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Seeing Through Obama

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Now that Mitt Romney has secured the Republican presidential nomination, commentators are focusing on the question of whether the candidate can motivate the conservative Republican base to vote for the “Massachusetts moderate” in November.

Meanwhile, it is becoming obvious that after three years in the White House, Barack Obama has managed to alienate the liberal base of the Democratic Party.  The Firedog Lake website has been among the most vocal, left-leaning blogs to regularly criticize the President.  The site’s publisher, Jane Hamsher, has picked up on Public Citizen’s campaign against the Trans-Pacific Partnership, which Obama is attempting to sneak past the public before November.  On April 27, Ms. Hamsher provided us with this warning:

The White House wants to fast track the Trans-Pacific Partnership (TPP) “free trade” agreement with Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam.  Japan is waiting in the wings, Canada and Mexico want in, Taiwan has announced its intention to meet membership requirements and China says it will “earnestly study” whether to seek entry into the agreement.

Basically, the TPP is NAFTA on steroids.  The White House wants to reach a deal prior to the election because they know all the apparatchiks feeding on the $1 billion in Obama campaign money flowing through the system will launch tribalistic attacks on anyone organizing against it (activists, labor unions, workers) for “helping Mitt Romney win” – thus facilitating its easy passage.

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At an April 4 press conference in the Rose Garden, President Obama said that TPP “could be a real model for the world.”  Earlier this month the US limited the ability of public interest groups to have input into the process.  So much for the “most transparent administration ever.”

At her Naked Capitalism blog, Yves Smith introduced a video clip of Matt Stoller’s appearance on Cenk Uygur’s television program with the following anecdote:

Matt Stoller, in this video clip from an interview last week with Cenk Uygur (hat tip Doug Smith), sets forth what should be widely accepted truths about Obama:  that he’s an aggressive proponent of policies that favor the 1%.  Yet soi disant progressives continue to regard him as an advocate of their interests, when at best, all he does is pander to them.

It reminds me of a conversation I had with a black woman after an Occupy Wall Street Alternative Banking Group meeting.  She was clearly active in New York City housing politics and knowledgeable about policy generally.  I started criticizing Obama’s role in the mortgage settlement.  She said:

I have trouble with members of my community.  I think Obama needs not to be President.  I think he needs to be impeached.  But no one in my community wants to hear that.  I tell them it’s like when your mother sees you going out with someone who is no good for you.

“Why don’t you leave him?  What does he do for you?”

“But Momma, I love him.”

“He knocked you down the stairs, took your keys, drove your car to Florida, ran up big bills on your credit card, and Lord only knows what else he did when he was hiding from you.”

“But Momma, I still love him.”

Her story applies equally well to the oxymoron of the Establishment Left in America. Obama is not only not their friend, but he abuses them, yet they manage to forgive all and come back for more.

In an article published by The Nation, Naomi Klein pulled the rose-colored glasses off the faces of many Obama fans with this review of the President’s performance so far:

After nine months in office, Obama has a clear track record as a global player.  Again and again, US negotiators have chosen not to strengthen international laws and protocols but rather to weaken them, often leading other rich countries in a race to the bottom.

After discussing Obama’s failure to take a leading role to promote global efforts to combat pollution, or to promote human rights, Ms. Klein moved on to highlight Obama’s subservience to the financial oligarchy:

And then there are the G-20 summits, Obama’s highest-profile multilateral engagements.  When one was held in London in April, it seemed for a moment that there might be some kind of coordinated attempt to rein in transnational financial speculators and tax dodgers.  Sarkozy even pledged to walk out of the summit if it failed to produce serious regulatory commitments.  But the Obama administration had no interest in genuine multilateralism, advocating instead for countries to come up with their own plans (or not) and hope for the best – much like its reckless climate-change plan.  Sarkozy, needless to say, did not walk anywhere but to the photo session to have his picture taken with Obama.

Of course, Obama has made some good moves on the world stage – not siding with the coup government in Honduras, supporting a UN Women’s Agency… But a clear pattern has emerged:  in areas where other wealthy nations were teetering between principled action and negligence, US interventions have tilted them toward negligence.  If this is the new era of multilateralism, it is no prize.

While watching Saturday evening’s White House Correspondents’ Dinner, I was particularly impressed by Jimmy Kimmel’s face-to-face confrontation with President Obama concerning the administration’s crackdown on medical marijuana clinics.  One of Obama’s most outspoken critics from the left – Constitutional lawyer Glenn Greenwald – pulled no punches while upbraiding the President for yet another broken campaign promise:

President Obama gave an interview to Rolling Stone‘s Jann Wenner this week and was asked about his administration’s aggressive crackdown on medical marijuana dispensaries, including ones located in states where medical marijuana is legal and which are licensed by the state; this policy is directly contrary to Obama’s campaign pledge to not “use Justice Department resources to try and circumvent state laws about medical marijuana.”  Here’s part of the President’s answer:

I never made a commitment that somehow we were going to give carte blanche to large-scale producers and operators of marijuana – and the reason is, because it’s against federal law.  I can’t nullify congressional law.  I can’t ask the Justice Department to say, “Ignore completely a federal law that’s on the books” . . . .

The only tension that’s come up – and this gets hyped up a lot – is a murky area where you have large-scale, commercial operations that may supply medical marijuana users, but in some cases may also be supplying recreational users.  In that situation, we put the Justice Department in a very difficult place if we’re telling them, “This is supposed to be against the law, but we want you to turn the other way.”  That’s not something we’re going to do. 

Aside from the fact that Obama’s claim about the law is outright false – as Jon Walker conclusively documents, the law vests the Executive Branch with precisely the discretion he falsely claims he does not have to decide how drugs are classified – it’s just extraordinary that Obama is affirming the “principle” that he can’t have the DOJ “turn the other way” in the face of lawbreaking.

*   *   *

The same person who directed the DOJ to shield torturers and illegal government eavesdroppers from criminal investigation, and who voted to retroactively immunize the nation’s largest telecom giants when they got caught enabling criminal spying on Americans, and whose DOJ has failed to indict a single Wall Street executive in connection with the 2008 financial crisis or mortgage fraud scandal, suddenly discovers the imperatives of The Rule of Law when it comes to those, in accordance with state law, providing medical marijuana to sick people with a prescription.

It’s becoming obvious that Mitt Romney is not the only candidate who will have to worry about whether his party’s “base” will bother to stand in line at the polls in November, to vote for a candidate who does not find it necessary to accommodate the will of the voters who elect him.


 

Circular Firing Squad

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I knew this would happen.  Near the end of Obama’s first year in office, I anticipated that the President’s polling numbers would eventually sink and his reelection campaign would face strong headwinds.  By that point – on the eve of his reelection campaign – someone would blame the defection of white voters for Obama’s failure to win a second term.  In December of 2009, I wrote a piece discussing how the “race card” would not serve as a “free pass” for the Disappointer-In-Chief.  I referenced critiques, written by several African-American commentators, who were more-than-a-little upset with Obama’s job performance during that first year.

