Email This to a Friend
A Thumbs-Down on Obama’s Economic Team
This group doesn't represent change we can believe in, but recycling that will fail.
For this Obama girl, my Obamania ended when the president appointed his economic team. Obama nominated Tim Geithner as secretary of the treasury, Larry Summers as head of the National Economic Council (NEC), and Mary Schapiro as chairman of the SEC. This is not CHANGE that we can believe in, but recycling that will fail.
Not only do I think that this group is not up to the job, but even worse they caused or, at the very least, did not prevent the economic problems that we are now facing when they were part of the Clinton administration. Summers and Geithner are acolytes of former Treasury Secretary Robert Rubin, whose previously stellar reputation as treasury secretary was shredded by his post-Treasury work at Citigroup. The nation’s largest bank went on life support under his watch. His gospel of Rubinomics, which calls for financial deregulation, has been discredited during this financial crisis.
Many consider Larry Summers a brilliant economist, but it was he as Clinton’s treasury secretary who pushed for passage of the Financial Services Modernization Act, the most sweeping overhaul of the financial industry since the Great Depression. This bill struck down the regulatory barriers between the merger of commercial and investments banks, and insurance companies and stock brokers. Basically, all those banks that are now too big to fail and are failing were created by Larry Summers.
In his unquenchable thirst for deregulation, Summers backed Senator Phil Gramm’s Commodity Future’s Trading Commission Act, which banned the regulation of the nascent credit derivatives market. These are the same financial instruments that Warren Buffett famously described as weapons of mass destruction and have since exploded.
Not everyone in the Clinton administration was enamored with credit derivatives. Brooksley Born, chairman of the Commodity Futures Trading Commission, testifying before Congress in 1997, said, “Credit derivatives threaten our regulated markets or, indeed, our economy without any federal agency knowing about it.” Some speculate that her advice went unheeded by the Three Musketeers — Greenspan, Rubin, and Summers — because she was a woman.
In my book, Summers is batting 0-2, so I am confused at why the man that detonated a financial Pearl Harbor on us should have another chance to wreck havoc. His defenders say that he has reformed and sees the error of his ways. In the same way that I would not put a reformed alcoholic in charge of a bar, I would not put a reformed deregulator like Summers in charge of a government that desperately needs regulation.
Page 1 of 2 Next ->
Laura Goldman worked on Wall Street for 25 years for such firms as Merrill Lynch and Paine Webber. She now owns her own money management firm, LSG capital, in Tel Aviv, Israel.
 |
 |
 |
Podcasts |  PJM Home |
Pajamas Media appreciates your comments that abide by the following guidelines:
1. Avoid profanities or foul language unless it is contained in a necessary quote or is relevant to the comment.
2. Stay on topic.
3. Disagree, but avoid ad hominem attacks.
4. Threats are treated seriously and reported to law enforcement.
5. Spam and advertising are not permitted in the comments area.
The clause regarding "hate speech" has been deleted because readers criticized it as being too loosely defined. We agreed.
These guidelines are very general and cannot cover every possible situation. Please don't assume that Pajamas Media management agrees with or otherwise endorses any particular comment. We reserve the right to filter or delete comments or to deny posting privileges entirely at our discretion. If you feel your comment was filtered inappropriately, please email us at story@pajamasmedia.com.
30 Comments
1. Dadoebie:Strange that according to this article, one possible good deed puts you high on the list and one possible bad thing makes you a bad choice for a function in the economic team. Seems to me that all the arguments in this article are rather thin.
Greets from amsterdam
Jan 22, 2009 - 3:37 am 2. David Thomson:“For this Obama girl, my Obamania ended when the president appointed his economic team.”
I can understand someone who knows something about economics choosing Barack Obama as the lesser of evils over John McCain. But how in heaven’s name can this individual rationally justify describing themselves as an “Obama girl”? When did the new president ever indicate that he is not an economic illiterate? The country was royally screwed with its two major presidential candidates. We are likely doomed to endure one dumb economic decision after another.
