Obama is back giving Centrism a bad name. His budget proposal has drawn criticism because it incorporates a mechanism for reducing Social Security Cost-of-Living benefits called the “chained CPI”, which ties those adjustments to the inflation rate. Obama’s inclusion of the chained CPI has drawn harsh criticism from Progressives as well as the Liberal base of the Democratic Party. Although the President and his sycophants characterize this proposal as an example of “Centrist” politics, it is actually an example of the economic neoliberalism which the Disappointer-in-Chief has advanced since taking office in 2009.
Despite its liberal slant, the FiredogLake blog has been critical of Obama since the beginning of his first term. A recent article by Jon Walker at FDL presents an unvarnished look at Obama’s motives for including the chained CPI in his budget:
Obama didn’t put chained-CPI in for Republicans, regardless what he may claim. While Republicans like to talk a big game on entitlements they have shown no real interest in cutting benefits for current retirees, who are the most important part of their base.
The comments to Walker’s piece give us a look at how a good number of liberals are finally seeing through the man who was advertised as an agent of Hope and Change. I was particularly impressed by the following comment from a reader identified as “coloradoblue”:
War criminal
Mass murderer
Crimes against humanity
Crimes against the American people
Crimes against the constitution he swore to uphold
Failure to investigate, prosecute and punish the war criminals of the last administration
Failure to investigate, prosecute and punish the crimes of wall street
Destroyer of the legacy of FDR and LBJ and the dem party
Liar
Failure
Hell of legacy you’ve got there Barry. Hell of a legacy.
Oh, Snap!
Lest I repeat the entire batch of comments, I’ll include just one more. Reading through them provides one with the opportunity to understand the extent of disappointment in Obama, as expressed by those who voted for him. This comment was from an individual using the name, “BearCountry”:
o was never really the “capitulator in chief.” He has worked to destroy the safety net since he became pres. When I voted for him in ’08 I knew he was not going to be a savior for the nation, but I didn’t realize how bad he would be. He is worse than w because he knows full well what he is doing. Those that defend him or blame the repugs are simply deluding themselves.
Progressive Democrats chose Obama over Hillary Clinton because they wanted to avoid electing a President who would advance the same neoliberalism we saw from Bill Clinton, the man who signed the Commodity Futures Modernization Act of 2000 into law. Bill Clinton’s enactment of that legislation completely deregulated derivatives trading, eventually giving rise to such “financial weapons of mass destruction” as naked credit default swaps, which brought us the 2008 financial crisis.
When Hillary begins her run for the 2016 Democratic Nomination, it will be interesting to see whether any of her opponents exploit the photo of Bubba and Blankfein in Boca. On February 19 of 2012, The Business Insider published this photo of Bill Clinton having lunch with Goldman Sachs CEO, Lloyd Blankfein at the Boca Raton Resort and Country Club. Obama’s function as a tool of the Wall Street megabanks will provide an ongoing reminder to anyone entertaining the thought of supporting Hillary, as to what they could expect from another Clinton administration.
Meanwhile Barry O. Tool is gonna’ have some ’splianin’ to do about his chained CPI proposal. His angry former supporters will want some answers.
You can count me among those who believe that the non-stop Republican Presidential debates are working to President Obama’s advantage. How many times have you heard some television news commentator remark that “the big winner of last night’s Republican debate was Barack Obama”? As Julianna Goldman reported for Bloomberg BusinessWeek, two recent polls have revealed that Obama is no longer looking quite as bad as he did a few months ago:
Forty-nine percent of Americans approve of how Obama is handling his job, according to an ABC News/Washington Post poll and another conducted for CNN. The rate was the highest in both surveys since a short-lived bump the president got following the killing of al-Qaeda leader Osama bin Laden in May.
Nevertheless, there is an unstoppable wave of criticism directed against the President by his former supporters as well as those disgusted by Obama’s subservience to his benefactors on Wall Street. In my last posting, I discussed Bill Black’s rebuttal to President Obama’s most recent attempt to claim that no laws were broken by the banksters who caused the 2008 financial crisis.
The wave of disgust at Obama’s exoneration of the financial fraudsters has gained quite a bit of momentum since that outrageous remark appeared on the December 11 broadcast of 60 Minutes. Matt Taibbi of Rolling Stone focused on the consequences of this level of dishonesty:
What makes Obama’s statements so dangerous is that they suggest an ongoing strategy of covering up the Wall Street crimewave. There is ample evidence out there that the Obama administration has eased up on prosecutions of Wall Street as part of a conscious strategy to prevent a collapse of confidence in our financial system, with the expected 50-state foreclosure settlement being the landmark effort in the cover-up, intended mainly to bury a generation of fraud.
* * *
In other words, Geithner and Obama are behaving like Lehman executives before the crash of Lehman, not disclosing the full extent of the internal problem in order to keep investors from fleeing and creditors from calling in their chits. It’s worth noting that this kind of behavior – knowingly hiding the derogatory truth from the outside world in order to prevent a run on the bank – is, itself, fraud!
* * *
The problem with companies like Lehman and Enron is that their executives always think they can paper over illegalities by committing more crimes, when in fact all they’re usually doing is snowballing the problem so completely out of control that there’s no longer any chance of fixing things, thereby killing the only chance for survival they ever had.
This is exactly what Obama and Geithner are doing now. By continually lying about the extent of the country’s corruption problems, they’re adding fraud to fraud and raising such a great bonfire of lies that they probably won’t ever be able to fix the underlying mess.
John R. MacArthur, president and publisher of Harper’s Magazine, caused quite a stir on December 14, when an essay he wrote – entitled, “President Obama Richly Deserves to Be Dumped” – was published by the The Providence Journal (Rhode Island). For some reason, this article does not appear at the newspaper’s website. However, you can read it in its entirety here. MacArthur began the piece by highlighting criticism of Obama by his fellow Democrats:
Most prominent among these critics is veteran journalist Bill Moyers, whose October address to a Public Citizen gathering puts the lie to our barely Democratic president’s populist pantomime, acted out last week in a Kansas speech decrying the plight of “innocent, hardworking Americans.” In his talk, Moyers quoted an authentic Kansas populist, Mary Eizabeth Lease, who in 1890 declared, “Wall Street owns the country.. . .Money rules.. . .The [political] parties lie to us and the political speakers mislead us.”
A former aide to Lyndon Johnson who knows politics from the inside, Moyers then delivered the coup de grace: “[Lease] should see us now. John Boehner calls on the bankers, holds out his cup, and offers them total obeisance from the House majority if only they fill it. Barack Obama criticizes bankers as fat cats, then invites them to dine at a pricey New York restaurant where the tasting menu runs to $195 a person.”
* * *
What’s truly breathtaking is the president’s gall, his stunning contempt for political history and contemporary reality. Besides neglecting to mention Democratic complicity in the debacle of 2008, he failed to point out that derivatives trading remains largely unregulated while the Securities and Exchange Commission awaits “public comment on a detailed implementation plan” for future regulation. In other words, until the banking and brokerage lobbies have had their say with John Boehner, Max Baucus, and Secretary of the Treasury Tim Geithner. Meanwhile, the administration steadfastly opposes a restoration of the Glass-Steagall Act, the New Deal law that reduced outlandish speculation by separating commercial and investment banks. In 1999, it was Summers and Geithner, led by Bill Clinton’s Treasury Secretary Robert Rubin (much admired by Obama), who persuaded Congress to repeal this crucial impediment to Wall Street recklessness.
