Latest Lame Obama Excuse: “Geithner Blew Me Off”

This does not pass the smell test. An Associated Press report on a to-be-released book by Ron Suskind tells us that Obama said that Geithner ignored his request to look into the feasibility of breaking up Citigroup (hat tip Buzz Potamkin):

A new book offering an insider’s account of the White House’s response to the financial crisis says that U.S. Treasury Secretary Tim Geithner ignored an order from President Barack Obama calling for reconstruction of major banks…

The book states Geithner and the Treasury Department ignored a March 2009 order to consider dissolving banking giant Citigroup while continuing stress tests on banks, which were laden with toxic mortgage assets. The directive from the president was one of the most important decisions during the first few months of his presidency.

In the book, Obama does not deny Suskind’s account, but does not reveal what he told Geithner when he found out. “Agitated may be too strong a word,” Suskind quotes Obama as saying. Obama says later in the book that he was trying to be decisive but “the speed with which the bureaucracy could exercise my decision was slower than I wanted.”

Geithner says in the book that he did not recall that Obama was mad at him about the Citigroup decision and rejected allegations contained in White House documents that his department had been slow to enact the president’s plans.

“I don’t slow walk the president on anything,” Geithner told Suskind.

“The Citbank incident, and others like it, reflected a more pernicious and personal dilemma emerging from inside the administration: that the young president’s authority was being systematically undermined or hedged by his seasoned advisers,” Suskind writes.

Suskind states that Obama accepts the blame for mismanagement in his administration while noting that restructuring the financial system was complicated and could have resulted in deeper financial harm.

One of the major complaints about Obama’s administration is that it was too easy on major financial institutions, including Citi. The president had wanted Treasury officials to focus on a proposal to dissolve the bank, but no plan was ever created, the book states.

Let’s be clear. I’m sure Suskind’s sources did indeed tell him what he reported in the book. But there is plenty of reason to believe that this idea, that Obama “ordered” a Citigroup resolution plan and Geithner ignored it, is just an effort to shift blame for an unpopular pro-bank strategy to Geithner.

Look at the spin: we are supposed to believe Obama wanted to be tougher with the banks and was thwarted by his Geithner. Does that mean we are also supposed to believe that Eric Holder also ignored Obama’s orders to prosecute?

The only problem with this effort at revisionist history is that it is completely out of synch with other actions the Administration took in February and March 2009 that had to have been approved by Obama. And his posture before this supposed Citigroup “decision” and after, has been consistently bank friendly. Obama knew from the example of the Roosevelt administration, which he claimed to have studied in preparing his inaugural address, that the time to undertake any aggressive action was at the very start of his term, in that critical speech. March was far too late to start studying the question of whether to nationalize Citigroup.

Remember, Obama has been on the defensive since mid 2010, when it looked like the Democratic party was going to take big mid-term losses and they turned out to be even worse than expected. The realization that the Administration’s poor policy choices were coming home to roost would no doubt lead to trying to shift blame off the President on to convenient scapegoats. That mid 2010 timeframe likely coincided with Suskind’s research and interviews. And the “inexperienced President” positioning also serves to explain why an order-bucking staffer like Geithner is still in the saddle. Obama has since leashed and collared his advisors; this failure to exercise a firm hand was a short-lived problem, although the early mistakes that resulted still haunt him. A clever story, no?

All we have to do is look at the bigger arc of the President’s financial services industry bait and switch to see that this “Geithner blew me off” account doesn’t hold up. Recall that during his campaign, Obama made a great show of having Paul Volcker, who clearly had the stature to stare down the banks, as an advisor. The assumption was that Volcker would be Treasury secretary or otherwise very influential (think Kissinger in his role as head of the NSA, which prior to his appointment, had never been a powerful position).

After the election, Obama named Geithner and Summers, two of the major architects of the deregulatory strategies that drove the global economy over the cliff, to his most senior economics/financial services positions. And to top it off, Geithner and Summers then were close allies and Summers was seen as a ruthless infighter, so together they were more formidable than either would have been individually. Volcker was given a role that was the equivalent of exiling him to Siberia, head of a newly-formed Financial Stability Oversight Council. Anyone who knew anything about the players could see that Obama had decided to throw his lot in with the banks.

