April 9, 2009
President Obama must feel relieved by the cartoonish attacks against him by the likes of Rep. Michelle Bachmann and Fox News character, Sean Hannity. Bachmann’s accusations that Obama is planning “re-education camps” for young people surely brought some comic relief to the new President. Hannity must have caused some thunderous laughter in the White House with his claim that during a speech the President gave in Strasbourg, France, we saw examples of how “Obama attacks America”. These denigration attempts were likely received as a welcome break from criticism being voiced by commentators who are usually supportive of the Obama administration. Take Keith Olbermann for example. He has not been holding back on expressing outrage over the Obama administration’s claim that the Patriot Act provides sovereign immunity to the federal government in civil lawsuits brought by victims of illegal wiretapping conducted by the Bush administration. Another example of a disillusioned Obama supporter is MSNBC’s Rachel Maddow, who has been fretting over the President’s plan to up the stakes for success in Afghanistan by increasing our troop commitment there and settling in to fight the good fight for as long as it takes.
Nothing has broken the spirits of Obama supporters more than his administration’s latest bank bailout scheme — a/k/a the Public-Private Investment Program (PPIP or “pee-pip”). Although Treasury Secretary “Turbo” Tim Geithner has been the guy selling this plan to Congress and the public, the “man behind the curtain” who likely hatched this scam is Larry Summers. Summers is the economist whom Obama named director of the National Economic Council. At the time of that appointment, many commentators expressed dismay, since Summers, as Bill Clinton’s Treasury Secretary, supported repeal of the 1933 Glass-Steagall Act. It is widely accepted that the repeal of the Glass-Steagall Act helped bring about the subprime mortgage crisis and our current economic meltdown. On the November 25, 2008 broadcast of the program, Democracy Now, author Naomi Klein made the following remark about Obama’s appointment of Summers: “I think this is really troubling.” She was right. It was recently reported by Jeff Zeleny of The New York Times that Summers earned more than $5 million last year from the hedge fund, D. E. Shaw and collected $2.7 million in speaking fees from Wall Street companies that received government bailout money. Many economists are now voicing opinions that the Geithner-Summers Public-Private Investment Program (PPIP) is “really troubling”, as well. Nobel laureates Paul Krugman and Joseph Stiglitz have been vocal critics of this plan. As James Quinn reported for London’s Telegraph: Professor Stiglitz said that the plan is “very flawed” and “amounts to robbery of the American people.”
Obama supporter George Soros, the billionaire financier and hedge fund manager, had this to say to Saijel Kishan and Kathleen Hays of Bloomberg News about Obama’s performance so far:
“He’s done very well in every area, except in dealing with the recapitalization of the banks and the restructuring of the mortgage market,” said Soros, who has published an updated paperback version of his book “The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means” (Scribe Publications, 2009). “Unfortunately, there’s just a little bit too much continuity with the previous administration.”
The usually Obama-friendly Huffington Post has run a number of critical pieces addressing the Geithner – Summers plan. Sam Stein pointed out how the plan is “facing a new round of withering criticism from economists”:
These critiques have produced a Washington rarity: the re-sparking of a debate that, in the wake of positive reviews from Wall Street, had largely subsided. Just as Geithner seemed to be finding his political footing, the spotlight has been placed right back on his cornerstone proposal, with critics calling into question both his projections and past testimony on the matter.
Jeffrey Sachs, an Economics professor at Columbia University, wrote a follow-up article for The Huffington Post on April 8, affirming earlier criticisms leveled against the bailout proposal with the added realization that “the situation is even potentially more disastrous” than previously described:
Insiders can easily game the system created by Geithner and Summers to cost up to a trillion dollars or more to the taxpayers.
Zachary Goldfarb of The Washington Post took a closer look at Treasury Secretary Geithner’s testimony before Congress last month, to ascertain the viability of some of the proposals Geithner mentioned at that hearing:
The Obama administration’s plan for a sweeping expansion of financial regulations could have unintended consequences that increase the very hazards that these changes are meant to prevent.
Financial experts say the perception that the government will backstop certain losses will actually encourage some firms to take on even greater risks and grow perilously large. While some financial instruments will come under tighter control, others will remain only loosely regulated, creating what some experts say are new loopholes. Still others say the regulation could drive money into questionable investments, shadowy new markets and lightly regulated corners of the globe.
If President Obama does not change course and deviate from the Geithner-Summers plan before it’s too late, his legacy will be a ten-year recession rather than a two year recession without the PPIP. Worse yet, the toughest criticism and the most pressure against his administration are coming from people he has considered his supporters. At least he has the people at Fox News to provide some laughable “decoy” reports to keep his hard-core adversaries otherwise occupied.