I thought I'd share some more of it here on the blog. More

Question: Karen, my otherwise good financial adviser, often e-mails me articles on Obama's handling of the economy. These pieces are politically one-sided, and it's not my side. Should I complain?

Answer: Very irritating, these folks with an ax to grind who relentlessly forward "interesting" e-mails to everyone they know. More

It used to be that the mythbusters at Snopes.com were the go-to-guys for refutations of weird rumors. These days, though, those diligent debunkers can barely keep up. It seems like only yesterday that tongues were wagging about Obama's alleged non-citizenship — a false rumor the site addressed earlier this month with a typically withering takedown of the forged birth certificate that purportedly proves Barack Obama was born in Kenya.

Now the air is thick with talk of "death panels" hidden in the health care reform bills — a monumentally absurd notion endorsed by assorted Republican politicians, ex-politicians and talk show hosts, as well as by more than a few angry citizens at town hall hall meetings. (Not only are the claims untrue, but the wholly innocent, even laudable provision at the root of the myths that would have reimbursed doctors for counseling patients who wanted advice on living wills and other end-of-life issues has now been stricken from the Senate bill.) Snopes, which took on similar claims back in July, hasn't yet gotten to the latest round of rumors. So others have had to jump in and do a little mythbusting themselves.

Like, for example, AARP. Now, if there were anything to all this talk of "death panels," you'd think the AARP would be raising holy hell. After all, the nonprofit devoted to people age 50 and over has what you might call a vested interest in keeping America's elderly alive and well. But there isn't any substance to these "death panels," so the group has instead taken aim at the rumors. "Much of the debate is being driven by special interests that are deliberately kicking up clouds of dust to obscure the facts," the group notes on a page set up to combat the "misinformation and fear-mongering" that now clouds the debate. AARP's site is eminently useful for anyone who wants to make sense of what's really at stake in the health care reform battle, offering the group's own detailed refutations of the myths and lies, as well as links to mainstream press coverage of the scare tactics adopted by some opponents of reform.

For an even more thorough factchecking of what is and isn't true about health care reform, you can turn to Polifact.com, an online project of the St. Petersburg Times. For a quick overview of some of the disinformation that's being spread around, check out the site's health care Truth-O-Meter page. (Or simply look at the the health care "Greatest Hits, Vol. 1.") If you get tired of reading about what isn't true, and want nothing but the truth, Polifact.com's "simple explanation" of the health care bills now under consideration is the clearest I've seen anywhere

Polifact.com isn't partisan. In addition to refuting some of Sarah Palin's wild Facebook assertions about "death panels," they've also factchecked various pronouncements from Obama himself on health care and found some of them highly questionable — such as his claim at a town hall earlier this week that AARP had endorsed his reform plans. (In fact, the group, while supportive of many elements of reform, has not officially endorsed any of the plans now out there, as a spokesman for the group quickly made clear.)

Oh, and in case you're wondering, that video that got forwarded to you earlier this week of the guy shooting off a waterside and landing in a tiny pool — it's fake, too.

Five months after launching the Home Affordable program designed to keep millions of Americans from losing their homes to foreclosure, the Obama administration had to summon mortgage executives to D.C. in late July to ask: What gives? So far, 230,000 loan modifications are up and running. That represents just 15% of the homes that were hit with foreclosure filings in the first six months of 2009 according to RealtyTrac, and comes on the heels of 2.3 million properties that received foreclosure notices in 2008.

The magnanimous explanation is that the mortgage industry simply needs time to get its systems and personnel up to speed on processing applications. The less magnanimous take, as reported in the The New York Times, is that mortgage servicers have plenty of financial incentives to drag their heels.

For all its public jawboning, the administration nonetheless insisted that Home Affordable is “on pace” to help millions of homeowners over the next three years, and set a public goal of having 500,000 loan modifications up and running by November.

But at the same time there seems to be growing acknowledgment that foreclosure prevention is just one part of the equation. Attention is now shifting to what to do with all the existing foreclosures and the steady stream that is expected to continue flooding the market even if Home Affordable lives up to its goals.