Close observers can point to more evidence of Obama’s fealty to his financial lords and masters. He interrupted his campaign to whip aggressively for the TARP. Every single Obama appointee of any importance backed the strategy of protecting the banks, from the SEC to HUD to Treasury to DOJ. Don’t forget that Peter Orzag went to Citigroup after leaving, and Jack Lew came from the bank.

In addition, the idea that Obama directed Geithner in March 2009 to look into how to resolve Citigroup, and the implication, that that was a serious request that the President might act on, does not comport with the Administration’s actions that month. Remember, it was in early March that Team Obama went all in with its bank boosterism strategy. Indeed, a report on February 22 indicated clearly that the Obama Administration saw the “stress tests” which had been announced earlier that month and were being mistakenly assumed to be the real deal, as confidence building exercise:

Said one high-level official, “I think the market is missing that the whole intent of this process is to show that the banks have enough capital for even worse outcomes than we currently envision and to show there’s a program in place to give banks access to that capital if they need it.”

March 9 was the day that a memo from Citi CEO Vikram Pandit was leaked, saying the bank would be profitable for the first quarter of 2009. Bank stock prices jumped that day. The Obama administration piled on the momentum and continued to press even more aggressively the message of late February: the banks were going to be put through a tough process (we debunked that claim multiple times), the government had confidence in the system, and any banks that came up short had a path for strengthening its balance sheet.

So how do we interpret the report of the Obama demand and Geithner’s insubordination (which Geithner denies)? Remember, hese people are ALL adept bureaucratic infighters, which means masters of the strategic leak and PR cleanup after messes.

It is hard to imagine that Obama would tolerate Geithner blowing off a major request. The spin fed to Suskind, “Obama was a green executive,” stands in sharp contrast with reports of Obama’s arrogance (a common description of his private demeanor) and his famously well run campaign. And most important, the idea that a windup plan for Citi was a SERIOUS request (as in input for a decision as to whether or not to act) was inconsistent with the stress test/confidence building plan already in motion.

Thus a more logical explanation is that Obama did make a request, but it was understood by both Obama and Geithner to be a CYA exercise, something they could refer to if it ever proved necessary. Geithner gave it suitably low priority, particularly given that it would be a time consuming task and he was short staffed (there were numerous reports at the time of how Treasury had open positions). Obama was still miffed that it didn’t get done and chided Geithner about it.

Let’s consider the much less plausible idea that Obama really wanted a serious study. That would have been beyond the capability of Treasury staff to complete in quickly enough to be useful. The Administration needed outside help to design the stress tests and hired McKinsey; it would certainty have needed more horsepower to do this exercise on a timely basis. So Geithner and other regulators would likely have pushed back had Obama been earnest, particularly given the risk of leaks, the time required to do it right versus how rapidly events and existing action plans were moving forward.

Finally, it seems unlikely that anyone with experience in an organization would tolerate serious insubordination. By contrast, with a new team working together for the first time, Obama may well have cut some of the people working for him slack because dropped balls may have been due to things slipping between the cracks with the scramble of putting new programs and policies in place, or simple miscommunication (again, more likely with a new team). Those issues may explain lack of Obama follow up on other requests that are now being repositioned to prove his staff did him dirty and he can’t really be blamed for all the bad stuff that happened on his watch.

Put it another way: one of Obama’s striking characteristic is his shameless lying. While politicians are a famously untrustworthy breed, the magnitude of the gap between Obama’s campaign promises and his conduct is outside the pale (see this video starting at 6:40 in case you need a reminder). When asked about his repudiated campaign promises, Obama doesn’t try to say he’s honored them; he’s said that politicians lie. So his position is “Caveat emptor, you should have been smart enough not to believe me.” With that stance, there’s no reason to trust his self-justifying posturing via Suskind either.

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94 comments

  1. anjon

    Great job Yves.

    Maybe Obama is now getting ready to throw Geithner under the bus? Actually, that would be a good thing, assuming it signals a shift in policy.

    Or perhaps Barry has only now noticed that Citi/BofA/Government Sachs / JamieDimon inc and the rest aren’t sitting in an FDIC receivership? Perhaps he noticed the ticker going across the screen on CNBC and only now realized that he hadn’t checked in on Geithner since he “gave the order” back in March 2009?