Jan 22, 2009 - 3:57 am 3. SAF:Laura:
You aren’t the first nor will you be the last to realize that “change we can believe in” was a jingle not a philosophy. But it is nice to see an Obama supporter wake up to that reality.
Financial and security laws need to be rewritten from the ground up. We have seen what doesn’t work. So under the current set of rules and regulations we had Madoff and Buffet take investors money. Buffet made them rich and Madoff stole it all. And this happened during the same set of economic circumstances.
We have seen millions spent by the government trying prove Microsoft is nefarious while allowing Enron to run as a total fraud and disintegrate before our eyes. The SEC is investigating Apple to see if Steve Jobs was transparent enough about his health while Apple turns in their best quarter ever and GM needs billions to survive. Talk about transparent, the accounting rules allowed GM to pretend to be healthy when in truth it had one foot on the grave and another on a banana peel.
There is plenty of room and need for change. But you won’t get it from Obama.
Jan 22, 2009 - 5:14 am 4. formwiz:Nice to see someone on the Obama side who hasn’t lost the power of independent reason. There may be real Hope for substantive Change, after all.
Jan 22, 2009 - 5:17 am 5. Broadsword:Evidence please for this assertion: “His gospel of Rubinomics, which calls for financial deregulation, has been discredited during this financial crisis.”
Jan 22, 2009 - 5:47 am 6. TomD:By signing off on Tim Grithner are they also setting the stage to save another one of their own, Charlie Rangle’s tax cheating behind ??
They would be building themselves cover to save Rangle’s seat,
Congressional politicians are so patheticly lame.
While I am sure that is not the prime reason for Grithner’s selection it has probably been brought up.
It is apparent that at least for Democrats, Quality of Character has no bearing on fitness to hold office.
Does anyone remember how Sec of Labor Linda Chaves was made to step down because she had the nerve to help an “Illegal Immigrant” from Guatemala. (who is in fact now a U.S. citizen)
My MY how different the standards are when you are on the leftist side of the fence….
Jan 22, 2009 - 6:04 am 7. Cybergeezer:Every day I read something about Obama, and the same term comes to mind; Incompetence. It’s what our schools are manufacturing; Incompetence. There’s no education going on any more. U.S. educational establishments are becoming “charm schools”. Teaching students that they are “worthy’ simply because they have self esteem. They feel real good about themselves, but can’t read or write at their grade level. And making any “educated decisions” is totally beyond their comprehension. The real education will unfold when people realize that “patronizing” any one or group, does not promote their growth and development. Obama has never had any adversity. Adversity creates character.
Jan 22, 2009 - 6:19 am 8. seven:Any day now I shall read where Obama is appointing voodoo doctors to office.
We are getting moldie oldies from the clinton era. The era that spawned the dot com bubble and gave the appearance of growth. \
Write this down, Obama is bringing us the pain of inflation. He wants unskilled workers hired to be paid what skilled workers earn.
Jan 22, 2009 - 6:42 am 9. Anton:I love the bit about putting an alcoholic in charge of a bar. Great analogy.
Our President has moved from job to job without ever having accoplished something at any one of them. He has never run a business or invested in a risky undertaking. A study of Law gives little understanding of the mechanics of business and finiance.
He is now confronted with the fact that if something doesn’t get done he will be the one on the hot seat. His lack of acheivement is reflected in his choices for his Cabinet. They have been wrong on far too many things to keep credibility, would you keep going to a doctor that persistently mis-diagnosed your ailments?
Jan 22, 2009 - 6:53 am 10. Political Observer:Laura:
Sorry but you just don’t get it. Deregulation is not the problem – government is. There were at least three main government actions – including regulatory – that created this mess. The first was the CRA which the government regulators used as a threat to force banks and other financial institutions to lower the credit standards for home mortgages. Then with the help of the government entitites (Fannie and Freddie) the banks were allowed to off load these risk to the government. The second problem was the easy money policies of the feds. With so much money in circulation as such low rates – it just spurred on more and more reckless actions to use those dollars siting on their books. Finally the past actions of government encouraged this reckless behavior because everyone knew that when this Ponzi scheme finally crashed the government would step in to “save” the banks under the cloak of limiting the economic fallout across the country (just think of the S&L crisis of the 80’s as the model we see today only on a somewhat smaller scale).