As expected, once Obama’s approval rating dropped to 40%, it didn’t take too long for someone to step forward with the “blame whitey” meme.  Melissa Harris-Perry, a professor of political science at Tulane University, recently wrote an article for The Nation, wherein she blamed racism for Obama’s declining popularity:

The 2012 election may be a test of another form of electoral racism:  the tendency of white liberals to hold African-American leaders to a higher standard than their white counterparts.  If old-fashioned electoral racism is the absolute unwillingness to vote for a black candidate, then liberal electoral racism is the willingness to abandon a black candidate when he is just as competent as his white predecessors.

*   *   *

President Obama has experienced a swift and steep decline in support among white Americans – from 61 percent in 2009 to 33 percent now.  I believe much of that decline can be attributed to their disappointment that choosing a black man for president did not prove to be salvific for them or the nation.  His record is, at the very least, comparable to that of President Clinton, who was enthusiastically re-elected.  The 2012 election is a test of whether Obama will be held to standards never before imposed on an incumbent.  If he is, it may be possible to read that result as the triumph of a more subtle form of racism.

Despite the fact that Obama has yet to lose the 2012 election, Professor Harris-Perry has already seen fit to assemble a “circular firing squad” to assign blame for the Obama campaign’s inevitable failure.  Her theory about racism drew quick fire from more-intelligent commentators, who exposed the absurdity of her claim.  Corey Robin, who earned a PhD in Political Science from Yale, did a thorough job of debunking Professor Harris-Perry’s claim.  Among the points made by Dr. Robin, was this:

In fact, according to this September Washington Post story, “Five months ago, 83 percent of African Americans held ‘strongly favorable’ views of Obama, but in a new Washington Post-ABC news poll that number has dropped to 58 percent.”  That’s why, according to this piece, Obama has made special outreach efforts to blacks:  he’s worried about their dwindling support.  But as the Post also goes onto explain, “That drop is similar to slipping support for Obama among all groups.”

The most important point made by Corey Robin was his focus on the overarching problem of Obama’s politics:

But when we assess Obama, like any other president, we’re not thinking about his skills and talents; we’re thinking about what we call his “politics” and, even more important, how his politics reflect larger forces and structures in American society: corporate power, neoliberal ideology, declining organizational capacity on the left, and so on.  We see him, often, as a symptom of those forces, not a challenge to them.  Not, again, because of any lack of intelligence or ability on his part, but because, in part, he is a product of the structure (with all its failings) we would like to see dismantled.

Yves Smith of Naked Capitalism ripped Professor Harris-Perry’s article to shreds.  Ms. Smith concluded her essay by placing blame back on the man himself:

It took most people far too long to get that Obama was a phony because the presumption that a black man would be sympathetic to the fate of the downtrodden is a deeply embedded but never voiced prejudice (and this bias is exploited successfully by the right in depicting Obama as a socialist).

*   *   *

These traditional iconic symbols of liberalism – secular urban elitism, blackness, technocratic skill, micro-issue identity based political organizing groups – have been fully subverted in the service of banking interests.  Obama is the ultimate, but not the only, piece of evidence that these symbols are now used simply to con the Democratic base out of their support and money.  The task of moving forward will require rebuilding the symbolic vocabulary of the defenders of the middle class.

Melissa Harris-Perry is forgetting that Barack Obama is only half  black.  In fact, many of us are blaming Obama’s white half for breaking so many campaign promises and for his selling out to the plutocracy.


 

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Time For Some Serious Pushback

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The American people are finally getting angry.  I thought it would never happen.  In case you haven’t heard about it yet, the most popular topic on Twitter right now is:  #FuckYouWashington.  (For those who don’t like typing dirty words on their computer – there is the alternative #FYW.)  If you’re looking for some refreshing reading, which will reinforce your confidence in the people of this great country (especially after excessive exposure to the depressing, “debt ceiling” debate) be sure to check in on it.

Meanwhile, our fake, “two-party system” is facing a fresh challenge.  The Republi-Cratic Corporatist Party is being threatened by an Internet-based organization called, Americans Elect.  Here’s how the group describes itself:

Americans Elect is the first-ever open nominating process.  We’re using the Internet to give every single voter – Democrat, Republican or independent – the power to nominate a presidential ticket in 2012.  The people will choose the issues. The people will choose the candidates.  And in a secure, online convention next June, the people will make history by putting their choice on the ballot in every state.

*   *   *

We have no ties to any political group – left, right, or center.  We don’t promote any issues, ideology or candidates.  None of our funding comes from special interests or lobbyists.  Our only goal is to put a directly-nominated ticket on the ballot in 2012.

*   *   *

The goal of Americans Elect is to nominate a presidential ticket that answers to the people – not the political system.  Like millions of American voters, we simply want leadership that will work together to tackle the challenges facing our country.  And we believe a direct nominating process will prove that America is ready for a competitive, nonpartisan ticket.

Just when the Obama Administration was getting comfy with the idea that it could take the voters for granted  …  along came this new threat in the form of Americans Elect.  The timing couldn’t have been more appropriate.  A recent CNN poll revealed that Obama’s support among liberals has dropped to “the lowest point in his presidency”.  The man whom I characterized as the “Disappointer-In-Chief” during his third month in office, is now being referred to by The Nation as the “Compromiser-in-Chief”.  Ari Melber’s essay in The Nation provides a great summary of the criticism directed against Obama from the Left.  One example came from economist Paul Krugman, who described Obama as “President Pushover”.

In order to resist any new challenges to the status quo, the Republi-Cratic Corporatist Party is taking advantage of the proposed “debt ceiling” legislation to cement its absolute control over the United States government.  Ryan Grim of The Huffington Post provided us with the revelation of a bipartisan effort to create an authoritarian governing body, designed to circumvent Constitutionally-prescribed legislative procedures:

This “Super Congress,” composed of members of both chambers and both parties, isn’t mentioned anywhere in the Constitution, but would be granted extraordinary new powers.  Under a plan put forth by Senate Minority Leader Mitch McConnell (R-Ky.) and his counterpart Majority Leader Harry Reid (D-Nev.), legislation to lift the debt ceiling would be accompanied by the creation of a 12-member panel made up of 12 lawmakers — six from each chamber and six from each party.

Legislation approved by the Super Congress — which some on Capitol Hill are calling the “super committee” — would then be fast-tracked through both chambers, where it couldn’t be amended by simple, regular lawmakers, who’d have the ability only to cast an up or down vote.  With the weight of both leaderships behind it, a product originated by the Super Congress would have a strong chance of moving through the little Congress and quickly becoming law.  A Super Congress would be less accountable than the system that exists today, and would find it easier to strip the public of popular benefits.  Negotiators are currently considering cutting the mortgage deduction and tax credits for retirement savings, for instance, extremely popular policies that would be difficult to slice up using the traditional legislative process.

House Speaker John Boehner (R-Ohio) has made a Super Congress a central part of his last-minute proposal, multiple news reports and people familiar with his plan say.

