Will Next Week See A Sunday Night Massacre For Obama’s Economic Team?
Ever since the beginning days of his Administration, Obama has had an official economic team led by Treasury Secretary Geithner/Advisor Larry Summers and an unofficial economic advisory team led by Paul Volcker. Geithner/Summers are pro-financial consolidation and believe the government should spend its efforts into keeping asset prices up and liquidity cheap, and the real economy will follow. By contrast Volcker et al. view Too Big To Fail as a large part of the problem, that the financial industry has grown to the point where it is an unofficial “tax” on the real economy and that job/foreclosure policies should take precedent over asset values. Every compelling commentator I’ve read sides strongly with Volcker and against Geithner, and that applies across the ideological spectrum (there is large agreement about breaking up the banks/removing supports but disagreement about what to do then).
I’ve always had the suspicion that Obama selected his economic team based on the “you broke it you fix it” policy and created the unofficial advisory council in case he decided to radically switch directions at a given point in the future. This made a lot of sense politically speaking: last spring we very well would have entered a rapid Depression without the steps that were taken, but in the long term we are still in a Depression. That Depression may still reveal itself similar to the Great Depression (my bet) or merely similar to Japan’s now two decade long stagnation (increasingly the consensus view) which in my opinion would lead to a catastrophe of Sisyphean proportions.
In either case, Obama — for better and for worse — has rather effectively pursued status quo economic policy and wrapped it around the necks of Geithner/Summers and Bernanke. Now that it is becoming increasingly clear that our recovery is almost entirely illusionary (even with the effects of the stimulus, which is going to have smaller contributions going forward) and there is a strong possibility that we will enter recession again by the middle of the year, it appears that Obama is laying the groundwork to pivot to the Volcker view.
Whether it is the bank tax on uncovered assets or the proposed mini-Glass Steagall (dubbed the Volcker Rule) there finally is a growing pushback against Too Big To Fail. And that couldn’t make Volcker happier. Based on how Geithner is reacting, he too seems to think there is writing on the wall which is drawing fire from some increasingly prominent quarters such as Simon Johnson, former chief IMF economist and author of the great Atlantic article last May entitled “The Quiet Coup.” Considering how explicit Obama was in his language, this is probably not a bad guess.
Did I forget to mention that Bernanke’s term expires at the end of the month and he still hasn’t been reconfirmed by the Senate? Simon Johnson even wants the Senate to put him back in the hot seat, in light of Obama’s new proposals.
In light of this, I will partake in some gross and rank speculation. Bernanke will fail to be reconfirmed by the Senate, and on February 1st Obama will announce that Geithner and Summers resigned the night before, thank them for their service and then unveil new Fed Chair and Treasury appointees, in addition to bringing the rest of his unofficial advisory team into official positions. By the end of the week he’ll hold a press conference announcing a new jobs proposal and start attacking “Congress” as being ineffectual in general.
Update: We might not get to next Sunday as the floodgates have started to open with Sen. Boxer and Sen. Feingold coming out against Bernanke as well. That means that senators that normally represent the organizational base from both parties have now come out publicly against the confirmation.
Also, if you’re religious you may want to start praying, as Barney Frank has apparently come out against GSEs. Rep. Frank has long been the poster child for cronyist connects to Fannie/Freddie and if this stance turns out to be legitimate then it is very surprising. However it is another data point for my prediction that the Administration is going to move away from largescale asset support and start making bondholders take losses.
Update 2: Barry Ritholtz has a great chart showing how insane the last 15 years has been when it comes to the stock market.
Update 3: Now Obama is jumping the gun too:
A combative President Barack Obama exhorted Congress Friday to pass a new job-creation bill, taking a populist appeal to America’s recession-racked Rust Belt in an effort to recapture the excitement of his campaign.
Obama weaved us-against-them rhetoric into his appearances, telling a town hall audience that he “will never stop fighting” for an economy that works the hard-working, not just those already well off…
Obama made a repeated point of criticizing Washington, too — saying that one can get a “pretty warped view of things” from inside the capital city, blasting special interest power and emphasizing repeatedly that he badly wanted to escape the confining nature of the White House.
14 Responses to “Will Next Week See A Sunday Night Massacre For Obama’s Economic Team?”
I feel that since now corporations own govenment officially, they should also pay for it officially. Either that or Team-Obama has a choice: 2010 citizen's tax revolt or revoke corporate super-citizenship given that they are not actually separte living beings who care about other people. We don't allow felons to vote because of their proven apathic tendencies towards other citizen's welfare. So we don't allow corporations to be deemed separate and equal viable citizens who can sway legislation and elections based on their proven track records likewise as felons of complete disregard for the common wellbeing and welfare of other citizens supposedly their equals.
Congress has precident. Now let's see if they can act even to save their own jobs [which will be gone when corporations run this midterm election 2010] by using simple legal precident to turn around yesterdays abortion of democracy..
Congress and Team-Obama are literally faced with the choice: grow a pair, or say goodbye to your salaries and any hope of Obama in 2012, [not to mention our beloved nation as we thought we knew it]
Yes. Blaming others is the prime weapon of a weak person.