A general rule of thumb to follow on these types of calamities – if it is a small number of big players who are in trouble you can most likely assume that management is responsible. However when you see a systemic failure across the broad spectrum of an economic sector – look first to what the government has done to create this mess. More often than not you will find some misguided social experiment as the root cause of the problem.
Jan 22, 2009 - 7:09 am 11. psota:Geithner: Secretary of Bailouts and tax evasion! This should be an obvious line of attack for an enterprising GOP Senator or Congressman. It’s fine to be hopeandchangey now, but…the survival financial system is not LITERALLY dependent on Geithner being Treasury Secretary, which sometimes seems to be the implication. Maybe he will end up being confirmed, but that doesn’t mean the end of oversight. Just look what Chuck Schumer did to Alberto Gonzalez over a handful of “fired” US attorneys.
Geithner is also saddled with a personality that is not, shall we say, mediagenic. Like it or not, he will be Obama’s pointman for the economy. If the US economy stays depressed, Americans will not want to see Geithner on television frowning and furrowing his brow. For the GOP, Geithner should be an example of everything wrong with the last year’s worth of fiscal policy, and with the Obama administration: too close to Wall Street, too quick to bend the rules for their benefit, too profligate, and wedded to a financial system (with a regulatory framework from the 1930’s married to business models developed in the 1980’s) that is no longer working.
My bold prediction: Geithner will not make it past 2010
Jan 22, 2009 - 7:20 am 12. Retep:Laura
Jan 22, 2009 - 7:38 am 13. Cato:First of all I want to say I admire you for coming on here. I hope there are more Obama girls and guys that think like you. Two things…Geithner’s failure to pay taxes was not really about the complicated tax code. As Senator Kyl said in the hearings yesterday, would Geithner have paid his taxes for 2001 and 2002 if he was not nominated as Treas. sec? Geithner never answered the question. Also, as political observer mentioned about bank regulation…the problem was really over-regulation. No bank would have made loans to people who can’t afford them unless they were required to. Anyway, hope you come here more often.
I want to say go away. We have the mainstream media if we want to hear Obama girls and boys. I come here for intelligent opinion, not Obamolatry.
Jan 22, 2009 - 9:08 am 14. Kevin:You are all correct and have made excellent points (except the pothead from Amsterdam whose value system dictates that one’s actions are of no consequence).
Jan 22, 2009 - 9:30 am 15. AnninCA:CRA + GSE + Greenspan + SEC + Bernanke + Paulson – Mathematical certainty + Entitlement Programs + Asset bubbles + 18 Trillion Dollar Deficit + 50 Trillion est. of unfunded liabilities + Repeal of Glass-Steagal + Death of Common Sense = Greater Depression of 2009-2014.
Prepare yourselves and your portfolios appropriately.
Also, there is no way out of this. There is no solution. Debts go away in only two ways – they are paid down OR they are defaulted. If there is no cash, they are defaulted. GDP contracts, people lose jobs, savings rates go through the roof (a good thing long-term), government tries to borrow & spend their way out of it (like trying to get out of a hole by digging faster).
Bush = Hoover Obama = FDR
Dohhh!! Can you say ” Epic Fail?”
Government is a reflection of us, and right now, all that I’m seeing is a shotgun economic recovery approach.
Has any administration ever truly affected the economy positively?
I’m not sure we would know if it had, even if some policies actually worked.
Jan 22, 2009 - 9:53 am 16. TL:Well said Political Observer. Leftists think if they say often enough that something they disagree with has been “discredited” then others will start to believe it. And some will. So thanks for setting the record straight.
Jan 22, 2009 - 10:33 am 17. Jeff Perren:The author appears to be disappointed only because she believes that Obama’s economics team is not sufficiently far to the Left. She need not worry. They are.