Independents and “Third-Party” members of Congress would be excluded from this “Super Congress”, thus subverting any attempts by the “little people” to steal control of the government away from the Republi-Cratic Corporatist Party.  Concern about the upstart Americans Elect organization could have been the motivating factor which inspired the “Super Congress” plan.  Tom Friedman’s recent New York Times commentary must have set off a “treason alert” for the Congressional kleptocrats, who read this:

Write it down:  Americans Elect.  What Amazon.com did to books, what the blogosphere did to newspapers, what the iPod did to music, what drugstore.com did to pharmacies, Americans Elect plans to do to the two-party duopoly that has dominated American political life – remove the barriers to real competition, flatten the incumbents and let the people in.  Watch out.

The Republi-Cratic Corporatist Party is already watching out.  That’s why they are moving to create a new, imperial “Super Congress”.  Be sure to express your opposition to this power grab by logging-on to Twitter and sharing your feelings at #FuckYouWashington.


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Geithner And Summers Draw Flak

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August 30, 2010

It’s coming from everywhere.  House Minority Leader, John “BronzeGel” Boehner, while giving a speech in Cleveland on August 24, called for the ouster of Treasury Secretary Timothy Geithner as well as the removal of National Economic Council Director, Larry Summers.  Bridget Johnson reported for The Hill that on August 28, Representative Tom Price (R-Georgia) echoed the call for Geithner and Summers to step down:  “They need to resign because the policies that they’re putting in place are not being effective.”

An editorial from the Republican-oriented Investors Business Daily expanded on Boehner’s criticism of the duo, without really giving any specific examples of what Geithner or Summers did wrong.  That’s because what they did wrong was to protect the banks at the expense of the taxpayers  —  the same thing a Republican administration would have done.  As a result, there have been simultaneous calls from the left for the sacking of Geithner and Summers.  Robert Scheer wrote a piece for The Nation entitled, “They Go or Obama Goes”.  Here is some of what he said:

It is Obama’s continued deference to the sensibilities of the financiers and his relative indifference to the suffering of ordinary people that threaten his legacy, not to mention the nation’s economic well-being.

*    *    *

While Obama continued the Bush practice of showering the banks with bailout money, he did not demand a moratorium on foreclosures or call for increasing the power of bankruptcy courts to force the banks, which created the problem, to now help distressed homeowners.

*    *     *

There is no way that Obama can begin to seriously reverse this course without shedding the economic team led by the Clinton-era “experts” like Summers and Treasury Secretary Timothy Geithner who got us into this mess in the first place.

Economist Randall Wray wrote a great piece for Wall Street Pit entitled, “Boehner Gets One Right:  Fire Obama’s Economics Team”.  Professor Wray distinguished his argument from Boehner’s theme that because neither Geithner nor Summers ever ran a business, they don’t know how to create jobs:

Obama’s economics team doesn’t care about job creation. (here)  So far, nearly three years into the worst depression since the Great Depression, they’ve yet to turn any serious attention to Main Street.  The health of Wall Street still consumes almost all of their time — and almost all government funds.  Trillions for Wall Street, not even peanuts for Americans losing their jobs and homes.  No one, except a highly compensated Wall Street trader, could possibly disagree with Boehner.  Fire Timmy and Larry and the rest of the Government Sachs team.

As an aside:  If you take offense at Professor Wray’s suggestion that the government should get actively involved in job creation, be sure to watch the interview with economist Robert Shiller by Simon Constable of The Wall Street Journal.

The Zero Hedge website recently published an essay by Michael Krieger of KAM LP.  One of Krieger’s points, which resonated with me, was the idea that whether you have a Democratic administration or a Republican administration, both parties are beholden to the financial elites, so there’s not much room for any “change you can believe in”:

.   .  .   the election of Obama has proven to everyone watching with an unbiased eye that no matter who the President is they continue to prop up an elite at the top that has been running things into the ground for years.  The appointment of Larry Summers and Tiny Turbo-Tax Timmy Geithner provided the most obvious sign that something was seriously not kosher.  Then there was the reappointment of Ben Bernanke.  While the Republicans like to simplify him as merely a socialist he represents something far worse.

*    *    *

What Obama has attempted to do is to wipe a complete economic collapse under the rug and maintain the status quo so that the current elite class in the United States remains in control.  The “people” see this ploy and are furious.  Those that screwed up the United States economy should never make another important decision about it yet they remain firmly in control of policy.  The important thing in any functioning democracy is the turnover of the elite class every now and again.  Yet, EVERY single government policy has been geared to keeping that class in power and to pass legislation that gives the Federal government more power to then buttress this power structure down the road.  This is why Obama is so unpopular.  Everything else is just noise to keep people divided and distracted.

“Keeping people divided and distracted” helps preserve the illusion that there really is a difference between the economic policies of the two parties.  If you take a close look at how President Obama’s Deficit Commission is attempting to place the cost of deficit reduction on the backs of working people, the unified advocacy for the financial sector becomes obvious.  What we are left with are the fights over abortion and gay marriage to differentiate the two parties from each other.

It’s time to pay more attention to that man behind the curtain.



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Face It

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July 15, 2010

Despite Washington’s festival of self-congratulation, now that the so-called financial “reform” bill is finally becoming law, the public is not being fooled.  Rich Miller of Bloomberg News reported that almost eighty percent of the public accepts the premise I discussed on June 28 — that the financial “reform” bill is a hoax.  Mr. Miller examined the results of a Bloomberg National Poll, which measured the public’s reaction to the financial reform bill and here’s what was revealed:

Almost four out of five Americans surveyed in a Bloomberg National Poll this month say they have just a little or no confidence that the measure being championed by congressional Democrats will prevent or significantly soften a future crisis.  More than three-quarters say they don’t have much or any confidence the proposal will make their savings and financial assets more secure.

A plurality — 47 percent — says the bill will do more to protect the financial industry than consumers; 38 percent say consumers would benefit more.

*   *   *

Skepticism about the financial bill, which may be approved this week, cuts across political party lines.  Seven in 10 Democrats have little or no confidence the proposals will avert or significantly lessen the impact of another financial catastrophe; 68 percent doubt it will make their savings more secure.

The Bloomberg poll also revealed that approximately 60 percent of the respondents felt that the $700 billion TARP bailout was a waste of money.  This sentiment was bolstered by a recent report from the Congressional Oversight Panel, disclosing that TARP did nothing for the 690 smaller banks, with assets of less than $100 billion each, which received TARP money.  Ronald Orol of MarketWatch provided this summary:

The report said “there is little evidence” that the capital injections led small banks to increase lending.

It also said small-bank TARP recipients have a disproportionately larger exposure to commercial real-estate losses than their big bank counterparts.  They are also having a difficult time making dividend payments to the government, a requirement of TARP, and this problem will increase over time, the report said.

The bottom line in reports such as these is usually a variation on the theme presented by pollster J. Ann Selzer, president of the firm that conducted the Bloomberg poll on public response to the financial reform bill:

“The mood of the American public is highly skeptical toward government and its ability to do right by the average person      . . .”