One proposal making the rounds in D.C. is Right to Rent: a program, first floated two years ago by liberal think-tanker Dean Baker, that would allow folks who have lost their home to foreclosure to continue living in the home as a renter.  As Baker sees it, giving the foreclosed the right to rent their home at a market rate for a long stretch (perhaps five to 10 years) is a win-win. The landlord (an investor or bank) gets market rental income, the homeowner isn’t uprooted, property values aren’t further depressed by foreclosure fire sales, and taxpayers aren’t asked to bail out lender or borrower. In mid-July a Treasury official confirmed the administration is mulling the idea.  The House has supplied traction too, recently passing the Neighborhood Preservation Act, which would permit FDIC-insured banks to lease back homes to folks it has foreclosed on. Did you catch that artful spin? This isn’t solely about helping the foreclosed; it’s about protecting your neighboring home’s value.

I’m a bit dubious how this might play out in the real world. First off, determining “market value” rent is going to be interesting. The current thinking is that appraisers will handle that job, and we all know how smoothly things are going in that neck of the real estate world. I’m also curious how homeowners stripped of their equity will respond to sending a rent check to the lender who foreclosed on them. (Or to the investor who buys the foreclosed property from the lender.)  Thoughts?

It looks like the end of the American retirement dream as we know it. The 77 million baby boomers who are heading into their golden years with shattered nest eggs may prove to be the first generation in modern U.S. history to have less retirement security than their predecessors.

The numbers tell the story. For older workers, those ages 55-64, nearly 30% had no personal retirement savings — zip, nada — according to a recent analysis by benefits consultants Watson Wyatt, which reviewed data from the 2007 Survey of Consumer Finances (the most recent available). Those non-savers were mainly low-income households, but even among middle- and upper-income groups, retirement wealth was "generally inadequate," say the consultants.

Worse, only an elite 15% of households of any income level had saved the equivalent of at least four times earnings. And even that level of savings will probably not be enough to support you without a drastic downgrade in lifestyle. Say you are a 65-year-old who has saved four times your $100,000 salary, or $400,000. To reduce your chances of outliving that money, you should count on withdrawing only between  4% to 5% of that amount each year, or $16,000 to $20,000.  (To see how much you need to save for retirement, cnnmoney.com's retirement calculator can give you a rough idea.)

Social Security boosts that income, but the higher your salary pre-retirement, the less it helps afterward. For the lowest-paid individuals, according to one study, Social Security replaces 71% of income; for the highest-earning workers, it replaces only 31%. If you're the 65-year-old retiree in our example, a simple Social Security calculator estimates you'll receive $24,000 a year in benefits; adding in withdrawals from savings brings your income to around 40% to 44% of the pre-retirement level. Not all that retirement income is taxable, but it's still a big drop. And remember that Watson Wyatt's estimate of people's retirement savings is based on 2007 wealth levels; the recent market downturn has undoubtedly reduced the ranks of households that are successfully saving for retirement. (To get an estimate of your Social Security income, try this tool.)

All of which makes retirement security a critical issue that the Washington has yet to confront. Right now President Obama is grappling with a stalled health care plan and controversial financial reforms, among other issues. But judging by the one measure he has put forward, he seems to support only incremental change: His  automatic IRA plan would require employers that don't currently offer a retirement plan to automatically enroll workers in an IRA. (They could opt out.)

But that proposal doesn't address the real causes of the crisis, according to many economists, who say do-it yourself  plans like 401(k)s and IRA burden investors with too much risk and fail to deliver reliable retirement income. Some recommend crafting a universal retirement savings plan instead that would spread risk and responsibility among workers, employers and the government.

Even many supporters of the current system urge broader reforms. Says Christian Weller of the Center for American Progress: "The three-legged stool of retirement — public pensions, employer pensions and individual savings — is still intact, but it does need to be strengthened." He suggests more automatic features individual retirement accounts that would make them look more like pensions, as well as offering incentives for workers to stay on the job longer.

Clearly, given the pace of change in Washington, any major reforms, if they ever happen, are a long way off. Meanwhile, would-be retirees will need to save as much as they can and work longer they planned. That doesn't bode well for the American retirement dream.

What do you think should be done to rescue the retirement?

When the Obama administration proposed a new government agency solely devoted to protecting consumers who buy financial products, government officials knew they’d be facing opposition from Wall Street, banks and the financial services industry. But who knew that some of their most vocal opponents would come from the government itself?