Geithner is a Paulson clone who was perfectly happy robbing the public Treasury to ’save capitalism’, i.e. he advocates a fascist solution.
Summers is only slightly to the right of Marx when he advocates an $800,000 tax on the top 1% of taxpayers in order to give $10K checks to everyone making less than $120,000.
Romer is a pragmatist who has no problem strapping every business with more regulations, of exactly the sort we’ve had over the past 100 years that have led to the current situation.
Bernanke is an Keynesian who believes in printing money like there was no tomorrow.
The author will get everything she wants from this Administration.
Jan 22, 2009 - 10:41 am 18. ReConUSMC:The Obama Presidency: Here Comes Socialism by Dick Morris …. Go on Town hall.com and read it ….
it is awesome and scary ..
This is the best article to date on the future of America with Obama Leading America I have ever read ….HERE COMES SOCIALISM .
Jan 22, 2009 - 12:21 pm 19. Self-hating Boomer:Dick Morris Fills in a lot of missing blanks not researched by the main stream media for the last two years about Obama mind and thoughts sadly .
This is article is extremely well though out and not written by a mere Rookie , Agenda lead Journalist , Party paid Hack or Belt way know nothing talking head . Nor was it written by Rush Limbough or Shaun Hanity .
This is the one man that single handed guided Bill Clinton though his entire “Mind field “Political career and got him reelected which was a Miracle . In truth several near Clinton said Morris did Clinton serious issue thinking .
Dick Morris also guided another Dozen plus Democrats as well as Republicans Senators , Congressman and Top Governors as well . He got 91 % elected . He Knows the game .
Dick Morris like him or not is one of the 3 top well proven Strategists in the last 20 years in all of American Politics .
I must also admit hearing the truth here is freighting since 1 + 1 = 2 .
Please pay particular attention to those that don’t pay taxes will grow under Obama tax plan because they will decide the future of all elections . We will approach 50 % of all Voters(the middle class ) want pay taxes so we all know how they will vote …. 101 % Socialist . Univeral health and Bank control and the rest is simple .
Under Clinton those that didn’t pay taxes were 13-14 % in comparison .In 2007 141 Million Americans paid no taxes .
Unions will grow 10,000 Fold .
America politically will within a very years look , act and be exactly like slowly declining Canada , England , France and Germany .
The Nordic countries would be these racial Socialist future goals in America .
Say goodbye to Capitalism America yet there is no Socialist Country mentioned above that could began to carry our countries water .
Please pass this article around to Obama ”Change ” supporters as well . One suspects they will be shocked as well .
Any repair to the economy that might come from intelligent regulation will be very quickly flushed down the toilet of redistribution and “stimulus”. If you really think that anything positive is possible from the Chicago mob, I really don’t know what to say. I’m speechless.
Jan 22, 2009 - 1:36 pm 20. Cybergeezer:I take back what I said about our new President. He’s not incompetent. He’s juvenile and adolescent. After this mornings news conference, I’m convinced. He’s an absolute joke. We The People are screwed. And this includes you pathetic Obama supporters.
Jan 22, 2009 - 2:03 pm 21. Jay:Derivatives and the Black-Scholes false model for pricing options played an important role that has been missed by the business press since they use probability theory and a bit of statistics. Economists and finance professors claimed that they were a great advance to financial markets and that they would improve the valuation of risk and free up capital. The proponents in academia blocked papers that showed that B-S and their extensions could be falsified by proper data analysis.
Jan 22, 2009 - 2:18 pm 22. avoidswork:The SEC was taken in and the Wall Street bosses were pleased by the profits that rolled in until the models failed and the leveraging collapsed.
The Wall Street gang spend a lot of money on Obama’s campaign. Obama has some real leftie economists in the background but he knows that he has to deal with the crisis and so he brought in the wise men who have been hailed by the business press as great minds.
While I am not as pleased with the economic team as I could be, I will wait and reserve judgement. I do think, as Political Observer @10 noted, that there are many, many, many reasons for the problem and Republican, Democrat, Independent, etc. are to blame.
