White House: Krugman's Bailout Critiques "Not Entirely Convincing"

One of the leading progressive voices in the Obama White House said on Monday that criticism over the administration's bailout policies from like-minded economists -- namely the New York Times' Paul Krugman and The American Prospect's Robert Kuttner -- were "not entirely convincing."

In a short speech at the America's Future Now conference in Washington D.C., Jared Bernstein argued that, in the absence of any blueprint, the best way to judge a bailout policy was to look at its success. On this front, he reasoned, Treasury Secretary Timothy Geithner deserved credit.

"I think there is a lot to be said for the argument made by the Treasury Secretary and, for that matter, the chairman of the Federal Reserve that the authority to unwind an AIG simply doesn't exist," said Bernstein, Vice President Joe Biden's chief economic policy adviser. "It is something we absolutely need going forward. But I guess the larger point is that nobody really knows what the best way is to proceed in terms of stabilizing the financial sector in a way that is most effective, most efficient and least burdensome to the taxpayers. Everyone has strong ideas about it, myself as well. What I have seen unfold and I hope that we. ... give Secretary Geithner a tone of credit for this ... what I have seen unfold, I think, has been really very promising and really quite effective."

As for the critiques, Bernstein acknowledged that there were "honest disagreements" among economists on these very issues. But, he added, some of the progressive arguments against the administration - mainly that the White House has been tougher on the auto industry than Wall Street or has catered too willingly to the needs of the big banks -- failed to acknowledge the recent good news on these fronts.

"Take Paul Krugman, who I suspect is on a similar page as Bob [Kuttner]," said Bernstein. "Here is, I have to say, where I have found myself being in meetings with the folks in the administration, pursuing our strategy and reading everything from the critics on the outside, and I have found the critical arguments not entirely convincing. ... I think a lot of people thought that the banks who scored badly under the stress test and you can bend the curve anyway you want, would have great difficulty going out to financial markets and raising capital. But in fact they have been able to do that in ways that I think have been somewhat surprising and heartening. So I think basically since there are so many different ways of going at this and nobody really knows the right way I think you have to look at the outcomes. And I think the outcomes have actually been pretty favorable ... in terms of efficiency and in terms of protecting the taxpayers."

It is hardly unusual for an administration figure to defend its own policies. But Bernstein's strong response to Krugman shows the extent of the divide between the White House and the Nobel Prize-winning economist -- and just how confident the administration is with the early returns on its bailout and economic recovery packages.

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Comments

[freelyb]

The bailout was successful. That's their story and they're stickin' to it!

[sonofsamphm1c]

It has been successful. Remarkably. Obama's team took a mess and made it work.

[swisskabab]

Wall St. is STEALING $3Trillion with help from Summers/Geitner/Paulson and Obama, this is no "bailout". I regret supporting and contributing to Obama's presidency and have never voted Republican. This administration is systematically disgracing all reasonable rational arguments against its pro-Wall St. policies. They publicly disgraced Prof. Elizabeth Warren, now they are shutting out Krugman and Kuttner. Obama and Geitner are hastily funneling money through thinly veiled schemes.

Warren/Krugman/Kuttner are simply saying that Obama can use the $3trillion to put 10 million people work for 3 years, and provide universal healthcare and fix our schools, roads and bridges. Warren/Krugman/Kuttner are simply asking for where the $3 trillion is going and what the taxpayer is getting for it. They are asking for transparency and accountability. This is not a bailout ... OBAMA's POLICIES ARE HELPING WALL ST. STEAL $3trillion.

[sonofsamphm1c]

Steal 3 trillion? How?

Tarp is a loan. It has to be paid back. That's a very odd theft. Raising deposit insurance to $250,000 is essentially - hopefully in the vast majority of cases - a non-cash transaction. How do you steal from a non-cash transaction. When it does come into play, the money goes to the owner of the account, not the bank.

The fact is, they are not stealing a red cent.

Elizabeth Warren basically disgraced herself by prematurely running around every TV show in America trumpeting bank nationalization as a better solution, and my constantly repeating charges that, while they may have been true of Paulson's Treasury, they were not true of Geithner's Treasury.

It left people with the untrue impression she was saying Geithner's Treasury was being just as uncooperative as Paulson's had been. She made little corrections like, this one little thing is better - as though the whole thing could be fixed at once. The lady could not apologize enough to Timothy Geithner.