With the public mood at such a skeptical level about government, now is a good time to face up to the reason why our government has become so dysfunctional:  It is systemically corrupt.  Legalized graft has become the predominant force behind nearly all political decision-making.  If a politician has concerns that a particular compromise could upset his or her constituents, there will always be a helpful lobbyist to buy enough advertising propaganda (in the form of campaign ads) to convince the sheeple that the pol is acting in the public’s best interests.

Eric Alterman recently wrote a great (albeit turgid) article for The Nation, discussing institutionalized sleaziness in Washington.  Despite Alterman’s liberal bias, the systemic corruption he discusses should outrage conservative and independent voters as well as liberals.  Here are some of Alterman’s important points about ugly realities that the public has been reluctant to face:

Of course when attempting to determine why the people’s will is so frequently frustrated in our system, any author would be remiss if he did not turn first and foremost to the power of money.  The nonpartisan Center for Responsive Politics calculated that approximately $3.47 billion was spent lobbying the federal government in 2009, up from $3.3 billion the previous year.  By the final quarter of the year, lobbies were handing out $20 million a day.  The most generous spreaders of wealth were in the pharmaceutical and health products industries, whose $266.8 million set a record for “the greatest amount ever spent on lobbying efforts by a single industry for one year” according to CRP.  At one point, PhRMA employed forty-eight lobbying firms, in addition to in-house lobbyists, with a total of 165 people overall, according to the Sunlight Foundation’s Paul Blumenthal.

Max Baucus (D, Montana), who wrote the original Senate healthcare bill, raised roughly $2 million from the health sector in the past five years, according to opensecrets.org, despite running in a low-cost media market with marginal opposition.

*   *   *

Financial power need not be justified merely on the basis of the votes it sways.  Rather, it can define potential alternatives, invent arguments, inundate with propaganda and threaten with merely hypothetical opposition.  Politicians do not need to “switch” their votes to meet the demands of this money.  They can bury bills; they can rewrite the language of bills that are presented; they can convince certain Congressmen to be absent on the days certain legislation is discussed; they can confuse debate; they can bankroll primary opposition.  The manner and means through which money can operate is almost as infinite as its uses in any bordello, casino or Wall Street brokerage.

The banal, pretexted debates, focused on liberal vs. conservative, left vs. right, etc. are simply smokescreens for the real problem:  the disastrous consequences that governmental  influence peddling has on society.  Political corruption is bipartisan and in Washington it is almost universal.   Campaign finance reform is just one battle to be fought in the war against institutionalized government corruption.  It’s time for all of the Jack Abramoffs and their elected cronies to be rounded-up and tossed into the slammer.  The public needs to face this ugly reality and demand that laws be enforced, loopholes be closed and bribery be stopped.  We are just beginning to taste the consequences of ignoring these problems.  Failure to take control of this situation now runs a serious risk of unimaginable repercussions.




Pay More Attention To That Man Behind The Curtain

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October 15, 2009

Reading the news these days can cause so much aggravation, I’m surprised more people haven’t pulled out all of their hair.  Regardless of one’s political perspective, there is an inevitable degree of outrage experienced from revelations concerning the role of government malfeasnace in causing and reacting to the financial crisis.  We have come to rely on satire to soothe our anger.  (For a good laugh, be sure to read this.)  Fortunately, an increasing number of commentators are not only exposing the systemic problems that created this catastrophe – they’re actually suggesting some good solutions.

Robert Scheer, editor of Truthdig, recently considered the idea that the debate over healthcare reform might just be a distraction from the more urgent need for financial reform:

The health care issue should never even have been brought up at a time when the economy is reeling and we are running such immense deficits to shore up the banks.  Instead of fixing the economy by saving Americans’ homes and jobs, we are preoccupied with pie-in-the-sky rhetoric on a hot issue that should have been addressed in calmer times.  It came up now because, despite all the hoary partisan posturing, it is a safer subject than the more pressing issue of what to do with Citigroup, AIG and General Motors, which the taxpayers happen to own but do not control.  While Treasury Secretary Timothy Geithner plots in secret with the top bankers who got us into this mess, we are focused on the perennial circus of so-called health care reform.

There is an odd disconnect between the furious public debate over health care reform, with its emphasis on the cost of an increased government role, and the nonexistent discussion about the far more expensive and largely secretive government program to bail out Wall Street.  Why the agitation over the government spending $83 billion a year on health care when at least 20 times that amount has been thrown at the creators of the ongoing financial crisis without any serious public accountability?  On Wednesday, the Wall Street Journal reported that employees of the financial industry that we taxpayers saved are slated to be paid a record $140 billion this year.

Remember, taxpayers:  That $140 billion is your money.  The bailed-out institutions may claim to have repaid their TARP obligations, but they also received trillions in loans from the Federal Reserve — and Ben Bernanke refuses to disclose which institutions received how much.

William Greider wrote a superb essay for the October 26 issue of The Nation, emphasizing the importance of the work undertaken by the Financial Crisis Inquiry Commission, led by Phil Angelides, as well as the investigation being done by the House Committee on Oversight and Government Reform:

Even if Congress manages to act this fall, the debate will not end.  Obama’s plan does not begin to get at the rot in the financial system.  Wall Street’s most notorious practices continue to flourish, and if unemployment rates keep rising through 2010, the public will not set aside its anger.  The Angelides investigators could put the story back on the front page.

*  *  *

Beyond Ponzi schemes and deceitful mortgage lending, a far larger crime may lurk at the center of the crisis — wholesale securities fraud.  “Risk models” reassured unwitting investors who bought millions of bundled mortgage securities and derivatives like credit-default swaps.  But as Christopher Whalen of Institutional Risk Analytics has testified, many of the models lacked real-life markets where they could be tested and verified.  “Clearly, we have now many examples where a model or the pretense of a model was used as a vehicle for creating risk and hiding it,” Whalen said.  “More important, however, is the role of financial models for creating opportunities for deliberate acts of securities fraud.”  That’s what investigators can examine.  What did the Wall Street firms know about the reliability of these models when they sold the securities?  And what did they tell the buyers?

*  *  *

Surely the political system itself is a root cause of the financial crisis.  The swollen influence of financial interests pushed Congress and presidents to repeal regulation and look the other way as reckless excesses developed.  Efforts to restore a more reliable representative democracy can start with Congress.  The power of money could be curbed by new rules prohibiting members of key committees from accepting contributions from the sectors they oversee.  Regulatory agencies, likewise, need internal designs to protect them from capture by the industries they regulate.

The Federal Reserve, having failed in its obligations so profoundly, should be reconstituted as an accountable federal agency, shorn of the excessive secrecy and insider privileges accorded to bankers.  The Constitution gives Congress, not the executive branch, the responsibility for managing money and credit.  Congress must reassert this responsibility and learn how to provide adequate oversight and policy critique.

Reforming the financial system, in other words, can be the prelude to reviving representative democracy.