    Btw- Looks like we got our posts out almost at the same time
    http://economicmaverick.blogspot.com/2011/09/moment-obama-ruined-his-presidency.html

    1. Carla Giampaglia

      Will there ever be a day that Oscama actually puts his spine back in and says to the American public, “Yes, I did it. I am the one who signed the bill that committed billions of YOUR dollars to bail out greedy, careless bankers who don’t have the common sense God gave a flea. That is, in fact, MY signature on that document.”

      The real kicker is that although we all know just how that turned out, he hasn’t the presence of mind to investigate and prosecute the banks that wasted the money given them for bail-outs.

      At minimum, I think the American public is entitled to an accounting for the money our grandchildren are on the hook for!!

      1. F. Beard

        I think the American public is entitled to an accounting for the money our grandchildren are on the hook for!! Carla Giampaglia

        You should not buy into the lie that we can borrow from our children. After all, what do children own that we can borrow from them? And how can we borrow from someone who does not even exist yet?

        The US National Debt will either be repudiated or paid off with seigniorage.

        1. citalopram

          How is it that anyone in America is on the hook for anything? Did we sign a contract? Did we want all that debt to finance their war profiteering and bank bailouts? Like Attempter says, “We owe them NOTHING!”

      2. iamnoone

        No, Carla that day will never come. Not unless he faces some kind of revolutionary tribunal. Nice thought, but atm low probability

      3. curlydan

        Except it was George W. Bush’s signature on TARP, and W also presided over the initial AIG and Fannie and Freddie bailouts.

        Not that Obaman would have done much different, but let’s not forget the man who really held the fountain pen in his hand.

        “Some will rob you with a six-gun,
        And some with a fountain pen.”
        –Woody Guthrie, “Pretty Boy Floyd”

      4. propertius

        Will there ever be a day that Oscama actually puts his spine back in

        The “spineless” narrative just doesn’t cut it for me. He’s not “spineless” – he’s a liar and a crook. He’s not “weak”, he’s responsible (or, more to the point, culpable).

      5. terry

        It ain’t your money! It belongs to the feds. Bernake is giving billion if not trillions of American dollars to outside interest.
        And when is the last time you ever saw YOUR money being made? Seriously. Have you ever seen money being made from start to finish? No!

        1. F. Beard

          It is OUR money! Federal Reserve Notes are legal tender for both government and private debts. When the Fed dilutes the value of FRNs it steals from every holder of those FRNs which is the entire US population!

    2. Yves Smith Post author

      The Suskind revelations are in a book. Book lead times means the text was put to bed at least six months ago. So this “news” does not indicate a recent change in posture.

      1. Moopheus

        Not necessarily–for “normal” books that would be true, but for an “important” timely book the lead time can be much shorter. As in, manuscript might still be arriving two weeks before going to the printer (the worst I ever witnessed was one week for a whole book). Keep in mind there’s no prepublication publicity, no need for advance proofs. That alone cuts four months off your planning.

        1. Yves Smith Post author

          It is a near certainty the Suskind book was not done on a quickie basis. That format makes sense for celebrity autobiographies where the name of the writer will carry the day, or in covering a big scandal of some sort, when you are competing with other authors to be first to market. In either scenario, the reason for skipping the “normal” process is that the book is expected to be “hot” enough that it does not need to be marketed.

          The reason for the long lead time is 1. Getting dust jacket blurbs and 2. Sending galleys out to editors who then assign the book to be reviewed and put the review in their publication calendar. Rushing to market means guaranteeing you don’t get reviews, or get very few and get them pretty late. I can’t imagine a Pulitzer prize winning author (ie the sort who is VERY likely to get reviews) would sacrifice his best marketing opportunity when he has a non-competitive story (no one else is doing 200 interviews of the Obama inner circle to tell the story he is out to present).

          People who have skipped the normal process (such as Nomi Prins) have regretted it. The lengthy process is for marketing. Why would someone who has had past best sellers slit their throat by skipping critical marketing steps?

          The way to confirm my theory is to see if there are any blurbs on the jacket…..that would indicate a normal book production process. The other is if you see a review ANYWHERE, like the NYT book review section or a major newspaper or magazine, in the first month after publication. If that takes place, they had to have gone through the galleys process. Note it was AP that broke the story, and AP does not do book reviews. This suggests Suskind has a really good publicist that put someone at AP up to it and they bit.

