CEO in chief

In this new industrial era it will be President Obama who largely determines the fate of the risk takers who have been both the engine - and the peril - of the American economy for three decades. This will be accomplished through a sweeping new regulatory structure. The center of any new financial regulation is likely to feature a "systemic risk regulator" (something that Wall Street supports) that sets standards like capital requirements according to the riskiness of a company's operations. While risk taking in the financial markets will be accepted, it will be managed.

Obama will bring to the White House a view endorsed by some of his advisors that bigness itself is a source of risk. It was a Republican administration that imposed a policy of "too big to fail" for the rescue of banks and insurance giants, and for loans to the auto industry. As a candidate, Obama issued cautious support for the Bush administration's bailout of AIG (AIG, Fortune 500), the world's biggest insurance firm. Any future decisions on corporate bailouts - including ailing automakers - would be determined by how "interconnected you are to the rest of the economy, both here and abroad," said Bernstein.

But some Obama advisors argue that the government should use its antitrust stick to prevent the formation of big business in the first place. "Pardon me for asking," Obama advisor and former Clinton Labor Secretary Robert Reich wrote on his blog last month, "but if a company is too big to fail, maybe - just maybe - it's too big, period."

Reich is especially critical of the federal government's using consolidation as a rescue tool. "They've prodded Bank of America to take over Merrill Lynch (MER, Fortune 500) and Countrywide, J.P. Morgan to acquire Washington Mutual and Bear Stearns. So we're ending up with even bigger giants, with even more power over the economy and politics." By contrast, more centrist Obama advisors, like former Clinton Treasury secretaries Lawrence Summers and Robert Rubin, support those episodes of consolidation.

If Obama's new industrial era bears a telling resemblance to the policy dilemmas facing F.D.R. in the 1930s, his critics fear he is already making some of the same kinds of choices that worsened the Great Depression. "I'm worried sick," says Charles Calomiris, a financial historian at the American Enterprise Institute, a conservative think tank. "I've seen this play before, and it doesn't have a good ending."

The critics in this corner worry that Obama and a Democratic Congress's push for card-check legislation - ending secret ballots in unionization efforts - will lead to higher wages and a dangerous drag on job creation, just as F.D.R.'s union efforts did during the Great Depression. They say Obama's opposition to pending free-trade agreements - exemplified by fierce attacks on NAFTA during the campaign - suggests a bent for the same kind of protectionism that lengthened the Depression. They fear a heavy regulatory hand on the financial markets that lacks nuance and quashes innovation. They fear a tax policy that penalizes the largest job producers in the economy.

"If Obama would say, 'I won't pass any tax increases in the first year,' that would have a substantial impact on the markets," said Calomiris.

Presidents can be judged by the company they keep, as Obama learned when he was attacked in the campaign for his past associations with antiestablishment radicals in Chicago. But if we judge the President-elect by his associations during his Senate term and a long presidential campaign, a different pattern for governance emerges. Obama's team is deep and experienced, and suggests a more centrist sensibility than his own campaign rhetoric.

"I've been very impressed with the caliber of people around Obama," concedes John McCain's top economic advisor, Kevin Hassett, adding, "There's great hope they won't fall down a partisan path."

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