At The Huffington Post, Robert Borosage warned that the financial industry is waging a huge lobbying battle to derail any attempts at financial reform.  Beyond that, the banking lobbyists will re-write any legislation to make it more favorable to their own objectives:

The banking lobby is nothing if not shameless.  They hope to use the reforms to WEAKEN current law.  They are pushing to make the federal standard the ceiling on reform, stripping the power of states to have higher standards.  Basically, they are hoping to find a way to shut down the independent investigations of state attorneys general like New York’s Eliot Spitzer and Andrew Cuomo or Illinois’ Lisa Madigan.

*  *  *

Historically, the banks, as Senator Dick Durbin decried in disgust, “own the place.”  And they’ve succeeded thus far in frustrating reform, even while pocketing literally hundreds of billions in support from taxpayers.

*  *  *

But this time it could be different.  Backroom deals are no longer safe.  Americans have been fleeced of trillions in the value of their homes and their savings because of Wall Street’s reckless excesses.  Then as taxpayers, they were extorted to ante up literally trillions more to forestall economic collapse by bailing out the banking sector.  Insult was added to that injury when the Federal Reserve refused to tell the Congress who got the money and on what terms.

Legislators would be well advised to understand the cozy old ways of doing business are no longer acceptable.  Americans are livid and paying attention.  Legislators who rely on Wall Street to finance their campaigns and then lead the effort to block or dilute reforms will discover that their constituents know what they have been up to.  Organizations like my own Campaign for America’s Future, the Sunlight Foundation, Americans for Financial Reform, Huffington Post bloggers will make certain the word gets out.  Legislators may discover that Wall Street’s money is a burden, not a blessing.

The most encouraging article I have seen came from Dan Gerstein of Forbes.  His perspective matched my sentiments exactly.  Looking through President Obama’s empty rhetoric, Mr. Gerstein helped provide direction and encouragement to those of us who are losing hope that our dysfunctional government could do anything close to addressing our nation’s financial ills:

The Changer-in-Chief long ago gave up on the idea of dismantling and remaking the crazy-quilt regulatory system that Wall Street (along with its Washington enablers) rigged for its own enrichment at everyone else’s expense.

*  *  *

Instead, Team Obama opted to move around the deck chairs within the existing bureaucracy, daftly hoping this conformist approach would be enough to prevent another titanic meltdown.

*  *  *

In the end, though, the key to success will be countering Wall Street’s influence and putting the politicians’ feet to the ire.  Members of Congress need to know there will be consequences for sticking with the status quo.      . . .  Make clear to every incumbent: Endorse our plan and we’ll give you money and public support; back the banks, and we will run ads against you telling voters you are for corrupt capitalism.

As I have said before, this is all about power.  Right now, Wall Street has the political playing field to itself; it has the money, the access it buys and the fear it implies.  And the public is on the outside, looking incredulous that this rigged system is still in place more than a year after it was exposed.  But if the frustrated middle can organize and mobilize a focused, non-partisan revolt of the revolted — as opposed to the inchoate and polarizing tea party movement — that whole dynamic will quickly change.  And so too, I’m confident, will the voting habits of our elected officials.

Fortunately, individuals like Dan Gerstein are motivating people to stand up and let our elected officials know that they work for the people and not the lobbyists.  Larry Klayman, founder of Judicial Watch, has just written a new book:  Whores: Why And How I Came To Fight The Establishment.  The timing of the book’s release could not have been better.



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How The Democrats Self-Destruct

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June 29, 2009

For the past few days, we have been inundated with news reports detailing the self-destructive behavior of the late singing sensation, Michael Jackson.  Perhaps it is this heightened awareness of self-destruction that is causing people to take a closer look at the self-destructive behavior taking place within the Democratic Party.

Most notable is the behavior of President Obama.  As his Inauguration approached, many people were surprised to learn that some principal players selected for Obama’s economic team were the same people responsible for creating this mess during the Clinton years.  The most prominent of these is Larry Summers, who is expected to replace Ben Bernanke as Chairman of the Federal Reserve in January.  On June 24, Robert Scheer, on his Truthdig website, bemoaned the fact that Obama is following the “trickle down” strategy of bailing out the big banks, while doing nothing to really solve the mortgage crisis:

It’s not working.  The Bush-Obama strategy of throwing trillions at the banks to solve the mortgage crisis is a huge bust.  The financial moguls, while tickled pink to have $1.25 trillion in toxic assets covered by the feds, along with hundreds of billions in direct handouts, are not using that money to turn around the free fall in housing foreclosures.

*    *    *

Here again the administration, continuing the Bush strategy, is working the wrong end of the problem.  Although President Obama was wise enough to at least launch a job stimulus program, a far greater amount of federal funding benefits Wall Street as opposed to Main Street.

*    *    *

Why was I so naive as to have expected this Democratic president to not do the bidding of the banks when the last president from that party joined the Republicans in giving the moguls everything they wanted?  Please, Obama, prove me wrong.

If President Obama doesn’t prove Robert Scheer wrong, Obama might find himself facing some hostile crowds at the “town hall” meetings as 2012 approaches.

The President might also be surprised to encounter large-scale Democratic grassroots disappointment over his proposed “overhaul” of the financial regulatory system.  As I pointed out on June 18, President Obama’s financial reform proposal, released on that date, drew immediate criticism for the expanded powers granted to the Federal Reserve.  On June 24, The Nation (which prides itself on having a liberal bias) ran a harshly critical piece by William Greider, entitled:  “Obama’s False Reform”.  In addition to criticizing the expanded powers granted to the Federal Reserve, Greider emphasized that the proposal did not contain any significant measures, or “hard rules”, to reform the financial system.  Beyond that, Greider took Obama to task for the false claim that the regulatory system was overwhelmed by “the speed, scope and sophistication of a 21st century global economy”.  The article emphasized the need to “slow down the rush to weak solutions” by taking the time to find out about the root causes of the breakdown and then to address those causes:

Give subpoena power to Elizabeth Warren the Congressional Oversight Board she chairs.  Hire some of those investigative reporters who have no political investment in digging deeper into the mulch.  What exactly went wrong?  Who has bloody hands?  Where are the fundamental reforms?  If the economy returns to “normal’ rather soon, the ardor for serious reform might dissipate with much left undone.  That is a small risk to take, especially if the alternative is enacting the bankers’ pallid version of reform.

President Obama is now taking pride for the passage in the House of Representatives of the “climate change bill” (H.R. 2454, the American Clean Energy and Security Act of 2009).  Despite the claim of House Majority Leader Steny H. Hoyer (D-Md.) that the bill’s passage in the House was “a transformative moment”, 44 Democrats voted against the bill.  One harsh critic of the bill is Democrat Dennis Kucinich.  Here’s some of what Mr. Kucinich had to say:

It won’t address the problem.  In fact, it might make the problem worse.  It sets targets that are too weak, especially in the short term, and sets about meeting those targets through Enron-style accounting methods.  It gives new life to one of the primary sources of the problem that should be on its way out — coal — by giving it record subsidies.  And it is rounded out with massive corporate giveaways at taxpayer expense.

*   *   *

.  .  .  the bill does not require any greenhouse gas reductions beyond current levels until 2030.

