Needed: A Financial Bailout "B" Team to Help Save Obama and the Nation From Geithner's and Summer's Caution

An Open Letter to Joseph Stiglitz, Paul Krugman, Nouriel Roubini, Elizabeth Warren, James Galbraith, Dean Baker, Robert Kuttner, George Soros and Friends:

Ladies and Gentlemen:

Your country needs you. Whether he fully recognizes it or not, President Obama needs you. If, for whatever reason, Obama has decided to limit his economic team to a relatively homogenous group made up mostly of Robert Rubin acolytes, then you should be forming an alternative "B" team of top economic minds to bring a wider range of ideas to Obama from the outside, and, specifically, to formulate a smart alternative to the Geithner half-baked financial bailout "plan".

Passage of the Economic Stimulus Bill, whatever its limitations in size and scope, was a key first step in addressing the worst economic crisis since the Great Depression.

Solving the financial and banking crisis will be even more important--and far more difficult both technically and politically--in preventing this deep recession from turning into a depression.
In that regard, it seems clear that Secretary Geithner's financial rescue plan, to the extent it is a plan, is DOA, particularly if it will require any additional funding from Congress. It's being rejected by the markets, rejected by economists from left to right, and rejected by Congress. James Galbraith has named it BARF: The Bad Assets Relief Fund. Joseph Stiglitz previously warned of "cash for trash". Whatever positive elements there may be in Geithner's "plan" (particularly the bank "stress test"), it seems questionable whether Geithner, Summers, and the other Bob Rubin acolytes who dominate the top economic positions in the administration have the understanding or courage to speedily come up with an economically and politically viable financial rescue plan. They are personally too close to Wall Street insiders. They are ideologically too committed to propping up the current failed financial structure. As the Washington Post reported, Geithner and Summers "think governments make poor bank managers", as though the masters of the universe who collected tens of millions of dollars in bonuses while turning America's largest banks insolvent have made good bank managers.

We need an economic "B" team outside the White House to devise the kind of financial rescue package that has a high probability of working and to then lobby Obama, Congress, the public, and the media to make it policy.

The kind of economic thinkers who should serve on this "B team are those who were right about the perils of deregulation and predicted the financial meltdown early on, while the Rubin acolytes still had their heads in the sand. Among the names that come to mind are those to whom this Open Letter is addressed: Joseph Stiglitz, Paul Krugman, Nouriel Roubini, Elizabeth Warren, Dean Baker, Robert Kuttner and George Soros. I'm sure that among you, you know other less well-known figures who should also serve--Since even some Republicans are now entertaining the idea of temporary nationalization, perhaps there are compatible conservative economists who can be added. Maybe add some Swedish experts who helped manage their country's successful financial rescue in the '90s. Perhaps Mr. Soros would help fund the effort to put together the plan and to run a media campaign to sell it, to the extent that funding is needed. Or if Mr. Soros is considered too controversial, and if his funding of the effort might prove politically damaging to the outcome, perhaps there is a think tank or academic organization that could fill the role. Or maybe nothing more is needed than a little bit of travel and you would each be willing to fund your own expenses.

Many of you have some access to the media to express your views as individuals. But even a megaphone of the size of Paul Krugman's New York Times columns, or Nouriel Roubini's Washington Post op-ed article doesn't seem loud enough to be heard, or listened to, by the insiders putting together President Obama's plans.