I have frequently discussed the criticism directed at Obama from the political Center as well as the Left (see this and this). I have also expressed my desire to see Democratic challengers to Obama for the 2012 nomination (see this and this). In the December 20 edition of The Chicago Tribune, William Pfaff commented on John R. MacArthur’s above-quoted article, while focusing on the realistic consequences of a Democratic Primary challenge to Obama’s nomination:
John MacArthur’s and Bill Moyers’ call for the replacement of Barack Obama as the Democratic presidential candidate next year is very likely to fail, and any Democratic replacement candidate is likely to lose the presidency. As a veteran Democratic Party activist recently commented, this is the sure way to elect “one of those idiots” running for the Republican nomination. Very likely he is right.
However, the two may have started something with interesting consequences. Nobody thought Sen. McCarthy’s challenge was anything more than a futile gesture. Nobody foresaw the assassinations and military defeat to come, or the ruin of Richard Nixon. Nobody knows today what disasters may lie ahead in American-supervised Iraq, or in the dual war the Pentagon is waging in Afghanistan and Pakistan. The present foreign policy of the Obama government is fraught with risk.
As for the president himself, the objection to him is that his Democratic Party has become a representative of the same interests as the Republican Party. The nation cannot bear two parties representing plutocratic power.
The current battle over the payroll tax cut extension reminded me of a piece I wrote last August, in which I included Nate Silver’s observation that it was President Obama’s decision to leave the issue of a payroll tax cut extension “on the table” during the negotiations on the debt ceiling bill. My thoughts at that time were similar to William Pfaff’s above-quoted lament about the nation’s “two political parties representing plutocratic power”:
As many observers have noted, the plutocracy has been able to accomplish much more with Obama in the White House, than what would have been achievable with a Republican President. This latest example of a bipartisan effort to trample “the little people” has reinforced my belief that the fake “two-party system” is a sideshow – designed to obfuscate the insidious activities of the Republi-Cratic Corporatist Party.
It’s nice to see that the tsunami of disgust continues to flow across the country.
The Occupy Wall Street protest has exposed the politicians – who have always claimed to be populists – for what they really are: tools of the plutocracy. Conspicuously absent from the Wall Street occupation have been nearly all Democrats – despite their party’s efforts to portray itself as the champion of Main Street in its battle against the tyranny of the megabanks. As has always been the case, the Democrats won’t really do anything that could disrupt the flow of bribes campaign contributions they receive from our nation’s financial elites.
The “no show” Democrats reminded me of an article which appeared at Truthdig, written by Chris Hedges, author of the book, Death of the Liberal Class. In his Truthdig essay, Chris Hedges emphasized how the liberal class “abandoned the human values that should have remained at the core of its activism”:
The liberal class, despite becoming an object of widespread public scorn, prefers the choreographed charade. It will decry the wars in Iraq and Afghanistan or call for universal health care, but continue to defend and support a Democratic Party that has no intention of disrupting the corporate machine. As long as the charade is played, the liberal class can hold itself up as the conscience of the nation without having to act. It can maintain its privileged economic status. It can continue to live in an imaginary world where democratic reform and responsible government exist. It can pretend it has a voice and influence in the corridors of power. But the uselessness and irrelevancy of the liberal class are not lost on the tens of millions of Americans who suffer the indignities of the corporate state. And this is why liberals are rightly despised by the working class and the poor.
If it had not been obvious before the 2010 elections, it should be obvious now. Back in July of 2010, I was busy harping about how the Obama administration had sabotaged the financial “reform” bill:
As I pointed out on July 12, Mike Konczal of the Roosevelt Institute documented the extent to which Obama’s Treasury Department undermined the financial reform bill at every step. On the following day, Rich Miller of Bloomberg Newsexamined the results of a Bloomberg National Poll, which measured the public’s reaction to the financial reform bill. Almost eighty percent of those who responded were of the opinion that the new bill would do little or nothing to prevent or mitigate another financial crisis. Beyond that, 47 percent shared the view that the bill would do more to protect the financial industry than consumers.
Both healthcare and financial “reform” legislation turned out to be “bait and switch” scams used by the Obama administration against its own supporters. After that double-double-cross, the liberal blogosphere was being told to “pay no attention to that man behind the curtain”.
In an earlier posting, I discussed the sordid efforts of the Democratic-controlled Senate to sabotage the financial reform bill:
The sleazy antics by the Democrats who undermined financial reform (while pretending to advance it) will not be forgotten by the voters. The real question is whether any independent candidates can step up to oppose the tools of Wall Street, relying on the nickels and dimes from “the little people” to wage a battle against the kleptocracy.
Since the Occupy Wall Street demonstration has gained momentum, a number of commentators have analyzed the complicity of hypocritical Democrats in ceding more unregulated power to the very culprits responsible for causing the financial crisis. The most important of these essays was an article written by Matt Stoller for Politico. Stoller began the piece by debunking the myth that the cancer known as “financial deregulation” was introduced to the American system by the Reagan administration:
Like President Bill Clinton before him, Obama and his team believe in deregulation and are continuing a “let them eat cake”-style social contract that solidified during Ronald Reagan’s presidency. As this contract has fallen apart, so has the strong coalition behind Obama’s presidency.
We haven’t seen a challenge to the bank-friendly Democratic orthodoxy for 40 years. The progenitor of this modern Democratic Party was Jimmy Carter. Though Reagan and Clinton helped finish the job, it was Carter who began wholesale deregulation of the banking industry – as Jeff Madrick details in his new book, “The Age of Greed.”
In signing the landmark Depository Institutions Deregulation and Monetary Control Act of 1980, which lifted usury caps, Carter said, “Our banks and savings institutions are hampered by a wide range of outdated, unfair and unworkable regulations.”
Stoller provided some hope for disillusioned former supporters of the Democratic Party by focusing on three Democratic state attorneys general, who have been investigating possible fraud in the securitization of trillions of dollars of mortgages. Matt Stoller referred to these officials – Eric Schneiderman of New York, Catherine Cortez Masto of Nevada and Beau Biden of Delaware – as the “Justice Democrats”. As Stoller observed, a number of other officials have been influenced by the noble efforts of these Justice Democrats:
There are other politicians following this path. Jefferson Smith, an Oregon state representative now running for mayor of Portland, successfully fought legislation to make foreclosures easier in that state. Register of Deeds Jeff Thigpen in North Carolina took on banking interests by fighting foreclosure fraud. Maryland Rep. Elijah Cummings has been dogged in his investigations of mortgage servicers.
It should not be surprising that these officials have been getting quite a bit of pushback from their fellow Democrats – including Delaware Governor Jack Markell as well as a number of high-ranking officials from the Justice Department, led by Attorney General Eric Hold-harmless.