That opposition became crystal clear when Federal Reserve Chairman Ben Bernanke, Federal Deposit Insurance Corporation Chief Sheila Bair and several other regulators showed up on Capitol Hill last Friday. Testifying before the House Financial Services Committee, they seemed more interested in protecting the powers of their own agencies than in making changes to the financial system.

First up at Friday's hearings, Treasury Secretary Tim Geithner reiterated the need for a Consumer Financial Protection Agency, saying the economic crisis shows that the current financial system “failed in its most basic responsibility” to supply credit and protect consumers. "I think it's very hard to look at that system and say that it did anything close to an adequate job of what it was designed to do," Geithner told the committee. Hard to disagree with that assessment, considering the record number of home foreclosures, bad mortgage loans and rising credit card defaults in the past year.

The proposed CFPA would take over consumer protection powers currently spread throughout several government agencies, including the Fed, the FDIC, the Office of Thrift Supervision and the Office of the Comptroller of the Currency. That doesn't sit too well with the chiefs in charge of those organizations. Following Geithner’s testimony, Bernanke said consumer protection responsibilities should stay with the central bank, arguing that the Fed’s bank supervisory powers go hand in hand with consumer protection. John Bowman, acting director of the OTS, and John Dugan, head of the OCC, both said enforcement of consumer protection should remain within their agencies. While FDIC chair Sheila Bair endorsed the creation of the CFPA and said that the CFPA should be able to write new enforcement rules, Bair said that federal banking regulators such as the FDIC should retain authority to supervise insured institutions.

Geithner's response: "With great respect to the Chairman and other supervisors who are reluctant to do this, they are doing what they should, which is defend the traditional prerogatives of their agencies. I think frankly all arguments should be viewed through that prism."

It’s been a tough going for the CFPA this summer. House Financial Services Committee Chairman Barney Frank (D-Mass.) delayed plans to mark up the bill  to create the new agency until after Congress returns from its summer recess in September. Frank said he believes the CFPA bill has enough support to win approval but agreed to slow down to give the opposition a chance to weigh in. Meanwhile, Republicans have proposed an alternative that would strip the Fed of its regulatory role and abolish the OCC and the OTS. In their place would be a single regulator for depository institutions, which would include an office focused on consumer protections. Unlike the administration's plan, the GOP-envisioned regulator would have no authority over nonbank institutions, such as mortgage brokers.

All this has moved the CFPA off the fast-track that Barney Frank talked about just a few weeks ago and gives industry lobbyists more time to work on defeating the proposal for a consumer financial watchdog.

This is a critical time for the Obama Administration’s proposed Consumer Financial Protection Agency, a centerpiece of its financial market reforms.

The CFPA, officially proposed in June, is under fierce attack by the financial services industry, the U.S. Chamber of Commerce and a growing number of business groups. Those forces scored a few points Tuesday when House Financial Services Committee chairman Barney Frank announced that his committee is delaying consideration of the CFPA until September. Frank originally aimed to have the committee approve the legislation by early August.

Though some lobbyists proclaim to be backing the administration’s plans for financial reform, they’re adamantly against an agency that will have consumer financial interests as its sole focus. Steve Bartlett, head of the Financial Services Roundtable, told The New York Times that his group has a dual goal: to support comprehensive reform and to kill the CFPA.

The need for the CFPA also took a hit from Federal Reserve chief Ben Bernanke, who weighed in testifying before the Senate Banking Committee Wednesday, arguing that the Fed should keep its consumer protection powers instead of transferring them to the CFPA. Bernanke also suggested that Congress beef up the Fed's consumer protection role.

Consumer groups are fighting back and recruiting their own allies from the financial services world to support the CFPA. On Wednesday, Rep. Frank joined Americans for Financial Reform for a press conference on Capitol Hill to make the economic case for the new agency. Bennett Freeman, an executive at Calvert Investments, and Tim Duncan, founder of Story Street Wealth Management, were on hand to support the call for the CFPA.

