Sunday, December 07, 2008

Obama's troubling economic advisors

Over at Huffington Post Steve Hilderbrand has argued that progressives should lighten up and stop criticizing Barack Obama for the centrist appointments he has been making. I, and 232 people have responded and I encourage you to do so also.
I am concerned particularly of the appointments to his economic team. On Dec. 1, Dean Baker said the following on Truthout.
“Fortunes will be made or lost depending on how this bailout money
is used. For example, Secretary Paulson just agreed to lend another
$20 billion of the Treasury's bailout money to Citigroup.

In addition, the Federal Reserve Board agreed to guarantee up to
$300 billion of presumably bad assets. This is an enormously valuable
guarantee. If Citigroup had to arrange a comparable guarantee in the
private market, it would almost certainly pay more than $30 billion a

This decision sent Citigroup's stock soaring. In the week since
the bailout was announced, Citigroup's stock more than doubled, adding
more than $25 billion to the company's capitalization. (The government
could have bought the bank outright with the money it lent to Citi.)
This is great news for Citigroup's shareholders, who would be holding
almost worthless stock if Mr. Paulson had not been so generous.

Paulson's decision was also good news for Robert Rubin and other
top executives at Citigroup. If the government had not stepped in,
Citigroup would almost certainly be in bankruptcy and most of its
highly paid executives would likely be out on the street.”

William Grieder in a Nation post below explained the connections between Citigroup and the new Obama appointees.

“Events have confronted Obama with a fearful symmetry between past and present, illustrated by his choice of economic advisers. On Friday, we learned that Timothy Geithner, president of the New York Federal Reserve, would become his new treasury secretary and Larry Summers, who held the same position in the Clinton administration, would be the White House overseer of economic policy. On Monday, Geithner was busy executing the government's massive rescue of Citicorp--the very banking behemoth that Geithner and Summers helped to create back in the Clinton years, along with Federal Reserve chairman Alan Greenspan and Robert Rubin, Clinton's economics guru. Now Rubin is himself a Citicorp executive and his bank is now being saved by his old protégé (Geithner) with the taxpayers' money.
The connections go way beyond irony. They raise very serious questions about where the new president intends to lead and whether he has the nerve to break from the weak and haphazard strategy of the Bush administration. It has dumped piles of public money on the largest financial institutions and demanded little or nothing in return, hoping for the best. Geithner has been a central player in the deal-making, from Bear Stearns to AIG to Citi. The strategy has not only failed, it has arguably made things worse as savvy market players saw through the contradictions and rushed out to dump more bank stocks.
On Wall Street, Geithner is known as a highly competent technocrat, well versed in the financial complexities. But he has also been seen as a weak and compliant regulator of Wall Street firms, someone who did not seem the storm coming. Occasionally, Geithner would anguish publicly about the accumulating time bombs like credit derivatives and urge bankers to do something, but he did not use his supervisory powers to compel action. In bailout negotiations with Wall Street titans, Geithner and the Federal Reserve were spun around like a top more than once.”

So, we are being asked to trust Barack Obama that appointing Geithner and Larry Summers is not a capitulation.
I think that the titans of Wall Street, including Robert Rubin and others should be arrested and prosecuted for looting the U.S. treasury and the pensions of millions of our citizens. Putting Rubin’s close allies in charge of U.S. economic policy is deeply disturbing. It means that the Obama administration is taking the reins during the Bush recession, but he is not breaking with the people who caused the problems.

Persons who read this blog know that I worked long and hard for Barack Obama. These economic appointments are deeply disappointing. To me they are endangering the new administration by linking it with the Casino Capitalism of the past.

Duane Campbell
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