When the Occupy Wall Street protest began on September 17, what little coverage it received from the mainstream media was based on the “giggle factor”. With the passing of time, it becomes increasingly obvious that the news media and our venal political leaders are seriously underestimating the ability of the “little people” to fight back against the kleptocracy.
It seems as though every time some venal politician breaches a campaign promise while attempting to grab a payoff from a lobbyist, the excuse is always the same: “I’ve decided to tack toward the center on this issue.” “The Center” has become stigmatized as the dwelling place of those politicians who lack a moral compass.
I get particularly annoyed by those who persist in characterizing Barack Obama as a “centrist”, who is mimicking Bill Clinton’s “triangulation” strategy. During his campaign and throughout the early days of his Presidency, Obama successfully posed as a centrist. Nevertheless, his track record now demonstrates a policy of what Marshall Auerback described as “gutting the Democratic Party of its core social legacy.” I particularly enjoyed reading the comments to Auerback’s above-quoted piece about Obama entitled, “Worse Than Hoover”. Most of the commentators expressed the opinion that Auerback went way too easy on Obama. Here are some examples:
Sandra:
We have to stop comparing Obama to these iconic American figures. Obama is an opportunistic corporatist. There is no there there.
Rex:
I’m beginning to wonder if we are still giving Obummer too much credit. Common view seems to be trending toward he’s a manipulative scumbag.
Wasabi:
He’s very useful to the plutocracy. A Repub president could never persuade Dems to cut SS, Medicare, and Medicaid and all sorts of other essential programs.
Z:
He got the glory and the thrill of winning the election to become the 1st black president and I suspect that’s all the narcissio-path ever really wanted as far as the presidency is concerned. He certainly doesn’t look like he’s enjoying himself right now. I think he’s ready to cash out and is trying to create a scenario where he becomes an untenable candidate. He also wants to maintain his celebrity appeal so he’s going to try to posture as the adult of adults that was just too good for dc …
Steelhead23:
From a more technocratic perspective, I tend to see Obama as a consummate politician – able to inspire – but sadly lacking in intellectual curiosity and overflowing with ego, thus unable to quench his ignorance. This leaves him extremely susceptible to “experts” whom he parrots with enthusiasm. It was experts who helped him pick his advisers and now his expert advisers are misleading him and making him complicit in this quest toward neo-feudalism.
Keep in mind that those comments were not posted at Fox News or some right-wing website. They were posted at Naked Capitalism, where the publisher – Yves Smith – offered a comment of her own in reaction to Marshall Auerback’s “Worse Than Hoover” posting.
Yves Smith:
Obama is an authoritarian narcissist, an ugly combination.
He also seems unaware of the limits of his knowledge. That can render many otherwise intelligent people stupid in their decisions and actions in their blind spots.
Obama’s foremost critic from the Left is Glenn Greenwald of Salon. Mr. Greenwald has frequently opined that “… Obama wants to be attacked by liberals because of the perception that it politically benefits him by making him look centrist, non-partisan and independent . . . It’s not merely that he lacks a fear of liberal dissatisfaction; it’s that he affirmatively craves it.” Greenwald emphasized the foolishness of following such a course:
But that’s a dangerous strategy. U.S. presidential elections are very closely decided affairs, and alienating the Left even to some degree can be lethal for a national Democratic campaign; shouldn’t the 2000 election, along with 2010, have cemented that lesson forever?
I doubt that Obama is attempting to follow anything similar to Bill Clinton’s “triangulation” strategy. If Obama had been attempting such a plan, it has already backfired to an embarrassing degree, causing irreparable damage to the incumbent’s reelection prospects. Barack Obama has lost his credibility – and in the eyes of the electorate, there is no greater failing.
To get an appreciation for how much damage Obama has caused to his own “brand”, consider this article written by Columbia University economist Jeffrey Sachs for the Huffington Post:
Thus, at every crucial opportunity, Obama has failed to stand up for the poor and middle class. He refused to tax the banks and hedge funds properly on their outlandish profits; he refused to limit in a serious way the bankers’ mega-bonuses even when the bonuses were financed by taxpayer bailouts; and he even refused to stand up against extending the Bush tax cuts for the rich last December, though 60 percent of the electorate repeatedly and consistently demanded that the Bush tax cuts at the top should be ended. It’s not hard to understand why. Obama and Democratic Party politicians rely on Wall Street and the super-rich for campaign contributions the same way that the Republicans rely on oil and coal. In America today, only the rich have political power.
* * *
America is more militarily engaged under Obama than even under Bush. Amazing but true.
* * *
The stimulus legislation, pushed by Obama at the start of his term on the basis of antiquated economic theories, wasted the public’s money and also did something much worse. It discredited the vital role of public spending in solving real and long-term problems. Rather than thinking ahead and planning for long-term solutions, he simply spent money on short-term schemes.
Obama’s embrace of “shovel-ready” infrastructure, for example, left America with an economy based on shovels while China’s long-term strategy has given that country an economy based on 21st-century Maglev trains. Now that the resort to mega-deficits has run its course, Obama is on the verge of abandoning the poor and middle class, by agreeing with the plutocrats in Congress to cut spending on Medicaid, Medicare, Social Security, and discretionary civilian spending, while protecting the military and the low tax rates on the rich (if not lowering those top tax rates further according to the secret machinations of the Gang of Six, now endorsed by the president!)
* * *
America needs a third-party movement to break the hammerlock of the financial elites. Until that happens, the political class and the media conglomerates will continue to spew lies, American militarism will continue to destabilize a growing swath of the world, and the country will continue its economic decline.
The urgent need for a third-party movement was also the subject of this recent piece at The Economic Populist:
If the country had a legitimate third party to vote for, the Democrats and Republicans would be in serious trouble. Of course, the political system is geared to prevent third parties from emerging, so the country flounders about, looking for leadership from pusillanimous Democrats or ideological Republicans who consider raising taxes a mortal sin. The voters are probably a few steps away from concluding what is meant to be hidden but by now should be obvious: American democracy doesn’t exist, and the political system in Washington is beyond repair. What is worse: there are people and organizations who like things just the way they are and will fight any attempts at reform.
* * *
None of this suggests that Barack Obama is even considering abandoning his servitude to corporate interests. He’s merrily going along from one fundraiser to the next, raising millions of dollars each week from hedge fund managers and corporate lobbyists, so that he can get reelected as a “centrist” and bipartisan deal maker. This is based on his reading of what The People want – an end to the divisiveness in Washington – but Obama is fundamentally misreading the problem in Washington. It isn’t the rancor, name-calling, and petulance that is constantly on display which worries the American people. It is the backroom deals, the hidden bailouts, the tax evasions, the deregulation initiatives, the lack of prosecution for criminal behavior, that is more than frustrating Americans, because the beneficiaries of all this are wealthy people and corporations who have shifted power and money to themselves. Voters want this system overthrown – even the Tea Party voters, who keep searching for Republicans who will finally say no to corporate money.