As a group, your voice will be louder and harder for the White House to ignore than it is as individuals: Hold a private retreat to begin formulating a consensus around an alternative financial rescue plan. While I'm sure there are differences among you, overall you seem to favor a more radical approach than Geithner's that would most likely favor a greater degree of government control, which would align the interests of the banks with that of the taxpayers (rather than management, shareholders or bondholders), in exchange for recapitalizing the financial system and sorting out its toxic asses until it is restored to health and can be sold back to private investors with a financial return to taxpayers. Call it temporary nationalization of some of the insolvent banks if you like, or receivership if that sounds better, or call it the Swedish Model, or put the political communications experts to work coming up with a better word. (In any event, when a conservatives like Sen. Lindsey Graham (Rep.-S. Carolina), possibly John McCain, and even Alan Greenspan are willing to consider temporary nationalization, while some "liberal" Democrats like Sen. Charles Schumer (Dem.-Wall Street) oppose it, then we know that the whole political calculation has dramatically shifted). Not only is such a plan the most likely to shock the nation's financial arteries into starting to circulate credit again; it may, ironically, be easier to sell outraged taxpayers on putting more money into recapitalizing the financial system if in exchange they are given the indicia of ownership and the possibility of eventually recouping part of the investment, rather than bailing out the current managers and shareholders. But the devil is in the details, which is where experts like you come in.

Following your initial in-person retreat, follow up with conference calls, papers, and emails. Hire researchers, if need be, to help with the technical details. The goal would be within a month or so, to come up with a consensus plan for a workable financial bailout, as an alternative to the Geithner plan. Announce it at a press conference. Ask for a meeting with President Obama to present the plan. Fan out to the media to argue for the plan. Seek the backing of grassroots organizations, unions and the netroots to lobby for the plan.

As a group of noted economic thinkers--including two Nobel laureates--you are likely to have a far better chance to have a meaningful impact in influencing President Obama, Congress, and the public than any of you are having as individuals. Together, you may be able to able to help reshape and improve the financial rescue plan and transform the political debate.

If you are successful in helping a successful financial rescue plan become reality, the nation and the world will owe you a great debt of gratitude. And if the plan is successful in helping turn around the economy within a few years, President Obama will owe you a great debt of gratitude, too, even if he didn't initially ask for your advice.

Comments

[TomBrentwood]

Should Geithner apologize for not solving the economic crises in two weeks on the job? Wouldn't want to audit the banks first would ya? Maybe he wants to get all the facts first. Might take him an extra week or two.

[strangerinthenight]

No one expect Geithner to solve the economic crises in 2 weeks. The problem is that fear mongering "TIME IS OF THE ESSENCE - THESE RECOVERY PLANS MUST BE PASS OR WE ARE HEADED FOR CATASTROPHE.

For all the drama build up, the suspense of these so-called Recovery Plan, In an stunning reversal, Geithner says he is withdrawing the plan - the problem is too complex, too big !

Now, he tells us. So what then is the purpose of fear mongerin as if it is the end of the world.

The President should listen to other views, rather than relying on Geithner and Summer.

[ntmessage]

Again. Yesterday's rhetoric. The first TARP (who people think failed at fixing every problem in the country) worked in stopping the world from cratering. We are now in a fragile state and all the mongering about nationalization on a large scale is like keeping firefighters at bay while the house keeps burning.

[strangerinthenight]

I just finished viewing Stiglitz conference before Columbia University students. Like I'd been saying before - TARP is really "cash for trash".

Obama loyalists would have you believed Geithner's TARP II is "ANSWER" - throwing names like Buffet as semblance of "credibility" of a sure recovery. Dissenting opinions were treasonous.

I voted for this President though not always lockedsteps with his decisions. Quote " I will listen to all sides". I believed him. It's quite disappointing that he summarily dismissed Krugman Stiglitz et al.

After the President's dramatic build up, Geithner finally acknowledge the PLAN is not workable and has to be completely overhauled. The President has yet to acknowledge Krugman was right. .

For a 27-year-old Echo Boomer (Gen Y), I have a good paying job, had the audacity to negotiate my salary, company car and 6 year-seniority. I have a mortgage, $400/month student loan to be paid off next month, and a car note. BAD DAYS couldn't end soon enough, like yesterday. My employer had a huge lay offs in my department. I am one of the rag tag employees left working with wet heavy blankets on our shoulders. I will never know what my employers sees in me worth nurturing.

