Rolling out his new, more aggressive approach to Wall Street, President Obama turned to some advisers who hadn't been seen much in the past year. Standing shoulder to shoulder with Obama were former Fed Chairman Paul Volcker and Vice President Joe Biden. Council of Economic Advisers member Austan Goolsbee was brought out to brief reporters.
Biden has been pushing for a year for more focus on the middle class and Goolsbee and Volcker have been waging a lonely campaign to encourage the White House to be tougher on Wall Street.
One White House official didn't deny that that there has been "a shift" in the presentation of their economic policies and who is presenting them. Two other officials, meanwhile, pushed back to insist that Treasury Secretary Tim Geithner and senior adviser Larry Summers fully participated in crafting the new strategy.
Shortly after sharing the stage with Obama, however, it was Volcker who went to Capitol Hill to sell his idea to top Republicans.
Sen. Bob Corker (R-Tenn.) met him for a 45-minute, one-on-one meeting and ribbed the former Fed Chairman about the abrupt turnaround in his administration stature: This wouldn't have anything to do with a certain special election in Massachusetts, would it?
"I kidded him a little bit about that, to be candid. Was this more about votes or more about substance?" Corker said. "I kidded him about--you know, in the past they've used him as a prop."
Volcker, whose exile has at times been literal -- his biggest speech was delivered in Germany -- insisted that he was no prop, that the administration meant business. "From his standpoint, obviously it's about substance, and strongly encouraged me that from their standpoint it was, too," Corker said.
Volcker had company coming in from the cold. Goolsbee, long excluded from the White House's economic inner circle, took the lead in briefing reporters on the Volcker plan. Goolsbee is the chief economist for the President's Economic Recovery Advisory Board, a panel that was designed so that Volcker could chair it and advise the president. Little of that advice got much traction in the first year, however, as Geithner and Summers dominated.
The White House is now hoping to insert Volcker's proposal into the comprehensive package in the Senate.
Time will tell if the change is real, but to the extent that a president's words and stance have power in and of themselves, the message is clear. There is a new sheriff in town.
Corker said he and Sen. Richard Shelby (R-Ala.), the top ranking Republican on the banking committee, want Volcker to come testify and sent a letter to Chairman Chris Dodd (D-Conn.) asking him to invite the now prominent adviser. Shelby said that he also met with Volcker and personally asked him to testify before the committee, although he stressed that only Dodd can make invitations.
Geithner, meanwhile, was tossed to the populist mob by "financial industry sources" who told Reuters that "Obama's newest Wall Street crackdown was met with hesitation" by Geithner, who is "concerned that politics could be sacrificing good economic policy."
There's meaning behind the shifting public image, said one Democratic economist who informally advises the White House. "It's more than faces," he said in an e-mail. "Volcker is pushing and the White House seems to be moving towards much broader regulation of financial institutions, including limits on how big they can be, regulation of compensation arrangements and effective limits on their risks, which Summers and Geithner have sidelined but Volcker has pushed.
"On top of that is the president's neo-populist repositioning on the banks, which started before the election (but after the WH and most Dem pros in town had written off Coakley). Summers, of course, will 'adapt.' Harder for Geithner," he said.
Peter Morici, a professor at the Robert Smith School of Business the University of Maryland School, said that the lack of results is driving Geithner and Summers out.
"Geithner is just not doing a very good job of shaping and focusing bank reform on Capitol Hill. Worse, he is getting the president no points for championing it. So what you are seeing is the president is going to his bench and Volcker," he said. "Volcker is much more of a traditionalist. He wants to separate banks out and, while this doesn't go very far in that direction, it does go in that direction."
The two White House officials who said that Geithner and Summers were key players in the latest decision were adamant, however. It is the case that "Secretary Geithner and Director Summers were asked by the President to develop proposals, that they worked closely with Volcker, that they worked out a plan over the holidays, and that the plan was submitted to the President with a unanimous recommendation from the economic team," one said.
"Summers and Geithner deliberated over the concern that proprietary trading was not at the heart of the problem that fueled the crisis but concluded that reform needed to be about more than just fighting the last war, it needed to address sources of future risk as well," said another.
Sam Stein contributed reporting
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