      2. anjon

        I know, I know the Suskind book’s revelations can’t reflect any new posture at the moment because of the lead times required. I thought about that too. I think i’m like a pathetic abused ex-lover, who after years of abuse, even in moments of despair, still exhibits this inklining in the back of the mind, that maybe – just maybe- the abusive mate will come back and “this time things will be different”..

        1. John F. Opie

          It makes little difference if Suskind’s book was developed 4 or 6 months ago: the key point is that a “Dolchstoßlegende” is being prepared for President Obama to explain why things are so screwed up. The “Dolchstoßlegende” was used by revanchists in Germany after WW1 to explain why the Germans lost the war: the German military was stabbed in the back by socialists and communists. There’s not really much to that story (the Germans were beaten on the battlefield at horrendous costs on all sides), but it was a very politically useful legend.

          I think the meme here will be that the President was poorly advised and poorly served by his appointees. The President was blameless and would have acted otherwise if he had only known…

          The same story was used often by the Soviets in explaining how their glorious and exalted leaders failed: If Stalin Only Knew What Was Going On!

          It’s a crock, of course, but that’s what’s being developed here. Expect this to be the major explanation of why we’re so screwed…

    3. alex

      anjon: Maybe Obama is now getting ready to throw Geithner under the bus? Actually, that would be a good thing, assuming it signals a shift in policy.

      But a shift in what direction? Amongst the rumored candidates for replacing Geithner was Jamie Dimon.

      What next, Bernie Madoff to head the SEC? Shame about John Gotti though – he would have made a great head of the FBI.

  2. Weevie

    The link in “(see this video starting at 6:40 in case you need a reminder). ” doesn’t link to a video.

  3. hang on here

    Some of this may be true but others feel Suskind is a fabulist. He writes “narrative nonfiction”.

    This isn’t the first first time Suskind has made huge claims – this needs be be carefully documented.

    http://en.wikipedia.org/wiki/Habbush_letter#Ron_Suskind_allegation

    https://sites.google.com/site/suskindresponse/

    listen to the last few mins of this interview

    http://www.kqed.org/a/forum/R901140900

    Listen to this interview where he won’t answer a simple question at the 38 minute mark “Why won’t Ron name sources”

    http://www.commonwealthclub.org/events/archive/podcast/ron-suskind-new-era-new-president-and-world

  4. Skippy

    Ummm bad case of man love gone wrong? Crammers interview?

    Skippy…maybe if I mute the audio I can search for *That Look.*

  5. mlnberger

    I appreciate your point, Yves, but I can still see the possibility that our hapless president is being outmaneuvered by more clever, seasoned infighters. We saw this with Bush, Jr., who strove mightily to give the impression he was on top of events but actually was the plaything of Cheney, Rumsfeld, and later, Paulson. To me, it may be possible that Obama has had second thoughts about (banking) policy, but once sabotaged, has been forced to accept and defend Geithner’s decisions. Don’t get me wrong — either failing of Obama, whether flat-out lying and buck passing or cluelessness — leads us to same conclusion: we have a tragically flawed (for both our country and progressive ideas) presidency.

    1. Yves Smith Post author

      Obama is quite ruthless when he wants to be. The cool wonkiness is useful protective coloring. People who have observed him are convinced the “Obama is weak” meme is greatly exaggerated. He’s used being conciliatory as a way to provide an excuse to the Dem base that he regularly sells out for moving exactly where he wanted to go, to the right.

      Please link to this article for a long-form discussion of Obama’s critical March decision to cast his lot with the banks:

      http://www.nakedcapitalism.com/2010/03/the-empire-continues-to-strike-back-team-obama-propaganda-campaign-reaches-fever-pitch.html

      1. Susan the other

        And now we are finally investigating the giant mess known as securitization, no thanks to Obama. The most unsecure is secure; poor is rich; profits are earnings – all thanks to the bank fiasco and our dedication to offshoring our own industries. We should rename the dollar the US Minsky. Lots of money, no demand. What I want to know is where in hell are the jobs? This isn’t rocket science. We might have been slow to see it, but nobody believes the b.s. anymore. How will Obama top his already overused propaganda to win another election?