I see these students with their backpack at the press conference and I (((shake my head))). It wasn't that long ago, I was one of them - eager to find my own expression in this world. It's not so easy being an adult - 'am finding that

[CONCERNED122]

ADD SUZE ORMAN AND LOU DOBBS

[BluestateGuyInTX]

Suze Orman is all about personal finances. Not necessarily the skill set. Lou Dobbs is a bad idea no matter how you cut it. He's a xenophobic, rabble-rousing, demagogue who has no economic knowledge that I can discern.

[OhioMapleLeaf]

Suze Orman is perfect for the team. This whole economic disaster is based on the financial industry manipulating the personal finances of the American population to their advantage. Orman has been castigating the banking industry for raising credit card interest rates as our economy continues to sink. She has called for the banks to lower all - I repeat all - of the mortgages, credit cards and business lines to 4% across the board. Seems fair to me considering that the banks are currently borrowing money from the Fed for close to 0%.

Lou Dobbs, a native of your state of Texas, was an Economics major at Harvard, where Summers later taught. He has been calling for a solution to the housing problem for a year and a half. Most financial experts didn't even acknowledge a problem with the financial sector until September. Dobbs is an Independent, and a highly intelligent human being. He is not xenophhobic, his wife is Hispanic and he is pro legal immigration. Listen to his program some time - you might find you agree with a few things he has to say. He was one of the first to point out the problem of outsourcing and listed each company outsourcing jobs on his show every night until the list got too long. We have lost over 4 million good paying middle class manufacturing jobs since 2000. That may not matter to you in Texas, but it certainly hurts the workers here in Ohio and Michigan.

[CONCERNED122]

Add Sheila Bair

[DiogenesOfAlaska]

'They are ideologically too committed to propping up the current failed financial structure.­'

Well, after Greenspan's revelations, this certainly doesn't count any more. Thanks, Mr. Greenspan.

[Raven]

A brilliant idea, Miles. Sure hope they heed your advice.

[LiberalDem]

Excellent idea! There are way too many Rubin groupies involved in this administration. Obama, and the country, really need better advice than Geithner, Summers,etal are providing.

[DuganS1]

I would hardly call Krugman and Roubini an "A" team. Krugman is just an academic, and a radical left wing academic at that. Roubini is just an eternal pessimist, who sang his "the world is going to collapse" song every single year until he was right. I figure that anyone could say the economy is going to collapse and be right at some point in their life...

[DiogenesOfAlaska]

Let me see.

Are you implying that you would not have preferred somebody to actually predict the crisis?

Let me see what that means.

does it mean that: you WANTED this crisis to happen? As in: you profited from it?

Or does it merely mean that you don't care whether the system you put your faith in actually has any solid foundation valid even though the world changes?

[BluestateGuyInTX]

Just an academic? Too smart huh? Perhaps we ought to ask the smart guys for a change. Lord knows the dumb guys had their shot under Bush.

[ntmessage]

Hmm. A team of people who never ran a Bank. How ridiculous is that. So your pilot crashes a plane so you want to fly with someone that saw the crash, as opposed to another pilot? Even Soros’s plan does not call for that untested notion.

[wrightthewrong]

This is a ridiculous comparison. To use another, imagine one type of surgeon over another surgeon, but one truly suspected a tumor was there and ordered the CT scans, PET scans, MRI/MRA, the CA19-9, instead of one who said to the patient, "Gee, everything looks okay to me, and you seem to be feeling fine. Just leave your check at the desk..." The people you are referring to, to whom this letter is addressed, who indeed may not be pilots and may not be bankers, understand the workings of the banks and the markets; and these are the people who saw it coming and tried to warn us. You give bankers too much credit, and economists too little.

[ntmessage]

Don’t be silly. Economists analyze, write reports and are talking heads. Operational people that understand the business is what is needed. If you never ran a business with more than a few hundred employees, it is impossible to understand.

I mean who didn’t know back in 2005 there was a housing bubble? Greed got the best of everyone. We do not need a crystal ball. We need people that know what they are doing operationally for any policy to work.

So many people, who are cognizant of the Auto supply chain, neglect to acknowledge that this one is even larger and affects our pocketbooks directly.

The comparison stands.

[cam]

By your logic barbers should still be doing surgery.