[Dameocrat]

Obama admits we can't expect unemployment to go down for 5 years, so the green shoots ain't affecting ordinary voters. Wake up people. It is completey normal that wallstreet would perk up over trillions of dollars of money being given to it no strings. Has nothing to do with you and me.

We need new parties in office the dems and the republicans are old and stale and not progressive.

[sonofsamphm1c]

How about something like we can't expect unemployment to get back under 5% for 5 years. Perhaps you could start the "I Dream of Jeannie" political party. Then your President could just wiggle his nose and invent millions of jobs.

[LeLoup]

"And I think the outcomes have actually been pretty favorable ... in terms of efficiency and in terms of protecting the taxpayers."

This is a blatant and bold-faced lie and he knows it. Taxpayers assume 90% of all the downside risk of the TARP and TALF while banks get to keep all the upside.

Amazing that the post didn't even bother to mention this rather embarrassing fact. HUffPo is falling for the He said-She said and the keeping score so dear to the political talking heads instaed of showing us the numbers...(sigh!)

[Javani]

I think Geithner has been successful in assuring derivatives holders get paid out 100%, no discounts.

He has been successful so far holding off change for derivative regulations by two prongs--proposing reforms that are merely bureaucratic reshufflings of the "we'll monitor it" type., and two, every so often fending off criticisms by pretending only Congress can effect these changes.

Even when Congress stirs that it may do something, the media, given the latest Huff article, misunderstands it Obama taking action.

Obama has ALREADY taken action. Namely, the proposed shuffle of oversight positions which give the HOPE for CHANGE, yet the executive also says NO substantive regulations can be effected without congress to act, which,

logically,

means,

that the proposed oversight shuffle is meaningless.

[steamboat]

Just over the news wires:

General Motors to PERMANENTLY close 9 more plants, idle 3 others.

Is that CHANGE we can believe in?

[OliverTwist]

It frequently happens that different people predict exactly the same outcomes from strategies but favor different outcomes.

The Obama administration does not seem to object to companies that are larger and more powerful than nations - companies so large that they could be imagined rolling on the floor in laughter at any suggestion of the existence of a market that would require them to compete.

Krugman may have different values.

[sonofsamphm1c]

Actually, what they objected to was unwinding companies that are too big to fail in the midst of a global economic meltdown as that could easily cause 20% to 40% unemployment and put America into a decades-long tailspin.

Other hate bankers so much they could care less about risking consequences of that magnitude.

[swisskabab]

@sonofsamphm1c -- 20% to 40% unemployment ??? These numbers have no credibility. Put it another way ... Bush-II's claim of WMDs in Iraq was more credible and I have hever supported Republican. Wall St. is holding a gun to this country's head. Wall St. will collude to kill the economy if they dont get:

Recoup $3 Trillion that they lost gambling over the last 3-4 years.
No major regulation changes in current credit card, derivative, futures markets.
New carbon markets to sell dubious products into.
Protection to keep angry picthforks at bay.
Lots more.

Now Obama/Geitner/Paulson/Summers' cant come out and say this outright, now can they? "20%-40% unemployment" is Obama/Geitner/Paulson/Summers' spin on this.

[themodernleader]

Petef59. Are you aware that the financial-institution arranged bailoutsof the auto manufacturing has a large percentage of the functions and jobs outsourced? What will Americans do except gamble in casinos and in the market while other people of the world gain knowledge, skill and domination of a once great people called Americans? You are witnessing the destruction of American manufacturing and technology and the rise of the east. It did not or does not need to end this way. Our infatuation with easy money and the easy way is leading us to little money and a hard road of desperate and penurious citizens.

[TrueSense]

The questions are also about cost effectiveness, mission effectiveness, and efficiency.

The banks are still not really lending. It is the Fed's lending that is helping. If that is the case, why did we need to give away all that money to keep banks that are too big too fail ?

They also keep practicing and lobbying fo things that are detrimental to the real and a real economy !

If they thought out of the box and returned banks to their traditional utlility role, they could have reinvented the economy in ways that would have made them great !

Instead they want to revive the old destructive entities and recreate another bubble. They rather burn a pile of cash to get through the twine instead of just using a cheap pair of scissors.

[sonofsamphm1c]

What do you mean by "not really Lending"?

There is far less demand for loans, so lending is down, but the banks are lending.

[StephenJK]

"There is far less demand for loans"

Where is a link to the facts, son?