In the mean time, we are stuck witnessing America’s demise. If you think that Obama’s critics from the Left are the only people voicing a dispirited attitude about our country’s future, be sure to read this essay at Counterpunch, “An Economy Destroyed”, written by Paul Craig Roberts – Assistant Secretary of the Treasury during the Reagan Administration and the co-creator of Reaganomics:
Recently, the bond rating agencies that gave junk derivatives triple-A ratings threatened to downgrade US Treasury bonds if the White House and Congress did not reach a deficit reduction deal and debt ceiling increase. The downgrade threat is not credible, and neither is the default threat. Both are make-believe crises that are being hyped in order to force cutbacks in Medicare, Medicaid, and Social Security.
* * *
The US economy is driven by consumer demand, but with 22.3 per cent unemployment, stagnant and declining wages and salaries, and consumer debt burdens so high that consumers cannot borrow to spend, there is nothing to drive the economy.
Washington’s response to this dilemma is to increase the austerity! Cutting back Medicare, Medicaid, and Social Security, forcing down wages by destroying unions and offshoring jobs (which results in a labor surplus and lower wages), and driving up the prices of food and energy by depreciating the dollar further erodes consumer purchasing power. The Federal Reserve can print money to rescue the crooked financial institutions, but it cannot rescue the American consumer.
As a final point, confront the fact that you are even lied to about “deficit reduction.” Even if Obama gets his $4 trillion “deficit reduction” over the next decade, it does not mean that the current national debt will be $4 trillion less than it currently is. The “reduction” merely means that the growth in the national debt will be $4 trillion less than otherwise. Regardless of any “deficit reduction,” the national debt ten years from now will be much higher than it presently is.
The longer you think about it – the more obvious it becomes: We really need to sweep all of those bastards out of Washington as quickly as possible and replace them with intelligent, honest individuals who are willing to represent this country’s human inhabitants – rather than its corporations, lobbies and “special interests”.
After establishing an economic advisory team consisting of retreads from the Clinton White House, President Obama has persisted in approaching the 2010 economy as though it were the 1996 economy.
After I posted my April 7 piece, I felt a bit remorseful about repeating a stale theme. Nevertheless, a few days later, Ezra Klein’s widely-acclaimed Washington Post critique of President Obama’s misadventure in “negotiating” the 2011 budget was entitled, “2011 is not 1995”. Ezra Klein validated the point I was trying to make:
Clinton’s success was a function of a roaring economy. The late ‘90s were a boom time like few others — and not just in America. The unemployment rate was less than 6 percent in 1995, and fell to under 5 percent in 1996. Cutting deficits was the right thing to do at that time. Deficits should be low to nonexistent when the economy is strong, and larger when it is weak. The Obama administration’s economists know that full well. They are, after all, the very people who worked to balance the budget in the 1990s, and who fought to expand the deficit in response to the recession.
Right now, the economy is weak. Giving into austerity will weaken it further, or at least delay recovery for longer. And if Obama does not get a recovery, then he will not be a successful president, no matter how hard he works to claim Boehner’s successes as his own.
President Obama’s attempt at spin control with a claim of “bragging rights” for ending the budget stalemate brought similar criticism from economist Brad DeLong:
To reduce federal government spending by $38 billion in the second and third quarters of 2011 when the unemployment rate is 8.9% and the U.S. Treasury can borrow on terms that make pulling spending forward from the future into the present essentially free is not an accomplishment.
It will knock between 0.5% and 1.0% off the growth rate of real GDP in the second half of 2011, and leave us at the start of 2012 with an unemployment rate a couple of tenths of a percent higher than it would have been otherwise.
Robert Reich expressed his disappointment with the President’s handling of the 2011 budget deal by highlighting Mr. Obama’s failure to put the interests of the middle class ahead of the goals of the plutocracy:
He is losing the war of ideas because he won’t tell the American public the truth: That we need more government spending now – not less – in order to get out of the gravitational pull of the Great Recession.
That we got into the Great Recession because Wall Street went bonkers and government failed to do its job at regulating financial markets. And that much of the current deficit comes from the necessary response to that financial crisis.
That the only ways to deal with the long-term budget problem is to demand that the rich pay their fair share of taxes, and to slow down soaring health-care costs.
And that, at a deeper level, the increasingly lopsided distribution of income and wealth has robbed the vast working middle class of the purchasing power they need to keep the economy going at full capacity.
“We preserved the investments we need to win the future,” he said last night. That’s not true.
The idea that a huge portion of our current deficit comes from the response to the financial crisis created by Wall Street banks was explored in more detail by Cullen Roche of Pragmatic Capitalism. The approach of saving the banks, under the misguided notion that relief would “trickle down” to Main Street didn’t work. The second round of quantitative easing (QE 2) has proven to be nothing more than an imprudent decision to follow Japan’s ineffective playbook:
And in 2008 our government was convinced by Timothy Geithner, Hank Paulson and Ben Bernanke that if we just saved the banks we would fix the economy. So we embarked on the “recovery” plan that has led us to one of the weakest recoveries in US economic history. Because of the keen focus on the banking system there is a clear two tier recovery. Wall Street is thriving again and Main Street is still struggling.
QE2 has truly been a “monetary non-event”. As many of us predicted at its onset, this program has shown absolutely no impact on the US money supply (much to the dismay of the hyperinflationists). And now its damaging psychological impact (via rampant speculation) has altered the options available to combat the continuing balance sheet recession. While more stimulus is almost certainly off the table given the Fed’s misguided QE2 policy, it would be equally misguided to begin cutting the current budget deficit. Sizable cuts before the end of the balance sheet recession will almost guarantee that the US economy suffers a Japan-like relapse. It’s not too late to learn from the mistakes of Japan.
So where is the leader who is going to save us from a Japanese-style “lost decade” recession? It was over two years ago when I posed this question:
Will the Obama administration’s “failure of nerve” – by avoiding bank nationalization – send us into a ten-year, “Japan-style” recession? It’s beginning to look that way.
Comments Off on Wisconsin Bogeymen Could Save Democrats From Themselves
Until this week, it was beginning to appear as though November 6, 2012 would be the day when Barack Obama and the entire Democratic Party would fall victim to their incurable case of The Smug. I discussed this syndrome back on December 2:
The Democratic Party is suffering from a case of terminal smugness. Democrats ignored the warning back in 2006, when the SouthPark television series ran the episode, “Smug Alert”.
* * *
In the 2008 Democratic Primary elections, voters chose “change” rather than another Clinton administration. Nevertheless, what the voters got was another Clinton administration. After establishing an economic advisory team consisting of retreads from the Clinton White House, President Obama has persisted in approaching the 2010 economy as though it were the 1996 economy. Obama’s creation of a bipartisan deficit commission has been widely criticized as an inept fallback to the obsolete Bill Clinton playbook. Robert Reich, Labor Secretary for the original Clinton administration recently upbraided President Obama for this wrongheaded approach:
Bill Clinton had a rapidly expanding economy to fall back on, so his appeasement of Republicans didn’t legitimize the Republican world view. Obama doesn’t have that luxury. The American public is still hurting and they want to know why.
