Obama Really Wall Street CEO In Chief?

So far, I've laid the Obama administration's decision to keep propping up failed banks at Tim Geithner's feet. Obama, meanwhile, has so far avoided blame. I wonder how long that will last.

• First, it was the administration's ongoing insistence (via Geithner) that this is a liquidity crisis, not a credit crisis -- the Wall Street view.
• Then it was the failure to do anything more than express "anger" at the AIG bonuses.
• Then it was Geithner's plan to, yet again, bail out banks at taxpayer expense.
• Then it was the administration's decision to force GM into bankruptcy, fire its CEO, and hit its bondholders -- setting up a bizarre double-standard with Wall Street.
• Then it was a "stress test" for banks in which the baseline scenario has already been eclipsed by the deterioration of the economy -- once again slamming the administration's credibility
• Then it was the revelation that Larry Summers made $5+ million from Wall Street last year, which added to the perception that he, Geithner, Rahm Emmanuel, etc. are reluctant to bite the hands that feed them.
• Now it is the leaked announcement that "all banks have passed the stress test!", combined with a refusal to share the results of that stress test on a bank-by-bank basis.

Obama has never explained why he's acting so out of character here, so we have to speculate. The charitable explanation is that Tim Geithner is paralyzed by fear of triggering another post-Lehman credit meltdown and has convinced Obama that that's what will happen if the government holds banks and their bondholders accountable or just comes clean about the shape that banks are in.

As I've said, I disagree with this. No one is arguing for the sort of uncontrolled bankruptcy that Lehman went through. And the seizure, restructuring, and sale of a few major institutions should not be unmanageable, especially if the bondholders are required to pick up the tab.

The more disturbing explanation, meanwhile, is that the Obama administration really is in Wall Street's hip pocket. Jonathan Weil at Bloomberg thinks there's a chance this is the case. And Obama certainly isn't doing anything to discourage this.

By maintaining a double-standard and refusing to address the elephant in the room, Obama is risking his credibility and his reputation for telling it like it is. This behavior, both toward the banks and toward Americans, is a disturbing echo of the Bush administration. It's time for Obama to address it head on.

See Also:
Complete Guide To The Coolest Electric Cars
Geithner's Five Big Misconceptions

 

Follow Henry Blodget on Twitter: www.twitter.com/hblodget

Comments

[Kaves]

10:49 AM on 04/21/2009

Remember the outcry against Reverend Wright?!? That was nothing compared to Obama's new friends!

[Kaves]

10:47 AM on 04/21/2009

Why are people saying these terrible things?!? I thought we all wanted to go back to kings and queens and serfdom and slavery?!?!? When will people understand that they need people in higher standing to make their decisions for them?? When will people understand that we owe everything to our glorious leaders, especially as they were kind enough to convince us for so long we were free! Free to do what they say! What a liberty! No kings in the past were so kind! How can you say these nasty things??? You should be ashamed!

OBAMA QUICK STOP THE DISSENTERS!!! SAVE US FROM OURSELVES ASAP PLEASE!!! I DONT WANT TO KNOW THE TRUTH I CANT HANDLE IT!

[castlerider]

09:15 AM on 04/14/2009

Obama's largest supporters during the campaign were financial institutions. They are his main ticket. What he's doing here should be no surprise. In this way, he's shown he's just another bought politician. I've been severely disappointed in him over this, but we don't have time to even be sad about it. We need to continue to fight for all the democracy and honesty in government we can.

One of the bloggers here, Gnomedigest, said this:

"I have found Obama supporters to be little better than Bush supporters when it comes to actually paying attention to what their elected leader is doing. Its like they believe once we've elected him its all done because of course he is going to follow through on the promises he made to get elected. He is not a normal politician."

Gnome's right. One glimmer of hope t we have is Obama supposedly says he LISTENS. I hope it's true, but It's obviously up to US, the educated people who aren't content believing that "once they're elected it's all done", to continue speaking up, forcing his hand, like people did to FDR. He listened, and people didn't stop, and great changes were accomplished. Or they'd have never happened.

People need to be educated enough so that at his next townhall, someone takes Obama to task for being so deep in the bankster's pockets, and everyone stands up and cheers the brave soul who calls him for what he is. Wouldn't we love to see that...

.

[unclefesta]

08:00 PM on 04/13/2009

Obama was portrayed in the election campaign as a dangerous radical and tried to calm everyone's nerves by putting together a reassuring looking economic team

Now we know this team is incapable of defending the interests of the American public it is time for him to make changes

[GnomeDigest]

12:19 PM on 04/13/2009

I think his support will last far past when it should, just like it did with the Bush that just left office. I'ld say at least midway into 2010 even with a continuing bad economy.

