Economic Credibility Gap: Obama Defies His Own Economic Team, Demands Move to Block AIG Bonuses
Wall Street and Washington insiders like Larry Summers and Tim Geithner have spent the last few weeks telling America there's supposedly nothing that can be done to stop bailed out banks from using our taxpayer money to subsidize executive bonuses. As the New York Times reported this morning, Summers specifically "suggested that there was little if anything the government could do to stop [AIG's bonuses], seconding the conclusion of Treasury Secretary Timothy F. Geithner." Now, President Obama has publicly contradicted them, signaling a major schism in the new administration:
Obama Orders Treasury Chief to Try to Block A.I.G. BonusesBy HELENE COOPER
Published: March 16, 2009WASHINGTON -- President Obama vowed to try to stop the faltering insurance giant American International Group from paying out hundreds of millions of dollars in bonuses to executives, as the administration scrambled to avert a populist backlash against banks and Wall Street that could complicate Mr. Obama's economic recovery agenda.
The differing messages from the Obama administration suggests the potential for a major economic credibility gap whereby lower-tier functionaries like Summers and Geithner are saying one thing while the president is saying something entirely different. It raises a very serious question: Who is in charge - the president or the Washington and Wall Street insiders he put around himself?
I don't think we really have an answer.* Though it is certainly good news that the president is taking the more rational and populist line in this divide, it's a huge problem that he's allowing people to speak for his administration who seem to be directly undermining his wishes - in this case, his wishes to stop banks and insurance companies from ripping off taxpayers. That's not "team of rivals" - that's the Team of Zombies creating mixed messages, which reinforce the idea that this administration still refuses to answer the fundamental question: Which friggin' side are you on?
*By the way, I once thought this all might be a super secret pony plan whereby Obama is good cop and Summers/Geithner are bad cop/stupid cop. Now, I don't think that at all. When the Summers/Geithner insist that nothing can be done, and Obama insists that they better do something, that's not good or smart messaging, and therefore likely not pre-planned strategy - it's just having no message at all, and that's bad.
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Think some of Obama's problem is that being rather inexperienced to start with he chose people who had a lot expertise in the banking system, or in Clinton's administration, probably a good idea on the face of it but he seems to have the lion by the tail and experienced ones on his team haven't really any idea how to help him get a grip on the problem or perhaps no interest. The problem is a tough one but Obama is going with those who know Wall St. and corporate entities, rather than the folks like Krugman who are students and very knowledgeable of economics and perhaps have a more long term view from their historical perspective. I still can't understand why Obama is not relying on those folks and I do understand those who believe Obama may have a lot closer ties to corporate interests than he or his handlers have ever let on; Fannie Mae and Freddie Mac corporate leaders were very close to him and he did get funds from the two groups.
Geitner and Summers are too instinctively tied to these Wall Street raiders.
Taking action against them means taking action against their racquetball buddies and the other people they are cozy with.
It just never occurred to them to TRY and get the money back.
Hopefully Obama will be leading them and not be led by them.
We need some populist outrage in the Treasury Department.
If Obama is unwilling to replace Geitner and Summers, then he needs to make sure he's in charge of them.
When everyone started giving Obama gas, about his picks to lead the charge on our economic woes, I figured Obama was a strong enough personality to be able to reign in these same "financial types" who had helped construct the framework, for what proved to be, the raping of our financial markets. Placing these same suspect individuals in charge, took guts.
Now I'm not so sure it was a good idea. I still trust the President, but I think the faith he put in to being able to control these "types", may have been a bit too optimistic. That whole thing about leopards spots, doncha' know! I think now may be the time to enlist a few more academic types, like Kuttner, Krugman, and Stiglitz, as examples. It may irk the Wall Street types, but so be it. If they feel they're having their noses tweaked, they're free to leave.
The President at least deserves credit for making a change the way he is doing, and doing it in such a way as to give the impression , that he's willing to take the flak. That's balls, and he deserves to be commended for it.
Geithners gotta go!!!! He's connected at the hip to all the crooks.
Obama needs to put the Lincoln books back on the shelf and start reading Teddy Roosevelt.
Robert Reich had it right when he recently said that if a insurance company or bank is "too big to fail
then it needs to be broken up under anti trust law."
Teddy Roosevelt would have no problem dealing with the big Wall Street crowd.
He would simply break them up. Bigger is not better especially since we are no longer the
biggest creditor nation but the biggest debtor nation.
All the media talking heads have talked about is Lincoln's influence on Obama.