Worse yet is the Democrats’ fumbling and bumbling with their efforts at healthcare reform legislation.  Polling wiz Nate Silver of fivethirtyeight.com, did a meta-analysis of the polls conducted to assess public support for the so-called “public option”in healthcare coverage, wherein people have the option to buy health insurance from the government.  The insurance companies obviously aren’t interested in that sort of competition and they have launched advertising campaigns portraying it as controversial and flawed.  Nevertheless, Nate Silver’s report revealed that five of the six polls analyzed, demonstrated lopsided support for the public option, exceeding 60 percent.  Despite the strong popular support for the public option, Mr. Silver pointed out in another posting, how there is a great risk that Democrats might oppose the measure due to payoffs from lobbyists:

Lobbying contributions appear to have the largest marginal impact on middle-of-the-road Democrats.  Liberal Democrats are likely to hold firm to the public option unless they receive a lot of remuneration from healthcare PACs.  Conservative Democrats may not support the public option in the first place for ideological reasons, although money can certainly push them more firmly against it.  But the impact on mainline Democrats appears to be quite large:  if a mainline Democrat has received $60,000 from insurance PACs over the past six years, his likelihood of supporting the public option is cut roughly in half from 80 percent to 40 percent.

Awareness of this venality obviously has many commentators expressing outrage.  On June 23, Joe Conason wrote such an article for The New York Observer:

If Congress fails to enact health care reform this year –or if it enacts a sham reform designed to bail out corporate medicine while excluding the “public option” — then the public will rightly blame Democrats, who have no excuse for failure except their own cowardice and corruption.  The punishment inflicted by angry voters is likely to be reduced majorities in both the Senate and the House of Representatives — or even the restoration of Republican rule on Capitol Hill.

*  *  *

The excuses sound different, but all of these lawmakers have something in common — namely, their abject dependence on campaign contributions from the insurance and pharmaceutical corporations fighting against real reform.

*  *  *

Whenever Democratic politicians are confronted with this conflict between the public interest and their private fund-raising, they take offense at the implied insult.  They protest, as a spokesman for Senator Landrieu did, that they make policy decisions based on what is best for the people of their states, “not campaign contributions.”  But when health reform fails — or turns into a trough for their contributors, who will believe them?  And who will vote for them?

Those Democrats inclined to oppose the public option don’t appear to be too concerned about public indignation over their behavior.  Take California Senator Dianne Feinstein for example.  Do you really believe she gives a damn about voter outrage?  She was re-elected in 2006, despite criticism that as chair of the Senate Military Construction Appropriations subcommittee, she helped her husband, Iraq war profiteer Richard C. Blum, benefit from decisions she made as chair of that subcommittee.  So what if MoveOn.org is targeting her for ambivalence about the issue of healthcare reform?  MoveOn.org is also targeting other Democrats who are attempting to eliminate the public option.  If these officials have so much hubris as to believe that they can get away with scoffing at the public will, they had better start looking for new jobs now  . . . because the market isn’t very good.

Defending Reagan

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June 4, 2009

In case you’ve wondered whether Nobel laureates ever emit brain farts, Paul Krugman answered that question in the May 31 edition of The New York Times.  His column of that date targeted former President Ronald Reagan for causing our current economic crisis:

There’s plenty of blame to go around these days.  But the prime villains behind the mess we’re in were Reagan and his circle of advisers — men who forgot the lessons of America’s last great financial crisis, and condemned the rest of us to repeat it.

I was never a big fan of Ronald Reagan.  My reaction to his nomination as the Republican Presidential candidate in 1980, conjured up James Coburn’s sarcastic line from the movie In Like Flint:  “An actor for President!”  Reagan’s legacy was exaggerated — which is why the book, Tear Down This Myth by Will Bunch, is available on this site, under the “Featured Books” section on the left side of this page.  I never believed that Reagan deserved all the credit he was given for the collapse of the former Soviet Union.  In my opinion, that distinction belongs to Lech Walesa, leader of Solidarity (the former Soviet bloc’s first independent trade union) and his old buddy, Karol Wojtyla, who later became Pope John Paul II.  In fact, former Soviet leader Mikhail Gorbachev admitted that the demise of the Iron Curtain would have been impossible without John Paul II.

Another literary deflation of that aspect of the Reagan legend can be found in The Rebellion of Ronald Reagan:  A History of the End of the Cold War by James Mann.  In his review of that book for The Washington Post, Ronald Steel noted how James Mann addressed the claim that Reagan broke up the Soviet Union:

And in 1991 the Soviet Communist Party disintegrated and with it ultimately the Soviet Union itself.  Did Reagan make it happen?  This would be too strong, Mann insists.  The Cold War ended largely because Gorbachev “had abandoned the field.”

Despite my own feelings about the Reagan legacy, upon reading Paul Krugman’s attempt to blame Ronald Reagan for the economic meltdown, I immediately rejected that idea.  What became interesting was that in the aftermath of that article, commentators from “left-leaning” news sources voiced objections to the piece.  For example, William Greider is the national affairs correspondent for The Nation.  On his own blog, Greider wrote an essay entitled:  “Krugman Gets His History Wrong”.  While upbraiding Krugman, Mr. Greider took care to note the complicity of the Democrats in causing the current economic crisis:

What Krugman leaves out is that financial deregulation actually started two years earlier — before the Gipper got to Washington.  A Democratic Congress and Democratic president (Jimmy Carter) enacted the Monetary Control Act of 1980 which removed all remaining controls on interest rates and repealed the federal law prohibiting usury (note that sky-high interest rates and ruinous predatory lending have been with us ever since).  It was the 1980 legislation that took the lid off banking and doomed the savings and loan industry, the mainstay that used to provide housing loans and home mortgages.  The thrifts were able to raise capital because they were allowed to pay a half percent more in interest to depositors.  Bankers wanted them out of the way.  The Democratic party obliged.

Robert Scheer is the editor of Truthdig.  The columns he writes for Truthdig regularly appear in The Nation.  (He is famous for getting Jimmy Carter to admit for Playboy magazine, that Carter often “lusts in his heart for other women”.)  Mr. Scheer’s reaction to Krugman’s vilification of Reagan as the saboteur of the economy includes such words as “disingenuous” and “perverse”.  Beyond that, Sheer lays blame for this crisis where it properly belongs:

Reagan didn’t do it, but Clinton-era Treasury Secretaries Robert Rubin and Lawrence Summers, now a top economic adviser in the Obama White House, did.  They, along with then-Fed Chairman Alan Greenspan and Republican congressional leaders James Leach and Phil Gramm, blocked any effective regulation of the over-the-counter derivatives that turned into the toxic assets now being paid for with tax dollars.

*    *    *

How can Krugman ignore the wreckage wrought during the Clinton years by the gang of five?  Rubin, who convinced President Clinton to end the New Deal restrictions on the merger of financial entities, went on to help run the too-big-to-fail Citigroup into the ground.  Gramm became a top officer at the nefarious UBS bank.  Greenspan’s epitaph should be his statement to Congress in July 1998 that “regulation of derivatives transactions that are privately negotiated by professionals is unnecessary.”  That same week Summers assured banking lobbyists that the Clinton administration was committed to preventing government regulation of swaps and other derivatives trading.