Americans seem to approach politics like they do a sports team; They pick a side, put on blinders, follow like a lemming, and scream to high heaven the moment anyone questions their glorious infallible leader.

I have found Obama supporters to be little better than Bush supporters when it comes to actually paying attention to what their elected leader is doing. Its like they believe once we've elected him its all done because ofcourse he is going to follow through on the promises he made to get elected. He is not a normal politician.

For those of us paying attention, even those of us like myself who supported him, things look at lot more like the previous administration than the vision he promised us.

[tower20]

04:02 AM on 04/12/2009

Re: next post, my bad it's more like 6% not 4%, and $60 million not $40 million and $940 million that the taxpayers put up (give to the banks).

[tower20]

02:58 AM on 04/12/2009

You forgot one of the latest and greatest outrages. The banks have now announced their intention to participate in the "private/public" sale and purchase of toxic ("legacy") assets as BUYERS. So now the banks can buy their OWN assets using 4% of their money and 96% taxpayers money at whatever price they feel is fair and if the deal looses money they're only on the hook for 4%. That's right, a bank can buy a billion in toxic assets that it currently owns from itself for $40 million and the taxpayers pay the remaining $960 million. If the assets go bad the banks only loose the $40 million instead of the billion dollars they had on their books before the deal. I'm confused, what possible motivation do the banks have for fairly pricing their "assets" under these circumstances. What motivation could Geitner possibly have for allowing this massive fraud to be perpetrated? This is getting curiouser and curiouser.

The private/public purchases were sold to us based on the fact that the "third" parties buying these assets would value them fairly because they had "their" skin in the game. This concept is perversely twisted now that THE banks are jumping in to take advantage of this new "program" as SELLERS AND BUYERS. Hello, Congress, anybody home????

[FrozenNorthObserver]

10:49 PM on 04/11/2009

You mistake his pretty speeches for the rubes for his true character. His true character came shining through when he sold out on FISA, when began protecting Dic&Jr from their crimes after saying he would prosecute crimes where found and then refuses to look and when he lied about knowing about the bonuses and then lied again about doing everything in his power to stop them while doing the exact opposite and when he rewarded his top contibutors by giving them the keys to the Treasurey while crushing Detroit who just happened to give more money to his rival. It's nothing more or less than age old political cronyism.

"Obama has never explained why he's acting so out of character here"

[yesman]

05:26 PM on 04/11/2009

Obama cannot avoid responsibility for the fiscal policies of his administration. He picked Geithner, and he could get rid of him if he wanted to. The economic situation is the biggest priority of Obama's administration. He must be paying attention to what's going on, and he must be satisfied with what's being done. Otherwise, different policies would be in place. People who "like" Obama seem unwilling to make him responsible for his administration's actions. What's the difference between that and people who excused George W. Bush because they'd "like to have a beer with him"?

[johngary66]

01:39 AM on 04/12/2009

The problem is people were so swept up in Obama's double speak during the campaign, so invested in him, that they now would have to admit they drank the kool-aid if they started to question him. So they won't! wake up people. He is following very closely in Bush's foot steps.He needs to be put on notice that enough progressives are watching his actions to cause him a lot of political problems in the very near future. Right now he rightfully believes people arn't paying close enough attention to be aware of what he's up to. His justice department is behaving just as poorly as his Treasury Department. When recently asked why his kids didn't have a dog yet, he joked "this is Washington, it was a campign promise". Not so funny considering that seems to be his attitude about all his promises.

[indy100]

12:55 PM on 04/13/2009

Not everyone who supported Obama has blinders on. Some of us questioned several of his choices from the day they were made. Why would he want anyone even remotely tied to the Bush Administration and/or plicies and disasters in his Administration? I voted for Barack Obama, I've read one of his books, and I genuinely believed what he told us. The man is an amazing speaker, and after 8 years of listening to George W bumble, bluster and outright lie, I was awestruck. However, I wonder what the heck he is doing and I do not have faith in recent developments. Nothing wrong with requiring the CEO of GM to step down, and the company to restructure. It should have happened years ago. But, why was this not DEMANDED from the banks and AIG?? Contracts can be broken with hourly wage earners at auto plants, but not with overpaid finance execs? It's an obvious double standard that does not sit well with the middle class base that supported him.

[noesis]

03:16 PM on 04/11/2009

Ten principles for a Black Swan-proof world -- Professor Nassim Taleb

http://www.commondreams.org/view/2009/04/08-8

[Viper]

02:08 PM on 04/11/2009

Its ironic for the push to nationalization based on insolvency or future possible insolvency.. when the Government is insolvent and as a government enterprise insolvency is not recognized in its fund accounting.(any debt can be paid by printing more money or taxing more.. so no such thing as insolvency as the logic goes).. thus the only thing nationalization does is remove any future insolvency test or mark to market rules.