[TJM2]

These are impressive comments:

'Our controlled press calls up another group of experts of the same ethnic group...."Really? What ethnic group would that be? Economists?

"insisted upon surrounding himself with the best advisors and administrators from throughout his organization." And you know that Caesar, Louis et al did that how, exactly? What evidence can you cite?

This one is fabulous: "It is a most imprudent, dangerous and wicked repertoire of leadership to surround oneself with self-serving and unitary group ideology and hidden agendas." Other than your assertion without foundation, how is it wicked etc? Which policies?

Oh and then: "The greatest policies derive from the best thinking of a wide variety of ideas and experiences. All great leaders have followed this leadership repertoire..." I wonder why you think Obama has surrounded himself with like-minded advisers? The commentariat thinks he has assembled the "Team of Rivals."

In your addled, loony group of misfiring synapses, you think the comment to be acerbic and humorous but it's just another collection of silly generalizations. Next time, try to be specific in your criticism. Of course, that would require actual thought. The empirical evidence is scant, I'm betting you don't know whereof you speak. No surprise really.

[themodernleader]

There are enough trillions in New York to ignite a bubble stock market. And all will be well. Then the next crashing debt will cause a decline, then panic, then crash. What will tthe Obama Team of leveraged financiers and corrupt associates articulate to an incredulous citizentry? And how will the millions and millions of forgotten jobless Americans respond? And how will the Democrats and Republicans explain away a collapsing Republic and lost empire?

[petef59]

Hubris-plain and simple?

[steamboat]

Don't laugh. The Chinese actually LAUGHED in first Pelosi then later Geithner's face recently. When they tried to tell them there assets are safe here. Obama by spending $100 billion is risking a castrophe. Either bankruptcy, or will have to have very high interest rates to offset this ridiculous just printing of more money. High interests will of course mean the average folks won't be able to buy things which they will never be able to afford. Next year could be a castrophe. These folks in the administration are nuts. Of course, the HuffPo's will whitewash it. They'll talk about OReilly.

[Lemeritus]

Good job rounding up the usual suspects, themodernleader:
- leveraged financiers (check - and how!)
- corrupt associates (would that include Congress and the merry swarms of lobbyists, buzzing over the dung heap of our legislative branch?) and, finally...
- an incredulous citizenry

"And you know something is happening but you don't know what it is do you, Mr. Jones?"

[yappnmutt]

wait a minute. the main objection to the bailout is that the tax payer is on the hook. no plan was ever considered without the tax payer assuming the risk and losses for the banks and now gm.

there was a simple plan many reputable economists put forward that did not involve the tax payer. it was never considered in the rush to bail out the top 1% of wealth owners in the usa and the world.

buy a ford if you want to buy a car. kiss you investment in gm and chrysler good bye.

[BurtonOerney]

What plan didn't involve tax money? What do cars have to do with bank bailouts?

[yappnmutt]

stiglitz and roubini are the most well known economists but there are legions behind them.

you now own most of gm which has a negative book value of 100+billion dollars.

pay attention because you are paying your money. you are the reason they got away with it.

[CaptainVideo]

The plans of Krugman and similar would have required the use of taxpayer money too. The issue is which one would have been the more cost effective. That is something serious, intelligent people can honestly disagree on.

[themodernleader]

President Obama, a perceived black man, on economic policy surrounds himself with brilliant men of words of the same ethnic group, all who purport expertise in financial and economic policy. Our controlled press calls up another group of experts of the same ethnic group to critique ever so gently some policies and actions of the first group. In this critique there is not a discouraging word at the lack of any coherent, rational or visible economic policy---short term or long term. No mention of the perilous position of the common people.
A great leader, be it Wu Ti, T'ai Tsung, Augustus Caesar, Louis XIV, George Washington, Andrew Jackson, Abraham Lincoln, Teddy Roosevelt, Franklin D. Roosevelt, Harrry S. Truman, insisted upon surrounding himself with the best advisors and administrators from throughout his organization. What about our national hero President Obama? He shuts off the ideas of mainstream economists in favor of the radical fire-up-the-printing-press trite from the University of Chicago and New York.
It is a most imprudent, dangerous and wicked repertoire of leadership to surround oneself with self-serving and unitary group ideology and hidden agendas.
the prudent administrative practice would have been to surround oneself with authorities that represent every occupational, ethnic, religious-irreliguous, age, racial and regional group of the Country. The greatest policies derive from the best thinking of a wide variety of ideas and experiences. All great leaders have followed this leadership repertoire. Losing leaders have their minds made up.