        1. Mark P.

          It’s obvious that Obama’s platform in the 2012 election will, essentially, be the awfulness of whoever gets to be the Republican candidate — hopefully, from the Obama camp’s POV, somebody like Perry or an outright crazy like Bachmann.

          That said, there’ll always be party-line Dems who will determinedly ignore Obama’s patently obvious failures and sellouts, and who will promote the Obamaist BS. Some of these party-line Dems will be among your friends and acquaintances, so you’ll have to listen to the BS with a straight face.

      2. Andrew P

        Obama might have toyed with the idea of doing the right thing back in 2009 by letting the FDIC resolve the most insolvent TBTF banks. It is likely that he changed his mind once he realized what doing that would cost him in campaign contributions for 2012. It is entirely likely that Geithner helped him change his mind. Obama is very smart when it comes to pay-to-play politics, and I’m sure he realized back then that 2012 will be very tough, and dissing the banksters meant giving up a cool $100-150 million that he can’t afford to give up.

  6. PaulArt

    The way these Washington books get written is a quid-pro-quo from start to finish. It begins and ends with access. The White House gives access to these journalists in return for choosing the narrative the journalist promises he will hew to. Bob Woodward is a master of this game. Recall the cleverly camouflaged Bush Hagiographies he wrote? If you read the first two you thought he loved Bush and if you read the last one you were confused about the first two. Don’t forget ‘Maestro!’ the tome about the great Greenspan. I don’t think Woodward is likely to forget that one till they close his casket. One wonders if anything, anything at all is real in Washington except the money they cart off and apportion among the pigs at the trough.

  7. Middle Seaman

    From his first day as president to this very day, Obama’s actions are inline with the elite, the rich and the banks. The revelation by Suskind appears way too late, it flies in the face of Obama’s current efforts to destroy the safety net. A man who wants to raise the age of Medicare eligibility from 65 to 67, who started already to rob the SS fund with the nicely disguised pay role tax cuts never could have even dreamt of not strengthening the banks.

  8. Sam

    Please remember to state how you think a Republican president would have responded. Didn’t Bush want to give Hank Paulson everything, until the British heard about it and objected?

    ALL Congressional Republicans should be out looking for jobs. Show us exactly where the Bush tax cuts, in place for 10 years, have created jobs in the US. Take Faux, take the ACORN pimp and prostitute, and film the results.

  9. BDBlue

    The interesting thing about this – and the general chorus of “he’s weak” from O’s apologists and supporters – is that the Administration now thinks its best political move is to make Obama look weak. A guy who works for him blows off a significant order and then not only keeps his job but is constantly given more influence and, when it looks like he wants to leave, is asked to stay? That’s the image the O team thinks is a winner?

    I doubt it. It’s just that his policies have been such failures that calling him weak is preferable than holding him accountable. I think that’s very telling.

    1. monday1929

      This seems in accord with the leak that Obama feared a Military Coup if he pursued Bush’s War Crimes.
      Perhaps some strategist may have thought this would remind Boomer Democrats of Kennedy, and offset some blowback from safety net cuts? It did work on me that way, until Yves set me straight.

        1. SWP

          I have actually seen that ‘he didn’t want to end up like Kennedy’ meme on two different “progressive” blogs today.
          Apparently, the CIA and JSOC were just as concerned about nationalizing banks as they were about possible war crime investigations.

          1. Andrew P

            I don’t believe any of that “ending up like Kennedy” nonsense. Obama is a tough and clever politician from Chicago, where pay-to-play is an art form. It is all about taking good care of the people who can take good care you you.

            On the Terror War, Obama basically continued Bush’s policy, with only cosmetic change. Why? There is a very simple reason. Obama knows he can’t afford to have another 911 on his watch. He understood that from day one.

  10. Abigail Caplovitz Field

    I agree the “I tried but my cabinet thwarted me” weak line is offensive on so many levels but I’d love to see a reporter front off the President: look, in this book you portray yourself as having bank-friendlier policies than you wanted because your staff sabatoged you. Is that true? That is, did you want to be tougher on the banks than you were? If so, how? Why didn’t you fire Geithner for insubordination then? If you basically got the policy you wanted, then why say what you did in the book? Beyond a refusal to consider liquidating Citi, was Geithner or any other adviser insubordinate?