Meanwhile, Elizabeth Warren, who originated the idea for a consumer financial product safety commission two years ago and is expected to become its chief — if and when the agency is created — posted a YouTube video Monday to bring her case for the CFPA directly to the public. She also testified before Congress on the need for the agency earlier this month. And on Monday, Warren published an article in Baseline Scenario debunking three myths about the proposed agency.

Where do you stand on the need for a consumer financial watchdog? Do you think the Obama administration is doing enough to make sure its proposed CFPA becomes a reality? Or is it a misguided effort?

Ever since President Barack Obama proposed his wide-ranging financial reforms last month,  investors have been wondering how hard he will push for his plans. So far the White House has kept up the pressure, but opposition is mounting. And it's far from clear that Obama is prepared to fight what increasingly looks to be a two-front battle.

First, the progress update. On July 10 the Treasury Department sent legislation to Congress that would turn Obama's investor protection proposals into law. Here are the key changes the White House is seeking:

• Give the SEC power to regulate broker compensation. Right now, brokers are overseen by FINRA, a self-regulatory agency funded by the brokerage industry. This reform would ban brokers from selling high-commission products that make money for the brokerage firm, but not for customers.
• Require brokers to adopt the same fiduciary standards as investment advisers. That means brokers would have to act in the best interests of their clients. Currently brokers are only required to make recommendations that are "suitable" for their customers, even if there are less costly options available. By contrast, investment advisers, who are regulated by the SEC or the states, follow fiduciary standards.
• Restrict or limit mandatory arbitration. Brokerage customers typically must waive their right to sue in the event of a dispute. Instead, any conflicts must be resolved through arbitration — a process that investor advocates say is biased in favor of brokerage firms.
• Improve fee disclosure. Brokers would be required to provide more information about fees before selling a product. Right now most disclosures are not given to investors until after the sale is completed.

One early victory sign: a leading industry group, the Securities Industry and Financial Markets Association has announced it will support a fiduciary standard for brokers.

The White House is also putting its weight behind a new Consumer Financial Protection Agency, which would regulate mortgages, credit cards and other loan products. On  Tuesday assistant Treasury Secretary Michael Barr testified before the Senate Banking Committee in support of the agency. "There are too many agencies with consumer protection responsibilities, their authorities are too divided, and their primary missions are too distant from consumer protection," Barr said. "There is only one solution to these deep structural flaws: one regulator with one market with one mission — to protect consumers."

Other financial services industry lobbyists seeking to defend the status quo, as well as conservatives who oppose more government regulation, are pushing back hard. Edward Yingling, head of the American Bankers Association, testified before the Senate Banking Committee that  a consumer protection agency "will chill efforts to innovate and respond to consumer demand." And Peter Wallison of the American Enterprise Institute argued that the agency  "reflects a paternalistic desire on the part of elites to control and limit others’ choices while leaving themselves unaffected."  

On the other side of the philosophical divide, some critics say that the White House isn't working hard enough to overcome opposition resistance to a new consumer protection agency, while investor advocates are calling for even stronger fiduciary protection.  

And on Wednesday, an investor coalition that includes two former SEC chairmen, former chair of the Commodity Futures Trading Commission Brooksley Born, and money managers Bill Miller and Jeremy Grantham, issued a report that attacked Obama's plan to reorganize federal agencies on several counts, including awarding risk oversight to the Federal Reserve. As the report put it, the Fed's credibility has been "tarnished" by its "easy credit policies" and "lax regulatory oversight." Instead, the group recommends establishing a  Systematic Risk Oversight Regulator, which would have a staff appointed by the president and confirmed by the Senate.

It looks to be a long, hot summer in Washington.

What do you think of Obama's financial reform proposals — will they make life better for consumers and investors?

On Thursday morning, Warren Buffett said that a second stimulus package to help the economy might be called for. I'm not going to go into all the pros and cons of a second stimulus (you can read all about that here). But the metaphor that he used to break down the idea on Good Morning America was a little…how should we say it…odd. Buffett said, "Our first stimulus bill, it seemed to me, was sort of like taking half a tablet of Viagra and having also a bunch of candy mixed in as everybody was putting it into their own constituencies. It doesn’t have quite the wallop." (Credit to The Wall Street Journal's MarketBeat blog for picking this up.)

Viva Buffett!