We are not trying to keep the existing economy in the air, we are trying to design one that will fly. In your analagy the relatinship between bankers and economists is much like the conflict between the pilot and the model aircraft designer in Flight of the Phoenix. The bankers are the pilot, the economists the model designer.

Economists are needed far more than bankers at this stage. But we are very top-heavy with failed bankers' pet economists.

[DiogenesOfAlaska]

'By your logic barbers should still be doing surgery.'

I love this one. But, as usual, it's even worse: bankers weren't even barbers. No professional exams necessary to be an investment banker or derivative trader.

Cool, huh?

[ntmessage]

How about a re-enginnering first as opposed to an entire new system that affects everyone in the world. Comments like this without knowledge of scale seem silly.

[BluestateGuyInTX]

But what's your beef? The current team apparently never ran a bank successfully.

[ntmessage]

Your prove the point that this is yesterday's problem you are trying to fix. Most of the worst are out, and frankly should have been the ones in front of congress.

[Fez]

This would be the "A" Team, with two Nobel laureates and other world-class economists and financiers. Obama has installed the "B" team already. Sort of like putting a minor league team on the field and keeping your major leaguers on the bench. I predict that Geithner and Summers will be gone by July 1st when their "plans" have not worked and the credit system is still frozen.

[Hiphopcrates]

I completely agree. In the absence of any "mea culpas" from anyone bearing responsibility for the current crisis, who on earth would trust these guys again?

[Atticus]

No one of any note has ever heard of this bunch of bozos. Let Obama have a chance!

[WandaBooneshaft]

You're kidding, right? These people are Nobel prize winners. Me thinks you are the only "no one" who has never heard of these brilliant economists.

Geithner and Summers are decaf and we need espresso.

[BluestateGuyInTX]

You gotta get out more. You may never have heard of them but that says more about you than them. Stiglitz and Krugman won Nobel Prizes in Economics. Roubini called the collapse before it happened. The guys Obama has working for him had trouble recognizing the collapse after it happened. Obama's economic team is as disappointing as his Afghanistan policy and his choice for Dept. of State.

[RobertHenryEller]

I endorse these suggestions. I was also moved by N. Roubini's and M. Richardson's WP editorial advocating bank nationalization to e-mail Dr. Roubini and suggest something similar. Certainly Krugman, Soros, et al, would make a good group, and would be hard to ignore. Likewise, I would give access to like minded politicians of all flavors. If the Republicans really want to re-invent themselves, following Lindsey Graham on this one would be an auspicious start. This could be a place for President Obama to practice effective bi-partisanship. There are some "Bob Rubin Democrats" who are too close to banking executives who will resist because of personal relationships rather than support the idea as a potentially good policy. A real bi-partisan effort could neutralize that wing, if they did not relent. But maybe the Rubin Dems will realize that, at worst, they are dooming their pals to the betrayal and fate of merely being 8- or 9-figure multi-millionaires.

[moonbay]

Great article and great idea. We need these folks to get involved. The list of names is top notch, adding Catherine Austin Fitts. I hope the people mentioned hear of this idea and take it to heart. We need these very folks to get us out from under, not the group of suits that Obama has chosen. (I am - generally - an Obama supporter!)

[satyriasis]

What an excellent idea. I'd also like to add Gerald Celente and Catherine Austin Fitts to the list.

[RobertHenryEller]

Satyriasis, I hope you see this. I've known C. Austin Fitts for almost 40 years. How do you know Catherine, or know of Catherine? Why are you recommending her for this "B" team? I know she formerly worked at HUD. I don't know how to communicate directly with you via Huff Post. But if you're in touch with Fitts, she knows how to find me. Thanks.

[satyriasis]

I first heard Catherine on Coast to Coast am with George Noory. Her macroeconomic analysis has been spot on. I'm also really impressed with her ideas about localizing the economy. I read her work on Solari.com regularly. Her experiences in the investment world are very insightful. I also watch her interviews on youtube.

It's so awesome that you know her. Tell her that her fans appreciate all she's doing.