More recently, Robert Scheer lamented how President Obama’s economic team of recycled Clinton advisors shared the blame with Republicans in helping bring about the financial crisis and the ever-worsening income inequality between the “haves” and the “have nots”. Mr. Scheer reminded us that the Democrats who promised “change” have been no less corrupted by lobbyists than their Republican counterparts:
The lobbyists are deliberately bipartisan in their bribery, and the authors of our demise are equally marked as Democrats and Republicans. Ronald Reagan first effectively sang the siren song of ending government’s role in corporate crime prevention, but it was Democrat Bill Clinton who accomplished much of that goal. It is the enduring conceit of the top Democratic leaders that they are valiantly holding back the forces of evil when they actually have continuously been complicit.
* * *
Thanks to President Clinton’s deregulation and the save-the-rich policies of George W. Bush, the situation deteriorated further from 2002 to 2006, a period in which the top 1 percent increased its income 11 percent annually while the rest of Americans had a truly paltry gain of 1 percent per year.
And that was before the meltdown that wiped out the jobs and home values of so many tens of millions of American families.
Thanks to Wisconsin Governor Scott Walker and Wisconsin Congressman Paul Ryan, the Democrats now have two bogeymen, who can personify the “reverse Robin Hood” crusade of the modern Republican Party. E.J. Dionne of The Washington Postrecently placed the burden on centrists to prevent the draconian budget proposal introduced by Representative Ryan, from finding its way to the President’s desk (probably because it would be signed if it got there):
Ryan’s truly outrageous proposal, built on heaping sacrifice onto the poor, slashing scholarship aid to college students and bestowing benefits on the rich, ought to force middle-of-the-roaders to take sides. No one who is even remotely moderate can possibly support what Ryan has in mind.
Mr. Dionne then focused his attack more directly on two “middle-of-the-road” political figures:
Erskine Bowles and Alan Simpson, the co-chairs of the deficit commission and the heroes of the budget-cutting center, put out a statement saying some nice things about the idea of the Ryan budget. They called it “serious, honest, straightforward,” even though there is much about its accounting that is none of those.
What Mr. Dionne conveniently ignores is that it was President Obama who appointed Erskine Bowles and Alan Simpson as co-chairs of the deficit commission. Those guys were never my heroes. Last December, when I criticized Obama’s elevation of Alan Simpson and a Clinton retread to leadership of his own deficit commission, I incorporated some pointed observations by Cullen Roche of Pragmatic Capitalism. The platitudinous insistence by Erskine Bowles (Clinton’s former Chief of Staff) that it’s time for an “adult conversation about the dangers of this debt” drew this blistering retort from Cullen Roche:
Yes. America has a debt problem. We have a very serious household, municipality and state debt crisis that is in many ways similar to what is going on in Europe. What we absolutely don’t have is a federal government debt problem. After all, a nation with monopoly supply of currency in a floating exchange rate system never really has “debt” unless that debt is denominated in a foreign currency. He says this conversation is the:
“exact same conversation every family, every single business, every single state and every single municipality has been having these last few years.”
There is only one problem with this remark. The federal government is NOTHING like a household, state or municipality. These entities are all revenue constrained. The Federal government has no such constraint. We don’t need China to lend us money. We don’t need to raise taxes to spend money. When the US government wants to spend money it sends men and women into a room where they mark up accounts in a computer system. They don’t call China first or check their tax revenues. They just spend the money.
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Mr. Bowles finished his press conference by saying that the American people get it:
“There is one thing I am absolutely sure of. If nothing else, I know deep down the American people get it. They know this is the moment of truth”
The American people most certainly don’t get it. And how can you blame them? When a supposed financial expert like Mr. Bowles can’t grasp these concepts how could we ever expect the average American to understand it? It’s time for an adult conversation to begin before this misguided conversation regarding the future bankruptcy of America sends us towards our own “moment of truth” – a 1937 moment.
We centrists actually know better than to take Simpson and Bowles seriously. Unfortunately, E.J. Dionne’s hero – Barack Obama – doesn’t.
Wisconsin Governor Scott Walker has become the second bogeyman for the Democrats to spotlight in their efforts to cleanse their own tarnished images after selling out to Wall Street lobbyists. As Amanda Terkel reported for The Huffington Post:
A divisive budget battle between labor unions and Gov. Scott Walker (R-Wis.) turned a state Supreme Court race into a nationally watched bellwether on the electorate’s mood heading into a recall campaign and the 2012 elections.
Nearly 1.5 million people turned out to vote, representing 33.5 percent of voting-age adults — 68 percent higher than the 20 percent turnout officials had expected. JoAnne Kloppenburg has already declared victory, with the vote tallies showing her beating incumbent David Prosser by just a couple hundred votes. The race is expected to head to a recount.
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There were no party affiliations on the ballot, but Kloppenburg was heavily backed by Democrats and Prosser by Republicans, making it a fierce proxy battle for the two parties.
Will the Wisconsin Bogeymen provide the Democrats with the inspiration and motivation they need to put the interests of the American middle class ahead of the goals of the Plutocracy? Don’t bet on it.
A recent piece by Glynnis MacNicol of The Business Insider website led me to the conclusion that Shepard Smith deserves an award. You might recognize Shep Smith as The Normal Guy at Fox News. In case you haven’t heard about it yet, a controversy has erupted over a 20-minute crank telephone call made to Wisconsin Governor Scott Walker by a man who identified himself as David Koch, one of two billionaire brothers, famous for bankrolling Republican politicians. The caller was actually blogger Ian Murphy, who goes by the name, Buffalo Beast. In a televised discussion with Juan Williams concerning the controversy surrounding Wisconsin Governor Walker, Shep Smith focused on the ugly truth that the Koch brothers are out to “bust labor”. Here are Smith’s remarks as they appeared at The Wire blog:
It’s all political isn’t it? Isn’t it just 100% politics? … Have you looked at the list of the top 10 donors to political campaigns? Seven of those 10 donate to Republicans. The other three that remain of those top 10, they all donate to Democrats and they are all unions. Bust the unions, it’s over … . And this started when? It started with the Koch brothers. The Koch brothers were organizing…
* * *
I’m not taking a side on this, I’m telling you what’s going on … The facts! But people don’t want to hear the facts … let them get angry, facts are troublesome creatures from time to time. The Koch brothers, and others, were organized to bust labor, it’s what big business wants to do … this isn’t a new concept. So they gave a bunch of money to the governor’s campaign. The governor’s campaign is over. Now, away we go! We’re going to try to bust this union up, and that’s what they’re doing … this is political and everyone in the middle is a pawn.
Those “troublesome creatures” called facts have been finding their way into the news to a refreshing degree lately. Emotional rhetoric has replaced news reporting to such an extreme level that most people seem to have accepted the premise that facts are relative to one’s perception of reality. The lyrics to “Crosseyed and Painless” by the Talking Heads (written more than 30 years ago) seem to have been a prescient commentary about this situation:
Facts all come with points of view
Facts don’t do what I want them to
Facts just twist the truth around
Facts are living turned inside out
Budgetary disputes are now resolved on an emotional battlefield where facts usually take a back seat to ideology. Despite this trend, there are occasional commentaries focused on fact-based themes. One recent example came from David Leonhardt of The New York Times, entitled “Why Budget Cuts Don’t Bring Prosperity”. The article began with the observation that because so many in Congress believe that budget cuts are the path to national prosperity, the only remaining question concerns how deeply spending should be cut this year. Mr. Leonhardt provided those misled “leaders” with the facts:
The fundamental problem after a financial crisis is that businesses and households stop spending money, and they remain skittish for years afterward. Consider that new-vehicle sales, which peaked at 17 million in 2005, recovered to only 12 million last year. Single-family home sales, which peaked at 7.5 million in 2005, continued falling last year, to 4.6 million. No wonder so many businesses are uncertain about the future.