    That is, rather than just dismissing the claims, we should make Obama answer for them. I”m tired of spin being put out there, believed by some/many, dismissed by those who know better, and the spinner just gets to keep spinning.

    1. monday1929

      As though we ever get an answer to any question. We can each write the “reply” Obama would give to that question.

      1. monday1929

        But I know you were just dreaming. My wish is that the reporters would all ask the SAME question until it actually gets answered.

  11. JasonRines

    I agree with your opinion Yves. The entire narrative from Suskin is poorly attempted revisionist history. The rate of business has accelerated since the last Wall St./government collusion and looting fest of the Roaring Twenties but much of the monetary models are the same.

    To me, it looked like President Obama’s entire job was to make sure to sign off on all socialized loss bills for Bankers and keep the exit doors uncluttered for friends.

    If I ran for President and wanted to break up TBTF I would be prepared to take a bullet. Obama complimented Dimon and other Bankers for how bright they are.

    The Democratic party decided to sell out to Wall St. in the 1990’s but the response commentary on these kinds of articles shows a recent mass awakening. The Democratic and Republican parties are both responsible for throwing the rule books out on Wall St. and increasing the outsourcing of our productive society Eastward while issuing debt to mask this reality.

    Lobby groups created by independent media to encourage domestic investment is a solution. Democratic supporters will need to find a middle ground with corporate sponors, raise funds and THEN set the ground rules moving forward instead of sponors with NO rules like today.

    1. Neo-Realist

      “If I ran for President and wanted to break up TBTF I would be prepared to take a bullet.”

      Unfortunately, the elites would have done everything in their power to keep you from winning. FDR pulled a fast one on them the last time around, and they won’t allow another one to take power.

      1. citalopram

        I think you’re right. I also think that if we had a Grecian style rioting situation here, they’d start firing on us. For some reason I don’t think these crooks will go quietly. It’s no matter though, because Americans need to be prepared to die for doing the right thing which means ending this regime. Sadly, that is not the case. The closest I’ve seen of this was the longshoremen riot.

      2. JasonRines

        I would need better credentials to run. I have a feeling America will choose an Andrew Jackson type or the military will stage a coup to reign the banks in. That is when WW3 starts. Although I forecast a nasty regional war in the ME, I suspect debt repudiation in 2014 or 2015 and war in Korea/Sea of Japan in 2015 spreading global conflageration. I know, I am such a cheerful realist ;)

  12. pws4

    I remember in Tsarist Russia, Rasputin got a lot of blame for misleading the Tsar.

    Although, in the long run, that didn’t work out too well for the Tsar, or his ministers.

  13. Gil Gamesh

    That Obama would have even contemplated — even in passing, sitting on the toilet– offending in any way, shape or form, Robert Rubin, beggars belief. After all, that is the true third rail Democratic politicians dare not touch.

    1. j m kochevar

      me to!! she really lasered through the bullshit this time.

      this post brings to mind david rockefeller’s, “The supranational sovereignty of an intellectual elite and world bankers is surely preferable to the national auto-determination practiced in past centuries.” our arrogant Barackstar evidently fancies himself as one of those ‘intellectual’ elite.

  14. L Goodmang

    yves,

    Although Obamas bank positions are brutal and is his behind the scene slamming of NY AG is awful, I wonder:

    would you rather see Romney or gulp, Perry in the white house?

    1. Mark P.

      And there it is — the basic pitch of the Obamaist Dems in 2012.

      So, actually, yeah, at this point quite a few people could perhaps contemplate one of those two in the White House in preference to the self-serving, smugly incompetent empty shirt now there. Not that one likes Romney and Perry, but they have at least got records of — you know? — actually having run and been responsible for something before they aspired to the White House. Would Romney, for instance, in fact be any worse than Obama? One is starting to suspect that he would not be.

      The standard Obamaist Dem response on this score, of course, seems to be that, well, George W. Bush had a record as Texas governor and look at how that turned out.

      Yet the Dubya administration prosecuted Enron, at least, despite those crooks being the administration’s energy-industry corporate constituents. Conversely, the Obama administration has slavishly protected its corporate constituents, Wall Street, from prosecution at every turn.

      1. JasonRines

        Good point on zero prosecutions in this Administration vs Bush. I was a big fan of GWB until Iraq. His first term I felt he might just break awaymfro
        the CFR empirical imbalance and push for America instead.