In addition to Buffett's Viagra analogy, President Obama has fumbled over the definition of price/earnings ratios (fast-forward to about 1:50 into this clip):

And Treasury Secretary Geithner dumbed down his response to questions about the safety of the U.S. dollar and Treasury investments so much, that his audience of Chinese students broke out laughing:

I don't envy these guys. Trying to boil down an extremely complicated situation into a TV news bite is impossible. But I wonder what the Cialis folks think about Viagra getting all the attention?

Exactly what will Obama’s financial-industry consumer guardian police? The answer became clearer last week when the administration sent Congress a proposed law detailing its vision for the Consumer Financial Protection Agency.

Obama's plan for establishing the CFPA contains a few surprises regarding its authority. While the Securities and Exchange Commission will continue regulating investment products, the administration says the CFPA will oversee “financial products and services." That’s a pretty broad term, and when the agency proposal was first unveiled in mid-June, most observers took that to mean mortgages and credit cards, the two financial products that have caused the most trouble for consumers and the banking system in the past few years.

But the new 152-page blueprint lays out exactly what the Treasury considers a financial product or service, and it goes well beyond home loans and credit cards.  According to the proposal, the CFPA will oversee any financial activity that comes in connection with extending credit or servicing loans, which includes everything from overdraft protection on bank deposit accounts to stored-value cards.

But most noteworthy, say consumer advocates, is the inclusion of some notoriously overpriced insurance products associated with loans: credit insurance, mortgage payment insurance and title insurance. (Property and casualty insurance are explicitly excluded from the CFPA’s jurisdiction). “There are some serious signs of abuse in the sale of these insurance products, which have low loss ratios, high profit margins and big markups,” says Travis Plunkett, legislative director for the Consumer Federation of America, who testified before the House Financial Services Committee two weeks ago and urged Congress to include loan insurance products under the CFPA.

Credit insurance is sold with a variety of loan products, promising to cover your loan payments if you get laid off or become disabled. Similarly, mortgage payment insurance is designed to cover your home loan payments if you become disabled or die. But premiums for these products are expensive, and you’re typically already covered if you’ve got life or disability insurance.

Unlike credit or mortgage payment insurance, title insurance isn’t optional, and it protects the lender (not you) from any losses associated with ownership issues connected to title on your property. (Note that mortgage payment insurance isn't the same thing as private mortgage insurance, which lenders typically require when a down payment is less than 20%, and which protects lenders in the event of a mortgage default.) Title insurance prices vary widely, and while consumers are free to shop around, most rely on recommendations from real estate agents and lawyers, whose firms frequently get a cut of the premiums. Read this piece from my colleague Stephen Gandel about overpriced title insurance.

The bottom line: Insurance is complicated, and while there are many good reasons to buy insurance — for your health, your life, if you’ve got dependents, or your car — the addition of these insurance products to the CFPA will make it easier to determine which policies you can live without.

Based on the comments about an earlier post covering a government-assisted mortgage refinancing program, I don't think you're going to like the latest news out of Washington.

Late last week the Obama administration loosened the eligibility rules for the refinancing arm of its Home Affordable Plan, designed to help home owners who want to take advantage of lower interest rates but haven't been able to refinance. As a result of the change, home owners whose first-mortgage balance is up to 25% higher than their house's value can qualify for the federal refi program. When the program launched a few months ago, the upper limit was 5% under water, but that proved too stringent; the government raised the LTV ratio to 125% because not that many folks were qualifying for the program that the Administration launched with expectations — hopes? — of helping up to 4 million homeowners.

In making the official 125% LTV announcement, the Federal Housing Finance Agency added that it is “incenting” these borrowers to get out of their negative-equity morass sooner rather than later. But it turns out the incentive is nothing more than suggesting that folks choose a shorter mortgage term — say, 25 years rather than 30 years — and thus qualify for a slightly lower mortgage rate.

That’s not exactly a rip-roaring special incentive. It is no different than the incentive all lenders offer all borrowers who opt for a shorter term, whether part of a federal bailout program or not. The typical spread between a 30-year fixed-rate mortgage and a 15-year mortgage, for instance, is one-half a percentage point; Freddie Mac’s most recent  mortgage survey reports an average rate of 5.4% on a 30-year fixed-rate and 4.87% for a 15-year. In essence, the special “incenting” held out by the FHFA seems to be nothing more than now allowing folks to take advantage of a common industry practice: Choose a 15-year, 20-year or 25-year mortgage and you will be eligible for a lower interest rate than if you choose a 30-year term.