Without the government spending of the last two years — including tax cuts — the economy would be in vastly worse shape. Likewise, if the federal government begins laying off tens of thousands of workers now, the economy will clearly suffer.
That’s the historical lesson of postcrisis austerity movements. The history is a rich one, too, because people understandably react to a bubble’s excesses by calling for the reverse. When Franklin Roosevelt was running for president in 1932, he repeatedly called for a balanced budget.
But no matter how morally satisfying austerity may be, it’s the wrong answer.
Leonhardt’s objective analysis drew this response from Yves Smith of Naked Capitalism:
Did a memo go out? Leonhardt almost always hews to neoclassical orthodoxy. This is a big change for him.
Those “troublesome creatures” called facts became the subject of an opinion piece about the budget, written by Bill Schneider for Politico. While dissecting the emotional motivation responsible for “a dangerous political arms race where the stakes keep escalating”, Schneider set about isolating the fact-based signal from the emotional noise clouding the budget debate:
Many of the programs targeted for big cuts by the House Republicans have a suspiciously ideological tinge: Planned Parenthood, the Environmental Protection Agency, funds to implement the new health care reform law, National Public Radio, the Corporation for Public Broadcasting, President Bill Clinton’s AmeriCorps program, money for a White House climate change czar. The Washington Post calls the House budget “an assault on bedrock Democratic priorities.’’
The public is certainly worried about the deficit. But do people believe the deficit is a crisis demanding immediate and radical action? That’s not so clear.
In a Pew Research Center poll taken this month, the public was split over whether the federal government’s priority should be reducing the deficit (49 percent) or spending to help the economic recovery (46 percent). What economic issue worries people the most? Jobs tops the list (44 percent). Fewer than half that say the deficit (19 percent).
Yes, there is an economic crisis in the country. The crisis is jobs. So Republicans have to argue that spending cuts will create jobs — an argument that mystifies many economists.
Let’s hope that those “troublesome creatures” keep turning up at debates, “town hall” meetings and in commentaries. If they cause widespread allergic reactions, let nature run its course.
January 21 brought us Episode 199 of HBO’s Real Time with Bill Maher. At the end of the program, Bill went through his popular “New Rules” segment. On this occasion, he wound it up with a rant about how the Republicans were exclusively at fault for the financial crisis. Aside from the fact that this claim was historically inaccurate, it was not at all fair to David Stockman (a guest on that night’s show) who had to sit through Maher’s diatribe without an opportunity to point out the errors. (On the other hand, I was fine with watching Stephen Moore twist in the wind as Maher went through that tirade.)
That incident underscored the obvious need for Bill Maher to invite William Black as a guest on the show in order to clarify this issue. Prior to that episode, Black had written an essay, which appeared on The Big Picture website. Although the theme of that piece was to debunk the “mantra of the Republican Party” that “regulation is a job killer”, Black emphasized that Democrats had a role in “deregulation, desupervision, and de facto decriminalization (the three ‘des’)” which created the “criminogenic environment” precipitating the financial crisis:
The Great Recession was triggered by the collapse of the real estate bubble epidemic of mortgage fraud by lenders that hyper-inflated that bubble. That epidemic could not have happened without the appointment of anti-regulators to key leadership positions. The epidemic of mortgage fraud was centered on loans that the lending industry (behind closed doors) referred to as “liar’s” loans — so any regulatory leader who was not an anti-regulatory ideologue would (as we did in the early 1990s during the first wave of liar’s loans in California) have ordered banks not to make these pervasively fraudulent loans.
* * *
From roughly 1999 to the present, three administrations have displayed hostility to vigorous regulation and have appointed regulatory leaders largely on the basis of their opposition to vigorous regulation. When these administrations occasionally blundered and appointed, or inherited, regulatory leaders that believed in regulating, the administration attacked the regulators. In the financial regulatory sphere, recent examples include Arthur Levitt and William Donaldson (SEC), Brooksley Born (CFTC), and Sheila Bair (FDIC).
Similarly, the bankers used Congress to extort the Financial Accounting Standards Board (FASB) into trashing the accounting rules so that the banks no longer had to recognize their losses. The twin purposes of that bit of successful thuggery were to evade the mandate of the Prompt Corrective Action (PCA) law and to allow banks to pretend that they were solvent and profitable so that they could continue to pay enormous bonuses to their senior officials based on the fictional “income” and “net worth” produced by the scam accounting. (Not recognizing one’s losses increases dollar-for-dollar reported, but fictional, net worth and gross income.)
When members of Congress (mostly Democrats) sought to intimidate us into not taking enforcement actions against the fraudulent S&Ls we blew the whistle.
President Obama’s January 18 opinion piece for The Wall Street Journalprompted a retort from Bill Black. The President announced that he had signed an executive order requiring “a government-wide review of the rules already on the books to remove outdated regulations that stifle job creation and make our economy less competitive”. Obama’s focus on “regulations that stifle job creation” seemed to exemplify what Black had just discussed one day earlier. Accordingly, Bill Black wrote an essay for The Huffington Poston January 19, which began this way:
I get President Obama’s “regulatory review” plan, I really do. His game plan is a straight steal from President Clinton’s strategy after the Republican’s 1994 congressional triumph. Clinton’s strategy was to steal the Republican Party’s play book. I know that Clinton’s strategy was considered brilliant politics (particularly by the Clintonites), but the Republican financial playbook produces recurrent, intensifying fraud epidemics and financial crises. Rubin and Summers were Clinton’s offensive coordinators. They planned and implemented the Republican game plan on finance. Rubin and Summers were good choices for this role because they were, and remain, reflexively anti-regulatory. They led the deregulation and attack on supervision that began to create the criminogenic environment that produced the financial crisis.
Bill Clinton’s role in facilitating the financial crisis would have surely become an issue in the 2008 Presidential election campaign, had Hillary Clinton been the Democratic nominee. Instead, the Democrats got behind a “Trojan horse” candidate, disguised in the trappings of “Change” who, once elected, re-installed the very people who implemented the crucial deregulatory changes which caused the financial crisis. Bill Black provided this explanation:
The zeal, crude threats, and arrogance they displayed in leading the attacks on SEC Chair Levitt and CFTC Chair Born’s efforts to adopt regulations that would have reduced the risks of fraud and financial crises were exceptional. Just one problem — they were wrong and Levitt and Born were right. Rubin and Summers weren’t slightly wrong; they put us on the path to the Great Recession. Obama knows that Clinton’s brilliant political strategy, stealing the Republican play book, was a disaster for the nation, but he has picked politics over substance.