        But he caved entirely second term. Last, he was warned through Jeb (by me in March of 2008) that Hanky Paulson was coming hat in hand for massive bank bailout. What Bush ultimately signed off was the official signature for the end of our first Republic. It was unforgivable.

        To see a 100% puppet now, 46 Czars and total breakdown of the rule of law it makes me realize that as soon as Americans do start to liberate themselves they will face similar situation as the French Revolution with American financeers assisting our external enemies.

    2. propertius

      Well, this life-long Democrat has a very hard time believing that a Romney administration would be any worse – and I could, in fact, see it being somewhat better.

      Maybe Harry Truman was right, after all.

    3. Glen

      Was I the only one that thought Obama was toast when he decided to bail out the banksters and screw the American public in 2009?

      Because it was pretty obvious even back then, and I’m no genius.

    1. Neo-Realist

      I’ll give Obama this, like a few other dems, he won’t select ultra fascists type justices like Alito and Roberts as Perry and Romney would; This is not to say that Sotomayor and Kagan are the second comings of Thurgood Marshall or William O Douglas, but they’re not nearly as retrobate.

      1. doom

        You already lost the Supreme Court. 5-4 is as hopeless as 6-3. Give it up. You don’t need a Democratic president, you need a party that will comply with the Paris Principles and give the crooked corporate court some independent review.

        1. Neo-Realist

          Scalia isn’t exactly a young guy anymore. But he will probably hold on at least through a wide open presidential election in 2016.

      2. monday1929

        There is a slogan for Obama:

        NOT NEARLY AS REPROBATE AS THOSE OTHER GUYS!

        WE TORTURE, BUT WE DON”T ENJOY IT!

    2. Valissa

      According to this article Perry supported Gore, but there is no evidence he was the statewide chairman for him.

      The legend of Al Gore and Rick Perry http://www.politifact.com/truth-o-meter/article/2011/sep/07/legend-al-gore-and-rick-perry/

      Sherman lawyer Bob Slagle, who supported Gore while chairing the state’s Democratic Party, told us in an interview that Perry “may have been chairman for some area around Haskell County,” Perry’s home county, but he was no more than that.

      Similarly, two staff members in Gore’s 1988 effort said Perry was not its Texas chief.

      Tennessee lawyer Tom Jurkovich, Gore’s Texas director, told us by email that “we may have named (Perry) to a ‘steering committee’ or as one of several campaign ‘co-chairs,’ typically honorific titles with no real role … (Perry) wasn’t highly involved in the campaign, however, and had zero operational responsibility.”

      Mike Kopp of Nashville, who did press outreach for Gore, was more emphatic, saying in an interview: “We didn’t have a chairman in Texas; we didn’t have co-chairs,” either. “We weren’t that organized; we didn’t have that strong a ground game.”

      Perry, who switched to the Republican Party in 1989 before winning his first statewide office in 1990, has since said he realized around that time that Gore was not his man. Still, he did not— could not—deny he’d come aboard with 27 fellow Texas House Democrats who endorsed Gore at a Jan. 5, 1988, Texas Capitol press conference.

      Perry and the other legislators saw Gore as the best conservative Democrat in a field that included Massachusetts Gov. Michael Dukakis, Missouri U.S. Rep. Richard Gephardt and the Rev. Jesse Jackson.

      What I find interesting about this is that Al Gore was considered the most conservative Democrat of the group. Mr Faux Green the money seeking machine. Too made he didn’t become even richer (while “saving” the planet) with his now defunct Chicago Climate Exchange (that’s snark, btw).

  15. lambert strether

    “Obama 2012! He’s weak!”

    What on earth are this guy’s operatives thinking? (I don’t think Obama is weak at all, he does what he wants and he’s no more incompetent than Bush was, but his team seems to take every opportunity to push that idea. WTF?)

  16. Mauimom

    Great articles, Yves. Thank you.

    Please forgive my stupidity, but I have a question. As one of the “players” stated above:

    the whole intent of this process is to show that the banks have enough capital for even worse outcomes than we currently envision and to show there’s a program in place to give banks access to that capital if they need it.”

    I have never understood exactly what would have happened if banks and others hadn’t been provided with all that dough via TARP.