And you really have to wonder how enthusiastically home owners will jump at taking on the higher monthly payments that accompany a shorter-term loan. Are we really to expect that someone up to 25% under water is in a rush to build up equity? Or, as is more likely, are they turning to Home Affordable to get their current monthly costs as low as possible so they can stay in a home they might otherwise not be able to afford?

President Obama is a pretty good persuader, but he's been having a hard time selling his health care reform plan. His health care town hall meeting on ABC last Wednesday drew dismal ratings, garnering fewer viewers than a rerun of CSI: New York (and drawing gleeful responses from many of his non-fans). Meanwhile, some of his putative allies in the Democratic party have been sniping away at the plan, and negotiators in the senate have been slashing costs by lopping off some of the plan's most progressive elements, like subsidies for lower-income Americans to help them afford to buy insurance. (Huh? Wasn't helping the uninsured get insurance one of the main reasons for the plan in the first place?)

Cost isn't the only stumbling block for the plan. The other biggie is Obama's advocacy of the "public option" — that is, a Medicare-like public insurance plan that would compete with private insurers. While some have made alarmist claims that such a plan would drive private insurers out of business, others simply complain that it would cost too much. Indeed, some note, when the Congressional Budget Office added up the costs of early versions of the bill, arriving at a total cost of $1.6 trillion, they did so without including the cost of a public plan. Just imagine, critics say, how much Obamacare will cost with the plan included!

These critics are looking at it backwards, say researchers at the liberal Economic Policy Institute: Including a public plan will actually reduce the overall costs of health care:

While a public plan would indeed likely raise the level of federal government health spending, it is just as likely to reduce total national health spending. Independent research evaluating proposals produced by EPI and other sources has consistently found that a public plan would save money and result in better health outcomes by providing all Americans regular access to health care.

Indeed, they point out, one independent analysis found that having a public plan could actually save the US up to $1 trillion over ten years, while providing health care to all. Some of the elements of the plan contributing to that figure include increased competition among health care providers and lower administrative costs.

It's a compelling argument, and one that deserves to have a more central place in this debate, lest we nickel-and-dime ourselves into an anemic health care plan that ends up costing us more in the long run, while abandoning the goal of health care for the currently uninsured.

Even as President Barack Obama unveils his financial regulatory reform proposals, critics are hammering the weaknesses in his plan—everything from continued reliance on ineffective federal agencies to setting up a dubious council of regulators to the  too-big-to-fail bank problem.

Still, there is some praise for one of Obama's proposed reforms — the creation of a consumer financial product safety commission that would monitor the marketing of mortgages, credit cards and other loan products. The agency would take power away from bank regulators, who have proven to be more focused on keeping banks running than protecting consumers. The notion of a financial product safety commission was first proposed by Elizabeth Warren, a former Harvard law professor and now chair of the TARP Congressional Oversight Panel.

Sounds good. But there's a crucial element missing: some form of protection for small investors, not just borrowers. After all, the victims of the financial meltdown included millions of middle-class Americans who were trying to save for retirement and the children's college educations. Many were poorly informed about the risks in their investments by their brokers, insurance agents and fund companies.

As first conceived, the financial products safety commission would have played an investor protection role by regulating a wide range of financial products, including mutual funds and possibly annuities. Along the way, however, the idea of giving the new agency authority over investments was scrapped. Pressure from financial services lobbyists was clearly one reason. But mostly, the Obama administration has kept its focus on the causes of the market meltdown, which include too much consumer borrowing.

That leaves the chief responsibility for investor protection with the Securities and Exchange Commission, which has famously been asleep at the switch. Just ask anyone who invested with Bernie Madoff.

Still, buried deep in the 89-page White House proposals are several intriguing investor protection reforms. The most important: requiring financial advisers and brokers to follow the same strict  "fiduciary" standards.

