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.