See problem solved.. does not add more capital, does not inrease money supply, or jobs, or increase asset values and based on nationalization to date..real numbers... very, very expensive...

Regards

[Sundialsvc4]

01:16 PM on 04/11/2009

Unfortunately, Henry, I think that I agree with you. Mr. Obama is seriously stumbling here.

Nevertheless, so is the US Congress. I don't see legislation and re-regulation being rushed through the system for anyone's signature. I don't see the lessons learned from the ever-so-diplomatic words of foreign nations at G20 being rushed home with the notation, "Oh Sh*t! We gotta do something NOW!"

I know that corruption is an insidious crime. But you eventually have to face it and to deal with it, in your own country and in your own way ... lest the businessmen and governments of other countries decide to curtail your activities for their own self-protection. You have to use the "C" word. You have to call it "crime."

[StephenJK]

09:24 AM on 04/12/2009

It is a massively widespread systemic problem with our government. The problems transcend party affiliation and participating in the clinical definition of insanity by continuing to vote for people who will simply become infected with the corruption virus is a serious issue that deserves serious consideration. I think a proper course of action would be to not vote and not pay any taxes whatsoever until these systemic problems are corrected i.e. get the lobbyists the F\/c|< out of washington and campaign finances completely static. None of this BS of record breaking campaign fundraising, no matter HOW it is raised. The madness needs to stop.

[Viper]

01:03 PM on 04/11/2009

Come back when you have based the cost of nationalization on small banks to date (almost 40), the resulting consolidation into fewer banks and bargain sells to the rich, the Indy Mac (just a regional Bank) nationalization cost -by far the longest at 6 monts... 60% business lost, (direct and indirect, including businesses that closed do to loss of 50% of their deposits over 250K) , and who is staffed to run multinational holding companies with vast foreign interest/business partners (not the FDIC).... Or as Krugman has said .. "he has never considered how we could nationalize a large bank or the costs" Nationalization: 15 trillion based on real cost to date.

AIG, freddie, Fannie are nationalized, have been for awhile.. how is that owrking?

How you would do it in less than the 18 months it took to staff the much smaller/less complex S&L take over and tens of billions in consulting fees....

Then you will have a real plan, with costs and time tables so that one can compare the plans and if your are proposing a real option!

Right now what you provide is the unfounded views of an Idealog... just like Repugs on tax cuts and trickle down, outsorucing and free trade.

Then consider the political fall out when its now Obama foreclosing, Repoing , cutting up credit cards... All of the critism directed at banks/Bankers will be directed at DEMx, then running the banks.

Regards

[freelyb]

07:10 PM on 04/13/2009

If this is so, why doesn't Obama just say so? Even if all motives and actions taken were clean as a whistle, the lack of info has created a huge trust deficit. And while he's not talking too much, I personally think he's walking quite a bit like a duck...

[mjc]

12:22 PM on 04/11/2009

Think we all knew that Barack Obama would have to rely on various experts and analysts in many areas to propose and establish the policies necessary to carry forth Obama's schemes. What we knew also was that in most cases the men and women he would choose would probably come from previous administrations, Clinton's in particular, and from the people formulating policy in the particular field. Geithner, Summers, all vetted and established as economic analysts, certainly fill that bill and Rubin was the godfather. The trend in economic policy from Ronald Reagan on was to be careful regulating the financial sector of the economy lest it fall apart from ??? The end result was and is a system blathering along, individual banks and individual CEOs and others in power in those banks taking what they assumed was their right. Now there can be no restraining them....we are told. One can only hope that this nation will survive such negligence before there are many more jobs lost, homes lost and retirement/pension plans lost. Here's hoping...

[bobh]

12:12 PM on 04/11/2009

Obama probably feels that you put out the fire first, and then worry about the fire code.
I cannot believe that in due course he will not enact firm reforms; again the liberal blogosphere is jumping the gun and not giving these people a little time to do their work. So much of the liberal criticism of him has the quality of children in the back seat of the car on a long trip.

[StephenJK]

09:35 AM on 04/12/2009

Really, Bob? Really! So you're giving the Obama administration the benefit of the doubt in the face of obvious patterns of behavior that makes obvious he intends to funnel OUR TAX $$s to the richest people in the country. His appointments are disgustingly out of touch (frankly they don't care if we know, they will spin it how they need to spin it) with main street economic policy.

[freelyb]

07:14 PM on 04/13/2009

Some see child-like dependency and denial in those who advocate window dressings such as having more patience, gaining greater understanding of the issues, etc.