To understand why this notion is so revolutionary, you have to realize that brokers and financial advisers don't follow the same rules right now. Financial advisers are regulated by the SEC, as well as as the states. And they must meet tough fiduciary standards, which require them to put the client's interest first. Brokers are regulated by FINRA, a self-regulatory agency funded by brokerages, which only requires them to offer products that are "suitable" for the clients, without mentioning conflicts of interest. Most investors don't know the difference.

Question is, will the SEC really follow through on the White House reforms? Since becoming SEC chair earlier this year, Mary Schapiro has promised that the agency will take a more active role in watching out for investors. But the record is mixed. On Thursday June 18, for example, the SEC will hold joint hearings with the Labor Department on problems with target-date retirement funds, many of which shocked investors with their losses in the meltdown. Schapiro has said she favors improved disclosure of target fund risks.

But the SEC shelved reforms of mutual fund 12(b)-1 fees, which were designed to pay for marketing for small funds but have become de facto sales loads. And efforts to ensure brokers and financial advisers follow the same standards have been bogged down for years, with many brokers lobbying to remain under the FINRA.

Still, Barbara Roper, a longtime investor advocate with the Consumer Federation of America, is hopeful. "For decades it's gotten worse and worse for investor protection." she says. "This is the first time I've seen signs that it may move in the other direction."

What do you think Obama should do to help protect investors?

Some food for thought from President Obama's current investment portfolio, which was revealed last Friday as part of his government-mandated annual financial disclosure report:

1. There's an old bit of investment advice: If you don't have a lot of money, you invest to build your assets. If you already have a lot of money, you invest to protect them. Well, it's the second part of that statement that applies to our president. Judging from the report, he and his immediate family had investments and savings, as of year-end 2008, of at least $1.4 million and as much as $5.9 million. (Sorry about the imprecision there; blame the report's format for the wide range of valuations.) And, boy, is his portfolio safe and liquid. His biggest holding, by far, is his stake in U.S. Treasury bills–somewhere between $1.05 million and $5.1 million. The next biggest chunk is the $100,000 to $250,000 that Barack and Michelle have in their joint checking account. Face it: When either of them uses a debit card to gas up the limo at the 7-11, they don't have to worry about those pesky overdraft fees.

2. The president isn't really into stock-picking. He and the First Lady used to own a few different equity mutual funds; now he owns only one, and it's an index fund: the Vanguard FTSE Social Index fund (VFTSX). President & Mrs. Obama have somewhere between $115,00 and $250,000 in the fund, spread out among three different retirement accounts. And they've suffered like everyone else: The fund has a total return of negative 39% over the past year, slightly worse than that of the S&P 500. Michelle used to have big holdings in the actively-managed Vanguard Wellesley Income (VWINX) and Vanguard Wellington (VWELX) funds, but she apparently got rid of them last year.

3. Face it, when you're President of the United States, your investment objectives and criteria are not like your next-door neighbor's (if indeed you have any neighbors). As much as Obama might be concerned about protecting his wealth–and maybe he isn't, since he'll have a nice pension and plenty of opportunities to make money in retirement–he's got to worry more about how his investments look to other people, and what those investments say about him. That's what they euphemize in financial circles as the "optics" of the situation.

4. On that basis, the optics of Obama's investments look pretty good. By investing in an index fund, he's not making an active bet on a particular company (though he does end up making big bets, for better or worse, on particular industries: The Social Index fund has about 26% of its investments in financial stocks, 27% in information technology, and another 30% in either health care or consumer discretionary). That lone mutual fund invests nearly all its money in U.S. stocks, and it screens companies on the basis of their policies and performance relative to the environment, human rights, sweatshops, bribery and other social issues. Who's going to argue with that? And think about it: With so much of Obama's money in Treasury bills and cash, he's making a big bet on the performance of the U.S. economy and the U.S. dollar. It's like with any money manager: When he's playing with your money, you want him to have a lot of his own assets at risk, too.

Addendum:

The Obamas have socked away somewhere between $100,000 and $200,000 in 529 plans for Sasha and Malia's college education. That's great, but it appears they have put their money in broker-sold plans that charge a 3.5% upfront sales load and have annual expense ratios of around 1.3%. Ouch! Financial planner (and MONEY contributor) Allan Roth suggests they move to lower-expense direct-sold plans, a move that would mean lower fees and more money for the girls' schooling.