All the “legendary” and strong executives I can think of pulled similar maneuvers. The trick isn't in hedging your bets and decapitating the side that loses (while never admitting to a mistake of course) the trick is whether you can make a clean break and coherent new policy that gets support, or whether everything just falls into confusion and chaos.
Regardless of why, it's a step in right direction. C'mon, let's celebrate the little things!
This is pretty much what I thought was going on when he put his team together in the first place. “We tried the old methods and look how they failed, now for all of you still waiting on trickle down economics I am about to make it flood!” He won't, it will be a mini-trickle but any change to the last 30 years of policy will be seen as a lightning bolt, also that trickle will be more benefit seen from it in the last 30 years for those not at the top as well.
Interesting side note:
Governor of the People’s Bank of China Zhou Xiaochuan polls as less investor unfriendly than either Obama, Summers, or Geitner. Bernanke however polls better.
Obama Seen as Anti-Business by 77% of U.S. Investors
http://www.bloomberg.com/apps/news?pid=20601087…
But he does it so well…..LOl or rather not as Charles Krauthammer notes:
After Coakley's defeat, Obama pretended that the real cause was a generalized anger and frustration “not just because of what's happened in the last year or two years, but what's happened over the last eight years.”
I think the NYT editorial page may have blamed ?: “To our minds, it is not remotely a verdict on Mr. Obama’s presidency, nor does it amount to a national referendum on health care reform — even though it has upended the effort to pass a reform bill, which Mr. Obama made the centerpiece of his first year.”
Good post! The Bernanke, Geithner, Summers team has been a disaster, both economically and politically. They focused on saving Wall Street in hopes there would be a trickle down to Main Street, and seem amazed when the Wall Street crowd opted to keep it all for themselves. Politically their policies have probably done more than anything else to undermine the Obama agenda and the popularity of the President himself. Paul Volcker is the man to do it better…
Like Wile E. Coyote frantically flapping his arms after he's run off a cliff, hoping to stay in the air a few seconds longer? I don't like the sound of this for some reason…
That was exactly the image I had for a post in June. I was of course wrong about the timing, as they have pumped in way more money than I thought they'd be able to without (major) consequence, but the dynamics are still there and growing increasingly apparent for all to see.
We are paying less in taxes now, and that is why if you happen to have passed through Michigan or other parts of the country our roads are falling apart, our schools are failing, etc… the Right wing has corrupted people to think that Taxes are bad and that Putting your money into the Private Sector is good! This stems from the Regan era… Wallstreets Poster boy that got all kinds of things turned around. Like how he fired all those Air-Traffic controllers who were unionized and were protesting (cant remember what at the moment) anyway they fired them all dis-regarded the union and that became the end for Unions but that is another subject.
What i'm saying is this, why aren't we as a country helping each other out? I don't make very much money I make 17/hr It's ok but not nearly as much as the generation that came before me. I don't mind paying taxes in fact I ussually get money back, and Obama has money coming back to people in taxes, he has ways to get money for college by helping out at humane societys or helping out your community, there are all kinds of things that have been setup. The problem is that the US is more of a ME First Society.
When you see someone on the side of the road looking for work, do you help them out? Most of us don't.
We hear about all of these bad things that happen day in, and day out. But we just take it over and over.
Obama inherited all of these problems from the Previous administration, how do you expect anyone or any president to fix our mess in a year?
We should have had more of an up-roar about the Health Care Reform but we didn't, we did from the minority of course. The one that doesn't believe in helping out our fellow countrymen. Great idealization, why can't we be the Country of Yes we Can help each other out?
Why do we care if our Taxes are increased, but we dont' care if our Cable, Phone, Internet, Entertainment, Gas, Heating, etc… goes up?
Why does no one want to sustain the Country in Taxes? Without them and without additional funding to taxes I guarantee you will continue to see our infrastructure fall apart.
Obama needs to ban these companies that have outsourced from selling anything to the US. We need to make drastic changes now.
We as Americans should be all for Companies and Jobs staying here. So forget the Global Economy what has it done? Other than shatter America.
We need high paying jobs like what the Ford workers were making in the 1990's. And notice when in the 90's when the economy was booming?
Why was that? It's because there was no NAFTA, No Free Trade for companies to outsource to China, India, or wherever.
We need a Party for change yes, and Obama is the beginning of that, look at all those millions of people that believe in him. It is dwindling now yes, but we need a Loyalist party.
A Party that goes above the bickering's of the Corporate Parties, and is there for the People.
A Party that will Ban companies that moved over seas to sell their cheaply made stuff here.
A Party that will Keep jobs in the US, make the companies pay their workers a high wage, and make people feel that helping this country out by any means is for the good of the people.
We need to get our infrastructure fixed, we need to care about each other, we need to stop this hate between the 2 parties and unite to fix our country and become a country that helps each other out.
I think this is what we must do to make this country great, and until that happens we can only hope that Obama continues on his promise of Change. I have seen the things he has done and being limited by Congressional Republicans and some Congressional Democrats who don't want to help our countrymen out he has to deal with the cards he has been given. I just hope he isn't one term I sincerely believe he is here for the people, by the people. I fear that people may say oh he hasn't done enough. It's only been 1 year and he has way too many problems to deal with. Give the man a break, he will step things up just see.
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