But let us be clear about “government” as the problem. The term “government” is too blanket – but what is applicable is that government never really bothered to conduct oversight. We have been witnessing it, again, in the face of this recent Wall Street bailout, no one bothering to account for the money, the AIG parties, the bonuses, all paid for AFTER receiving money from the Treasury. Regulation, deregulation — both are irrelevant if no one is conducting oversight.
My only hope is that before another dollar is given to anyone, there is a stringent oversight where every penny is accounted for. I wish that if your firm/bank/whatever was found to have had a “lavish” party post-bailout AND is posting losses, you are kicked to the curb.
Naturally, I’m pro-Obama. But I’m not blind and I’m not really pro-Congress.
I hope that the new people Obama is bringing in, faults and all, will ameliorate this problem, hold firms accountable and wait to hand out money until this has been thought through from every angle.
We’ve already seen terrible management over the initial bailout(s). Let us all hope those days will be over and strict accountability must be enforced. If the Big 3 Car Mftrs have to tap dance, and carpool to get some money ($15 billion or 4.29% of $350 billion); I want to see a full on pageant for Wall Street.
I also hope we are doing all that we can to support our local, small businesses in this time of crisis.
Jan 22, 2009 - 4:29 pm 23. thegre8_1:Two fingers up for the new economic crooks I mean geniuses and you all guess which two fingers.
Jan 22, 2009 - 5:34 pm 24. Roger Godby:Paul Krugman? Run “paul krugman truth squad” through any web search engine to nix him. He did do good, if brief, work for Enron, though.
Roubini or Volcker, who tamed double-digit inflation under Reagan’s protection, not bad.
The other day I read that the FDR-era separation between banks and investment houses does not exist in Europe. If true, it apparently hasn’t caused great trouble there, so I doubt it will here.
We need less regulation, less government and politicized meddling, not more. Let the producers produce and innovators innovate. Kill the public-private disasters like Fannie and Freddie, which evolve into taxpayers’ problems, that have hurt us for decades to come.
Jan 22, 2009 - 6:45 pm 25. myth buster:Ann, Reagan slashed taxes resulting in a massive economic growth, a doubling of Federal Revenues, and a nine point drop in the inflation rate. George W. Bush did a mediocre job handling fiscal policy. The economy grew at a sustainable pace until being hit broadside by problems that Bush foresaw, but Congress would not let him fix.
Jan 22, 2009 - 7:15 pm 26. Cybergeezer:25. myth buster:
Jan 23, 2009 - 6:25 am 27. the scholar:That’s exactly what happened; So the fault lies directly on the hands of the Democrat Party. They’ve been kneecapping Bush and the Republicans for three years. It’s time to return the favor.
“The Greening of Social Security”
Jan 23, 2009 - 3:44 pm 28. Delia:If the Republicans are to stay politically relevant over the course of the next two or four years and want to avoid the same trap democrats fell into after Bush was elected, they must do more than simply act as obstructionists to the Liberal agenda. They must provide substantive, innovative and principled alternatives, which are rooted in free market and individualistic principles – like this one (”The Greening of Social Security” – http://thescholarsforum.org/)
What’s the big deal?
Your soul is just a broken metaphor for your i.d. and eventually we all sell out.
Of course, under the Obama rule of law you won’t have the choice to sell your i.d. on ebay or amazon.com…now your soul is rendered his (I’m sure he’s gonna enact a new law just for that) by proxy whether you voted for him or not.
As with all “Dear Leaders”…the start out innocuous enough…and then…
666
Jan 25, 2009 - 12:48 am 29. quasar:#5 Broadsword…..rightonrighton!
Jan 25, 2009 - 5:15 am 30. blinda:Sadly, the word “oversight” doesn’t appear to be in the authors vocab. This is all too similar to B.Frank (s)pinning everything on dewegulation. Regs. and deregs. both need oversight.
you are clueless … your alternatives suggest you reason with emotion not facts
Jan 26, 2009 - 7:56 pm