[BurtonOerney]

Pretty sure Bernanke and Geithner are white. Krugman is as well. Are you crazy? I'm asking ever so gently.

[steamboat]

And a 31 year old (Brian Deese) with no experience and JUST OUT OF GRAD SCHOOL to restructure our great automaker, GM.

[steamboat]

PS: Deese's family must have really given alot to the Obama campaign (LOL)

[BurtonOerney]

Who among the treasury or federal reserve senior staff and the gentle commentators are 'perceived black men?'

[jade7243]

" a perceived black man"...

"surrounds himself with brilliant men of words of the same ethnic group" ...

"calls up another group of experts of the same ethnic group ..."

Good God man, you have got to be the dumbest, blindest, most assinine, imbecilic, encephalitic racist in the box.

please proceed directly to Hades through the gates to your cell on the far right.

[polybius]

OKAY, thats enough comments on Krugman and Geithner-lacky.

This article is about Jared Bernstein.

First thought:
Jared is even hotter than Bradly Whitford (who played Josh Lyman on West Wing).

Comments?

[Knowitall]

None.

[apolloguide]

A child with connections who plays soccer? (Who couldn't go head to head with 40% of the posters here. Just like Timmy "Print more money, Honey!' Gheithner.

Spare change?

[BurtonOerney]

I'm sorry, ploybius, but this is ridiculous. Jared Bernstein is not young or poorly qualified. He is...
-----------------------------

Jared Bernstein joined the Economic Policy Institute in 1992. His latest book is "Crunch: Why Do I Feel So Squeezed? (And Other Unsolved Economic Mysteries)," which follows "All Together Now: Common Sense for a Fair Economy." His areas of research include income inequality and mobility, trends in employment and earnings, low-wage labor markets and poverty, international comparisons, and the analysis of federal and state economic policies. He is the co-author of eight editions of the book The State of Working America and has published extensively in popular and academic venues, including The New York Times, Washington Post, American Prospect, and Research in Economics and Statistics. He is also a contributor to the financial news station CNBC.

[SCG]

He's a new face at the WH podium?

[BurtonOerney]

I think he's pretty hot.

[polybius]

ok, thats more like it.
$$

[Dameocrat]

bleck

I don't like greedy guys!

[Fremon]

I have a lot of faith in Krugman. He is independent and presents, what I think, is the analysis of economic information that is out there and perhaps interpreting some of his own. I think he is as good an economist as the administration has access to in Geitner and Summers which may be biased (as all administrations) in its interpretation of the economic future. Krugman also is not a part of the MSNBC crowd types for which you get their Republican economic spin on events.

[NCYvonne]

You have faith in a guy whose last 10 predictions have been dead wrong?

You have faith in a guy who doing a 180 on his own claims now that the data is going hard against him?

We could all use a friend like you.

[NCYvonne]

You have faith in a guy whose last 10 predictions have been wrong?

You have faith in a guy who doing a 180 on his own claims now that the data is going against him?

We could all use a friend like you.

[CaptainVideo]

Krugman was arguing that there was a housing bubble while most commentators and analysts were denying it.

Krugman pointed out at the beginning of the Bush administration that his tax cuts would create huge deficit.

Krugman is right most of the time, but he is not infallible.

[NCYvonne]

When the Dow was tanking, it was on the front page of HP every day--a sure sign that Obama's plans were failures.

When it started to recover--silence. Then when it hit a rough spot- front page again. Now that it's up--silence.

Q: Why does HP want the president's economic policies to fail?
A: Because Paul K said he would.

[williamg]

Remember, the owner of HP demanded that Geithner be replaced. When you take that editorial stance, you must go "all in'' as she has.

[NCYvonne]

Yep. First they painted him as clueless. When it became clear that he's not, they tried to paint him as corrupt and a WS lackey. Never mind that the guy chose to work in the government sector, making a fraction of what he could have made on WS.

Last year, they offered him CEO of Citbank but he turned down that cool $30-40 million. Yeah, he's really on the take!

[SCG]

She's made no bones about disagreeing with the WH . I thought she was more than charitable to extend the view of sincerity to those involved, after her recent invite there.

As for not convincing, so far the Giethner plan leaves much to be desired on that front.