Thank goodness Eliot “Socks” Spitzer is still around, writing for Slate.  His most recent article about the economy not only provides an accurate assessment of the cause of the problem  —  it also suggests some solutions:

We have had a fundamentally misguided industrial policy over the past decade.  Yes, industrial policy is a dirty phrase to many, some of whom would argue that we haven’t had one, and indeed shouldn’t.  But the truth is we did have one:  to leverage up and guarantee the bets of a financial services sector that has now collapsed and left nothing of value in its wake.

What would be a better approach?  A policy to support those sectors that actually create goods and value.  Investment in transformational technology and infrastructure are core national needs.  So why not start with a government order for 500,000 electric cars, subject to an RFP two years from now, by which time a true electric car prototype will have been developed?  It should be open to any manufacturer, as long as 75 percent of the value of the car is domestically produced.  I don’t care if the name on the plate is GM or Toyota, as long as the value added is here.  (I prefer a “Toyota” produced in Tennessee to a “GM” produced in China.  Why struggle to save the shell of a company –GM– that intends to ship jobs overseas anyway?)  Guaranteeing an order of 500,000 will give manufacturers the needed scale to generate profits and reassure private customers that service and support will be around for the long haul.  And the federal government could also issue an RFP for recharging stations, to be built by private companies, along the interstate highway system, wherever there is a traditional filling station, so that recharging will be possible.

(By the way:  An “RFP” is a Request for Proposals, or bids, on a government project — just in case you were thinking it might mean “request for prostitutes”.)

I have always been a fan of Socks Spitzer.  His personal story underscores the simple truth that all of us, regardless of our accomplishments, are only human and we all make mistakes  —  even Nobel Prize winners such as Paul Krugman.

Geithner In The Headlights

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April 30, 2009

Regular readers of this blog know that one of my favorite targets for criticism is Treasury Secretary “Turbo” Tim Geithner.  My beef with him concerns his implementation and execution of programs designed to bail out banks at avoidable taxpayer risk and expense.  Lately, we have seen a spate of wonderful articles vindicating my attitude about this man.  One of my favorites was written by Gary Weiss for what was apparently the final issue of Conde Nast Portfolio.  Mr. Weiss began the article discussing what people remember most about Geithner from the first time they saw him on television:

In his worst moments, when the camera lights are burning and the doubt, the contempt, in the Capitol Hill hearing rooms become palpable, Tim Geithner has a look in his eye — at once wary and alarmed, even as he speaks quickly, sometimes interrupting, sometimes repeating his talking points.  It has become a look that he owns.  It is his.  It has made him famous in all the wrong ways.  The Geithner Look.

A few paragraphs later, Weiss recalled Geithner’s disastrous February 10 speech, intended to describe what was then known as the Financial Stability Plan — now referred to as the Public-Private Investment Program (PPIP or pee-pip).  Mr. Weiss recalled one of the reviews of that speech, wherein Geithner was described as having “the eyes of a shoplifter”.  I later learned that it was MSNBC’s Mike Barnicle, who came up with that gem.

The most revealing story about Geithner appeared in the April 26 edition of The New York Times.  This article, written by Jo Becker and Gretchen Morgenson, provided an understanding of Geithner’s background and how that has impacted his decisions and activities as Treasury Secretary.  This piece has received plenty of attention from a variety of commentators, most notably for the in-depth investigation into Geithner’s “roots”.  Becker and Morgenson summed-up their findings this way:

An examination of Mr. Geithner’s five years as president of the New York Fed, an era of unbridled and ultimately disastrous risk-taking by the financial industry, shows that he forged unusually close relationships with executives of Wall Street’s giant financial institutions.

His actions, as a regulator and later a bailout king, often aligned with the industry’s interests and desires, according to interviews with financiers, regulators and analysts and a review of Federal Reserve records.

After a thorough explanation of how Geithner’s social and professional ties have influenced his thinking, the motivation behind Turbo Tim’s creation of the PPIP became clear:

According to a recent report by the inspector general monitoring the bailout, Neil M. Barofsky, Mr. Geithner’s plan to underwrite investors willing to buy the risky mortgage-backed securities still weighing down banks’ books is a boon for private equity and hedge funds but exposes taxpayers to “potential unfairness” by shifting the burden to them.

Becker and Morgenson apparently went to great lengths to avoid characterizing Geithner as venal or corrupt.  Nicholas von Hoffman said it best while discussing the Times article in The Nation:

The authors did not have to spell it out for readers to conclude that Geithner, while honest in the narrow sense of the word, has been extremely helpful to his billionaire mentors and protectors.

Mr. von Hoffman was not so restrained while discussing the behavior of the bailed-out banks in an earlier piece he wrote for The Nation.  In attempting to figure out why those banks did not get back into the business of lending money after the government-provided capital infusions, von Hoffman pondered over some possible reasons.  First, he wondered whether the banks still lacked enough capital to back-up new loans.  I liked his second idea better:

Another possibility is that the banks may have found new ways to steal money, which is more profitable than lending it.  The banks’ conduct has been so devious, so mendacious, so shifty and so dishonorable that you cannot rule out any kind of sharp practice.  You just can’t trust the bastards.

In recent days, some banks have enhanced their reputations by announcing quarterly profits achieved not by business enterprise but by bookkeeping legerdemain.

Renowned journalist Robert Scheer saw fit to praise Becker and Morgenson’s article in a piece he wrote for the Truthdig website (where he serves as editor).  His analysis focused on how Geithner’s views were shaped while working for his mentors in the Clinton administration:   Robert Rubin and Larry Summers.  Scheer reminded us that these are the people who created “the policies that Clinton put in place and George W. Bush accelerated”:

The seeds of the current economic chaos were planted in those years, in which Wall Street lobbyists were given everything they wanted in the way of radical deregulation, and hence was born the madcap world of credit swaps and other unregulated derivatives.

Scheer noted how Turbo Tim has kept alive, what President Obama has often described as “the failed policies of the past eight years”:

Geithner has since pushed the Obama administration to approach the banking crisis not in response to the needs of destitute homeowners but rather from the side of the bankers who are seizing their homes.  Instead of keeping people in their homes with a freeze on foreclosures, he has rewarded the unscrupulous lenders who conned ordinary folks.

He still wants to give more money to Citigroup, which has just been found woefully short of cash by Treasury’s auditors, and has not stopped Fannie Mae, Freddie Mac and some other big banks ostensibly under government influence, and indeed sometimes ownership, from recently ending their temporary moratoriums on housing foreclosures.  Geithner has been in the forefront of coddling the banks in the hopes that welfare for the rich will trickle down to suffering homeowners, but that has not happened.

Rather than just complaining about the problem, Mr. Scheer has suggested a solution:

What is involved here is an extreme case of government-condoned “moral hazard” offering outrageous compensation to the superrich for screwing up royally.  Where is the socially conscious Obama we voted for?   E-mail him and ask.