* * *
Obama’s proposal and the accompanying OMB releases do not mention the word or the concept of fraud. Despite an “epidemic” of fraud led by the bank CEOs (which caused the greatest crisis of his life), Obama cannot bring itself to use the “f” word. The administration wants the banks’ senior officers to fund its reelection campaign. I’ve never raised political contributions, but I’m certain that pointing out that a large number of senior bank officers were frauds would make fundraising from them awkward.
Black targeted Obama’s lame gesture toward acknowledgement of some need for regulation, encapsulated in the statement that “(w)here necessary, we won’t shy away from addressing obvious gaps …”:
Huh? The vital task is to find the non-obvious gaps. Why, two years into his presidency, has the administration failed to address “obvious gaps”? The administration does not need Republican approval to fill obvious gaps in regulation. Even when Obama finds “obvious gaps” in regulatory protection he does not promise to act. He will act only “where necessary.” We know that Summers, Rubin, and Geithner rarely believe that financial regulation is “necessary.” Even if Obama decides it is “necessary” to act he only promises to “address” “obvious gaps” — not “end” or “fill” them.
At the conclusion of his Huffington Post essay, Black provided his own list of “obvious gaps” described as the “Dirty Dozen” — “. . . obvious gaps in financial regulation which have persisted and grown during this, Obama’s first two years in office.”
Bill Black is just one of many commentators to annotate the complicity of Democrats in causing the financial crisis. Beyond that, Black has illustrated how President Obama has preserved – and possibly enhanced — the “criminogenic” milieu which could bring about another financial crisis.
The first step toward implementing “bipartisan solutions” to our nation’s ills should involve acknowledging the extent to which the fault for those problems is bipartisan.
One could write an 800-page book on this subject. During the past week, we’ve been bombarded with explanations from across the political spectrum, concerning how President Obama has gone from wildly-popular cult hero to radioactive force on the 2010 campaign trail. For many Democrats facing re-election bids in November, the presence of Obama at one of their campaign rallies could be reminiscent of the appearance of William Macy’s character from the movie, The Cooler. Wikipedia’s discussion of the film provided this definition:
In gambling parlance, a “cooler” is an unlucky individual whose presence at the tables results in a streak of bad luck for the other players.
Barack Obama was elected on a wave of emotion, under the banners of “Hope” and “Change”. These days, the emotion consensus has turned against Obama as voters feel more hopeless as a result of Obama’s failure to change anything. His ardent supporters feel as though they have been duped. Instead of having been tricked into voting for a “secret Muslim”, they feel they have elected a “secret Republican”. At the Salon.com website, Glenn Greenwald has documented no less than fifteen examples of Obama’s continuation of the policies of George W. Bush, in breach of his own campaign promises.
One key area of well-deserved outrage against President Obama’s performance concerns the economy. The disappointment about this issue was widely articulated in December of 2009, as I pointed out here. At that time, Matt Taibbi had written an essay for Rolling Stone entitled, “Obama’s Big Sellout”, which inspired such commentators as Edward Harrison of Credit Writedowns to write this and this. Beyond the justified criticism, polling by Pew Research has revealed that 46% of Democrats and 50% of Republicans incorrectly believe that the TARP bank bailout was signed into law by Barack Obama rather than George W. Bush. President Obama invited this confusion with his nomination of “Turbo” Tim Geithner to the position of Treasury Secretary. As President of the Federal Reserve of New York, Geithner oversaw the $13 billion gift Goldman Sachs received by way of Maiden Lane III.
The emotional battleground of the 2010 elections provided some fun for conservative pundit, Peggy Noonan this week as a result of the highly-publicized moment at the CNBC town hall meeting on September 20. Velma Hart’s question to the President was emblematic of the plight experienced by many 2008 Obama supporters. Noonan’s article, “The Enraged vs. The Exhausted” characterized the 2010 elections as a battle between those two emotional factions. The “Velma Moment” exposed Obama’s political vulnerability as an aloof leader, lacking the ability to emotionally connect with his supporters:
The president looked relieved when she stood. Perhaps he thought she might lob a sympathetic question that would allow him to hit a reply out of the park. Instead, and in the nicest possible way, Velma Hart lobbed a hand grenade.
“I’m a mother. I’m a wife. I’m an American veteran, and I’m one of your middle-class Americans. And quite frankly I’m exhausted. I’m exhausted of defending you, defending your administration, defending the mantle of change that I voted for, and deeply disappointed with where we are.” She said, “The financial recession has taken an enormous toll on my family.” She said, “My husband and I have joked for years that we thought we were well beyond the hot-dogs-and-beans era of our lives. But, quite frankly, it is starting to knock on our door and ring true that that might be where we are headed.”
What a testimony. And this is the president’s base. He got that look public figures adopt when they know they just took one right in the chops on national TV and cannot show their dismay. He could have responded with an engagement and conviction equal to the moment. But this was our president — calm, detached, even-keeled to the point of insensate. He offered a recital of his administration’s achievements: tuition assistance, health care. It seemed so off point. Like his first two years.
Kirsten Powers of The Daily Beast provided the best analysis of how the “Velma Moment” illustrated Obama’s lack of empathy. Where Bill Clinton is The Sorcerer, Barack Obama is The Apprentice:
Does Barack Obama suffer from an “empathy deficit?” Ironically, it was Obama who used the phrase in a 2008 speech when he diagnosed the United States as suffering from the disorder. In a plea for unity, candidate Obama said lack of empathy was “the essential deficit that exists in this country.” He defined it as “an inability to recognize ourselves in one another; to understand that we are our brother’s keeper; we are our sister’s keeper; that, in the words of Dr. King, we are all tied together in a single garment of destiny.”
* * *
And at a 2008 rally in Westerville, Ohio, Obama said, “One of the values that I think men in particular have to pass on is the value of empathy. Not sympathy, empathy. And what that means is standing in somebody else’s shoes, being able to look through their eyes. You know, sometimes we get so caught up in ‘us’ that it’s hard to see that there are other people and that your behavior has an impact on them.”
Yes, President Obama, sometimes that does happen. Take a look in the mirror. Nothing brought this problem into relief like the two Obama supporters who confronted the president at a recent town hall meeting expressing total despair over their economic situation and hopelessness about the future. Rather than expressing empathy, Obama seemed annoyed and proceeded with one of his unhelpful lectures.
* * *
One former Emoter-in-Chief, Bill Clinton, told Politico last week, “[Obama’s] being criticized for being too disengaged, for not caring. So he needs to turn into it. I may be one of the few people that think it’s not bad that that lady said she was getting tired of defending him. He needs to hear it. You need to hear. Embrace people’s anger, including their disappointment at you. And just ask ‘em to not let the anger cloud their judgment. Let it concentrate their judgment. And then make your case.”
Then the kicker: “[Obama has] got to realize that, in the end, it’s not about him. It’s about the American people, and they’re hurting.”