I've said it before here and I'll say it again. It's not Lincoln stupid it's Teddy Roosevelt that
Obama needs to study. If Obama only had the balls that George Bush had and used
his presidential powers to pull out the Sherman Anti Trust super weapon created a hundred
years ago when America exploded with populist anger.
good comment Oldtimer. I think that is a great idea...Ted
I agree 100%. The crisis we are facing requires someone who can take on the Wall Street bandits who put us in this mess, and make them pay ... and by pay, it's not raping the payments of taxpayers to bail them out! AIG is just the tip of the iceberg for the injustices of government being in bed with big business. It is completely ruining and cripling this nation. All the while, the good people of the nation suffer. Remember, the taxpayers are now the MAJORITY OWNERS of this company! And if they want the bonus money back, they should get it. Geitner is a wimp in this regard. Where is this man?! Why does Obama need to step in every time and help this guy out in dealing with any situation of consequence. I thought he was going to put in strong people with the best minds to solve problems. Yet, all we see with Geitner is a BIG LACK of leadership, focus, ability to communicate, ability to prioritize, and toughness in dire times. It's time to find someone now who can be a true champion for change, not this guy who is clearly a deer in headlights without the ability to move when a truck is coming fast about to run him over on the road.
You had me until you mentioned the name "Bush". To ascribe the term "Balls" to Bush, is to mistake ideological fervor for pragmatism. Remember Bush's invocation of "gut"? He gutted us, is what he did. I'm loathe to give him credit for anything of a positive nature.
Am I biased? You're damned skippy, I am. The only positive thing he did, was leave.
I think I understand your problem with ascribing balls to Bush.
What I meant was Bush did what he wanted without regard to the consequences
and that takes balls. No president has ever damned the torpedoes like W and
Americans will suffer the consequences for years to come, perhaps decades..
I feel that President Obama will make the right decision by getting rid of Sommers and Geithner. He should tell them to "shape up or ship out." They are supposed to be brilliant and I don't think they want to be fired by the president and go down in history as failures. However, they have to show some creativity and aggressivness in solving this crisis.
Other people to consider would be Alice Rivlin and Paul Krugman. Also, President Obama needs to pay more attention to the Senate Budget Chairman, Kent Conrad. He might be more right of center, but he is decent and well respected.
and Stiglitz and Galbraith and many many more...
Obama promised Change we can believe in. After his appointments I saw no change. But if Obama can stand up to Summers and Geithner, then he will be standing up to the Wall Street special interest insiders who wrecked our economy.
Remember it was Summers who pushed hard for "Free Trade" that has taken away 30 million American jobs and shifted America's walth to China.
Tarrifs will create jobs here in America. They used to claim every billion dollars of exports creates 50,000 Americn jobs. Since we are running a $600 billion dollar trade deficit, that means we lost a net 30 million jobs to unfair/unbalanced trade.
By the way, how is that request to China for a new trillion dollar loan coming along? To bad you shifted thousands of our factories to China and now they earn the money.
Frank: Maybe it's time to fire some people. Yes! Fire Geithner and Summers.
The WSJ reports that bailed out WS firms are figuring out ways to circumvent the pay limits in the recent TARP bill:
http://onl
Will President Obama and Congress get in front and fix the loopholes in the recent TARP legislation? Or is another "credibility gap" in the works?!
I am hoping he fixes the tax code like Maria Cantwell said...Mak
not very clear was i...Make capital gains, dividends, and interest subject to income taxes...in
Summers and Geithner are joined at the hip. This doesn't bode well for our recovery. I've read elsewhere that they refuse to speak with Paul Volcker, because Paul has been critical of their banking plan. Those two need to be reeled in.
Volker was the one who pulled the Reagan economy out of the ditch... and tax rates were at least 50% on the rich at that time....an
Let the Georgetown crowd worry whether this is smart messaging. The rest of America wants the economy fixed -- and so what if Geithner and Summers are made to look stupid?
Too bad BHO can't fix the economy with words alone.
Too bad Limbaugh's shills can't stop reform and recovery with snark alone.
Who is in charge -- the president or the Washington and Wall Street insiders
David, good question, i've been asking this for months. wall street's been acting like petulant, spoiled brats with no parental oversight. I'm very happy President Obama's found the Big Stick*
* you know, Teddy Roosevelt's "Walk softly and carry a big stick
I know, Wall Street keeps whining and throwing tantrums, time to nationalize the banks like they did in Switzerlan
At the outset, Geithner and Summers opposed Congress when they proposed restrictions on CEO pay and bonuses. They're part of the Wall St. culture that led to our present economic problems.
Although I'm an Obama supporter, I'm afraid Obama is being overly influenced by Geithner and Summers. From appearances, it looks as if the tail is wagging the dog.
Obama to Summers/Geithner: I'm tired of hearing what you can't do!
Well David, to answer your question..
I think it is time to make a change. Get the money back and fire Summers and Geithner.
Hear Hear
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