Canada gets Obama's attention

And apparently, we've got his attention because we're so darn boring! But, hey, that's OK with me. Nothing wrong with being boring. Here's an excerpt of an interview President Obama gave to David Leonhardt, the economics columist for The New York Times. The interview was published today in The New York Times Magazine:

THE PRESIDENT: You know, I’ve looked at the evidence so far that indicates that other countries that have not seen some of the problems in their financial markets that we have nevertheless don’t separate between investment banks and commercial banks, for example. They have a “supermarket” model that they’ve got strong regulation of.

Like Canada?

THE PRESIDENT: Canada being a good example. And they’ve actually done a good job in managing through what was a pretty risky period in the financial markets. (Akin's note: A footnote in the Leonhardt article notes that Canada's banks now rank in the top 50 but a better footnote would have been to note that not a single Canadian bank has collapsed, is in danger of collapsing, or has required a penny in government bailouts or equity. Some U.S. banks and banks in most of our G7 peers have required government money to avoid collapse.)

So — that doesn’t mean that, for example, an insurance company like A.I.G. grafting a hedge fund on top of it is something that is optimal. Even with the best regulators, if you start having so much differentiation of functions and products within a single company, a single institution, a conglomerate, essentially, things could potentially slip through the cracks. And people just don’t know what they’re getting into. I mean, I guarantee you that the average A.I.G. insurance policyholder had no idea that this stuff was going on. And in that sense I think you can make an argument that there may be a breaking point in which functions are so different that you don’t want a single company doing everything.

But when it comes to something like investment banking versus commercial banking, the experience in a country like Canada would indicate that good, strong regulation that focuses less on the legal form of the institution and more on the functions that they’re carrying out is probably the right approach to take.