The American people are hurting because their President sold them out immediately after he was elected. When faced with the choice of bailing out the zombie banks or putting those banks through temporary receivership (the “Swedish approach” – wherein the bank shareholders and bondholders would take financial “haircuts”) Obama chose to bail out the banks at taxpayer expense. So here we are . . . in a Japanese-style “lost decade”. In case you don’t remember the debate from early 2009 – peruse this February 10, 2009 posting from the Calculated Risk website. After reading that, try not to cry after looking at this recent piece by Barry Ritholtz of The Big Picture entitled, “We Should Have Gone Swedish . . .” :
The result of the Swedish method? They spent 4% of GDP ($18.3 billion in today’s dollars), to rescue their banks. That is far less than the $trillions we have spent — somewhere between 15-20% of GDP.
Final cost to the Swedes? Less than 2% of G.D.P. (Some officials believe it was closer to zero, depending on how certain rates of return are calculated).
In the US, the final tally is years away from being calculated — and its likely to be many times what Sweden paid in GDP % terms.
It has become apparent that the story of “Where Obama Went Wrong” began during the first month of his Presidency. Whoever undertakes the task of writing that book will be busy for a long time.
Nobody seems too surprised about the resignation of Larry Summers from his position as Director of the National Economic Council. Although each commentator seems to have a unique theory for Summers’ departure, the event is unanimously described as “expected”.
When Peter Orszag resigned from his post as Director of the Office of Management and Budget, the gossip mill focused on his rather complicated love life. According to The New York Post, the nerdy-looking number cruncher announced his engagement to Bianna Golodryga of ABC News just six weeks after his ex-girlfriend, shipping heiress Claire Milonas, gave birth to their love child, Tatiana. That news was so surprising, few publications could resist having some fun with it. Politics Daily ran a story entitled, “Peter Orszag: Good with Budgets, Good with Babes”. Mark Leibovich of The New York Times pointed out that the event “gave birth” to a fan blog called Orszagasm.com. Mr. Leibovich posed a rhetorical question at the end of the piece that was apparently answered with Orszag’s resignation:
This goes to another obvious — and recurring — question: whether someone whose personal life has become so complicated is really fit to tackle one of the most demanding, important and stressful jobs in the universe. “Frankly I don’t see how Orszag can balance three families and the national budget,” wrote Joel Achenbach of The Washington Post.
The shocking nature of the Orszag love triangle was dwarfed by President Obama’s nomination of Orszag’s replacement: Jacob “Jack” Lew. Lew is a retread from the Clinton administration, at which point (May 1998 – January 2001) he held that same position: OMB Director. That crucial time frame brought us two important laws that deregulated the financial industry: the Financial Services Modernization Act of 1999 (which legalized proprietary trading by the Wall Street banks) and the Commodity Futures Modernization Act of 2000, which completely deregulated derivatives trading, eventually giving rise to such “financial weapons of mass destruction” as naked credit default swaps. Accordingly, it should come as no surprise that Lew does not believe that deregulation of the financial industry was a proximate cause of the 2008 financial crisis. Lew’s testimony at his September 16 confirmation hearing before the Senate Budget Committee was discussed by Shahien Nasiripour of The Huffington Post:
Lew, a former OMB chief for President Bill Clinton, told the panel that “the problems in the financial industry preceded deregulation,” and after discussing those issues, added that he didn’t “personally know the extent to which deregulation drove it, but I don’t believe that deregulation was the proximate cause.”
Experts and policymakers, including U.S. Senators, commissioners at the Securities and Exchange Commission, top leaders in Congress, former financial regulators and even Obama himself have pointed to the deregulatory zeal of the Clinton and George W. Bush administrations as a major cause of the worst financial crisis since the Great Depression.
During 2009, Lew was working for Citigroup, a TARP beneficiary. Between the TARP bailout and the Federal Reserve’s purchase of mortgage-backed securities from that zombie bank, Citi was able to give Mr. Lew a fat bonus of $950,000 – in addition to the other millions he made there from 2006 until January of 2009 (at which point Hillary Clinton found a place for him in her State Department).
Another victory for the lobbyists came in their sabotage of the prohibition on proprietary trading (when banks trade with their own money, for their own benefit). The bill provides that federal financial regulators shall study the measure, then issue rules implementing it, based on the results of that study. The rules might ultimately ban proprietary trading or they may allow for what Jim Jubak of MSN calls the “de minimus” (trading with minimal amounts) exemption to the ban. Jubak considers the use of the de minimus exemption to the so-called ban as the likely outcome. Many commentators failed to realize how the lobbyists worked their magic here, reporting that the prop trading ban (referred to as the “Volcker rule”) survived reconciliation intact. Jim Jubak exposed the strategy employed by the lobbyists:
But lobbying Congress is only part of the game. Congress writes the laws, but it leaves it up to regulators to write the rules. In a mid-June review of the text of the financial-reform legislation, the Chamber of Commerce counted 399 rule-makings and 47 studies required by lawmakers.
Each one of these, like the proposed de minimus exemption of the Volcker rule, would be settled by regulators operating by and large out of the public eye and with minimal public input. But the financial-industry lobbyists who once worked at the Federal Reserve, the Treasury, the Securities and Exchange Commission, the Commodities Futures Trading Commission or the Federal Deposit Insurance Corp. know how to put in a word with those writing the rules. Need help understanding a complex issue? A regulator has the name of a former colleague now working as a lobbyist in an e-mail address book. Want to share an industry point of view with a rule-maker? Odds are a lobbyist knows whom to call to get a few minutes of face time.
You have one guess as to what agency will be authorized to make sure those new rules comport with the intent of the financial “reform” bill . . . Yep: the OMB (see OIRA).
President Obama’s nomination of Jacob Lew is just the latest example of a decision-making process that seems incomprehensible to his former supporters as well as his critics. Yves Smith of Naked Capitalism refuses to let Obama’s antics go unnoticed:
The Obama Administration, again and again, has taken the side of the financial services industry, with the occasional sops to unhappy taxpayers and some infrequent scolding of the industry to improve the optics.
Ms. Smith has developed some keen insight about the leadership style of our President:
The last thing Obama, who has been astonishingly accommodating to corporate interests, needs to do is signal weakness. But he has made the cardinal mistake of trying to please everyone and has succeeded in having no one happy with his policies. Past Presidents whose policies rankled special interests, such as Roosevelt, Johnson, and Reagan, were tenacious and not ruffled by noise. Obama, by contrast, announces bold-sounding initiatives, and any real change will break eggs and alienate some parties, then retreats. So he creates opponents, yet fails to deliver for his allies.
Yes, the Disappointer-In-Chief has failed to deliver for his allies once again – reinforcing my belief that he has no intention of running for a second term.
TheCenterLane.com offers opinion, news and commentary on politics, the economy, finance and other random events that either find their way into the news or are ignored by the news reporting business. As the name suggests, our focus will be on what seems to be happening in The Center Lane of American politics and what the view from the Center reveals about the events in the left and right lanes. Your Host, John T. Burke, Jr., earned his Bachelor of Arts degree from Boston College with a double major in Speech Communications and Philosophy. He earned his law degree (Juris Doctor) from the Illinois Institute of Technology / Chicago-Kent College of Law.