The Big Bite

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March 12, 2009

As President Obama’s “big bang” agenda gets underway (wherein the government is simultaneously tackling the problems of the economy, health care, education and energy) criticism of this strategy is beginning to mount.  Commentators from the conservative end of the spectrum are, not surprisingly, the most vocal in their admonitions that these other issues are detracting attention from the most pressing issue facing America and the world:  the economy.  As William Galston pointed out in The New Republic, Obama’s “big bang” strategy runs the risk of repeating Jimmy Carter’s failed attempt to push a far-reaching agenda at the beginning of his term:

It is time for President Obama to focus his considerable leadership and communication skills on the financial crisis–to speak candidly with the people about the magnitude of pthe roblem, to embrace a solution commensurate with the problem, and to do whatever it takes to persuade Congress and the people to accept it.  If he does not, he could end up where another highly intelligent, self-disciplined, and upright president did three decades ago.

Conservative pundit, Tony Blankley, expressed similar dismay that not enough thought and effort have been dedicated to this urgent problem.  He added that this sentiment is not limited to those on the “far right”:

Obama not only is failing to focus more or less exclusively on protecting the financial system and the economy that depend on it but also is letting his ideological ardor drive him to expend both his own and his administration’s attention, along with the vast new tax dollars, on those programs rather than on the financial and economic crises.

Thus — and here is his political danger — if the financial system fails (and much of the economy along with it), it will be a fair, true and politically lethal charge against Obama that he didn’t do all he could as soon as he could to protect us from the catastrophe.  It was this decision that shocked even some of his moderate supporters, such as David Gergen, David Brooks and others, who are muttering in private.

And this misjudgment is only compounded by the slow and inept start of Treasury Secretary Timothy Geithner, the man who has the line responsibility to fix it and who only this past weekend got around to nominating some of his vital sub-Cabinet officials.  The failure of both Obama and Geithner, in the five months since the election, to come up with a plan to deal with the toxic assets and insolvency of major financial institutions may well look even more irresponsible than it already does if the derivatives crisis in fact hits the world.

Most of the anxiety over the Obama administration’s economic plan (or lack thereof) concerns its lack of disclosed details and the administration’s apparent decision to ignore the warnings of prominent economists about the urgency of taking the only logical action:  put the “zombie” banks through receivership to purge them of their “toxic assets” (most notably mortgage-backed securities).  The scant information disclosed about Treasury Secretary, “Turbo” Tim Geithner’s Financial Stability Plan is that it involves “stress testing” the banks to determine their true financial condition and creating some sort of investment fund by which private investors would be enticed to purchase the toxic assets with taxpayer money being used to guarantee the value of those assets.

Turbo Tim has repeatedly stated that he is opposed to “nationalization” of the functionally insolvent banks.  This position is in direct opposition to the warnings of two Nobel laureates and countless other Economics professors, including Dr. Nouriel Roubini, who predicted the economic crisis back on September 7, 2006.  As Steve Coll discussed on The New Yorker‘s Think Tank blog:

To compound all this, Geithner, Bernanke, and the President seem to have organized themselves as a determined minority in resistance to the gathering view among mainstream economists, even Alan Greenspan, that the best solution to the bank problem, at this point, is, in fact, temporary receivership — on the model of the Resolution Trust Corporation that cleaned up the savings-and-loans industry in the early nineteen-nineties, or the more routine receivership processes of the Federal Deposit Insurance Corporation.  Is this resistance by Geithner, Bernanke, and the President genuine and fully determined, or is it part of the political and confidence equation above, and therefore susceptible to change?  In the President’s case, it’s hard to be sure.  In Geithner’s case, he seems to be saying what he means. Where is Larry Summers, the top White House economic adviser, on this critical question?  Also hard to tell.  Perhaps, like Alan Greenspan, he is privately leaning toward receivership; if so, his position would be complicated by the fact that his younger, former protege, Geithner, who now holds a more visible position than his own, thinks otherwise.  Anyway, the facts about the health of the banks are not yet officially in hand — that is the purpose of the “stress tests” that are now being administered, to analyze which of the country’s largest nineteen banks are in the strongest positions, and which are in the weakest.  Policy options are still being developed. The likelihood of various economic forecasts is still being debated.  And so we endure more Kremlin-like opacity.

Is Turbo Tim simply “playing it close to the chest” by holding off on announcing any plans to put zombie banks into receivership, so as to prevent a “run” on more healthy institutions and the destruction of what is left of their stock value?  Although I would like to believe that, those more knowledgeable than myself are quite skeptical.  Columbia University Professor Joseph E. Stiglitz (2001 recipient of the Nobel Prize in Economics) pointed out in the March 29 issue of The Nation, that placing the insolvent banks into receivership must be done immediately.  The process of endless bailouts for these banks is a waste of money that appears to be solely for the benefit of the banks’ shareholders:

It has been obvious for some time that a government takeover of our banking system–perhaps along the lines of what Norway and Sweden did in the ’90s–is the only solution.  It should be done, and done quickly, before even more bailout money is wasted.
*    *    *
The politicians responsible for the bailout keep saying, “We had no choice. We had a gun pointed at our heads.  Without the bailout, things would have been even worse.”  This may or may not be true, but in any case the argument misses a critical distinction between saving the banks and saving the bankers and shareholders.  We could have saved the banks but let the bankers and shareholders go.  The more we leave in the pockets of the shareholders and the bankers, the more that has to come out of the taxpayers’ pockets.
*    *    *
By these standards, the TARP bailout has so far been a dismal failure. Unbelievably expensive, it has failed to rekindle lending.  Former Treasury Secretary Henry Paulson gave the banks a big handout; what taxpayers got in return was worth less than two-thirds of what we gave the big banks–and the value of what we got has dropped precipitously since.

Since TARP facilitated the consolidation of banks, the problem of “too big to fail” has become worse, and therefore the excessive risk-taking that it engenders has grown worse.  The banks carried on paying out dividends and bonuses and didn’t even pretend to resume lending.

The most recent recipient of the Nobel Prize in Economics, Paul Krugman, has become increasingly vocal in his criticism of the Obama administration’s approach to this problem:

A real fix for the troubles of the banking system might help make up for the inadequate size of the stimulus plan, so it was good to hear that Mr. Obama spends at least an hour each day with his economic advisors, “talking through how we are approaching the financial markets.”  But he went on to dismiss calls for decisive action as coming from “blogs” (actually, they’re coming from many other places, including at least one president of a Federal Reserve bank), and suggested that critics want to “nationalize all the banks” (something nobody is proposing).

As I read it, this dismissal — together with the continuing failure to announce any broad plans for bank restructuring — means that the White House has decided to muddle through on the financial front, relying on economic recovery to rescue the banks rather than the other way around.  And with the stimulus plan too small to deliver an economic recovery … well, you get the picture.

Is the administration’s approach to the financial crisis being handicapped by an over-extension of resources because of the overwhelming demands of the “big bang” strategy?  Whether or not that is the case, the administration’s current solution to the bank problem is drawing criticism from both the left and the right.  If President Obama stays with the course charted by “Turbo” Tim Geithner, odds are that our new President will be restricted to a single term in The White House.