    This is NOT a question about how TARP should have been structured — oversight, restrictions et al. — but a query about what exactly was that “doomsday scenario” that motivated this idiotic move.

    ** did they fear there’d be a run on the banks, and they couldn’t pay depositors because the properties “securing” their mortgages were crap? [But hadn’t they sold off those mortgages via securitization? Wouldn’t FDIC insurance protect depositors, up to the limit per account?]

    ** I recall lots of howling about AIG and why it should be saved, but again don’t understand why.

    Forgive me if this “road not taken” has been described somewhere else. Any links would be welcome.

    But all I recall is the hair-on-fire claims of how TARP had to be done, and immediately, that reminded me of the rationalization and “urgency” of going into Iraq.

    1. Yves Smith Post author

      No one has done a good counterfactual. I suspect they might have had to shut the banking system for a week to sort things out. This idea was broached at a dinner party I attended with some finance journalists and they acted like it would have been the end of the world. They literally said there would be revolution if people could not get to their money market funds for a week!

      The person who suggested the idea (a former trader and now an academic) and I argued no, it was doable, but we got a quasi-religious reaction from the journos. And since they control the narrative, you are not going to see dispassionate coverage of this notion.

      1. beowulf

        I should note that this awesome piece you ran last year is the definitive account of the backbench revolt in both parties against the bank bailout. If John McCain had followed Darrell Issa’s lead (“Issa’s office in D.C. became the “staging area” for the fight against TARP.”), he’d be President today.
        Guest Post: Bill Isaac Vs. Hank Paulson’s Bailout Machine — How The Former FDIC Chairman ALMOST Stopped TARP »
        By Dr. Pitchfork, an iconoclast who writes at Daily Bail.

        http://www.nakedcapitalism.com/2010/10/guest-post-bill-isaac-vs-hank-paulsons-bailout-machine-how-the-former-fdic-chairman-almost-stopped-tarp-%C2%BB.html

    2. Andrew P

      I understand why they bailed out AIG. It can be summed up in one word – annuities. There was about 1 trillion worth of life insurance and annuities in AIG that would vanish into nothingness if AIG went under, and remember, there is no deposit insurance for these things. Most of these instruments are owned by retirees and their heirs.

      And the TARP law also fixed a little detail in FDIC insurance that had been overlooked before – non-interest bearing transactional accounts. These are now guaranteed in any amount without limit, just like a T-bill. If they hadn’t done this trillions in corporate checking accounts would have gone poof, and most businesses in the US would have gone bankrupt once the bank run started.

  17. Concerned American

    President Obama’s campaign promises, “A highly principled leader who will do what is best for most Americans.” John Kenneth Galbraith’s definition of a leader is “the willingness to confront unequivocally the major anxiety of their people in their time.” My anxiety during the 2008 presidential election is “the ongoing fraud in the financial system, the ongoing wars in Iraq and Afghanistan and ongoing structural unemployment.” Obama pays lip service to these issues while Wall Street and European banks get bailout, after bailout, after bailout, totaling many trillions of dollars. Unfortunately, what we have in Obama is “a pussyfooting conman, who is beholden to Wall Street and cowers before the military-industrial complex and big business.” Trust is now gone, our rulers are psychopaths, thieves and whore masters. America desperately needs a new charismatic third party candidate for the 2012 presidential campaign.

  18. dcblogger

    Obama’s model has always been fooling liberals, so he needs to come up with endless excuses as to why he is not keeping his promises and/or why we are not getting liberal results.

    The problem is that if you believe his lies he comes across as weak and feckless.

  19. Lisa Frank

    But what about this? Early on – in one of the first debates with Clinton – Obama talked about what a hands off manager he was. And yet he still thought he was going to be able to control a large organization by putting the right people in place. http://abcnews.go.com/blogs/politics/2008/01/clinton-unlike/

    So I totally believe what he’s saying, even if he seems to have a terrible management strategy.

    1. monday1929

      Then surely you realized we were had when he put Geithner and the criminal Summers and Rubin in place?

    2. Yves Smith Post author

      Even a “hands off” manager would not find it acceptable to have a direct order violated. And even a “hands off” manager would want to sign off on basic strategy and then leave implementation to the doobies. Remember Obama also saying (I can’t recall exactly when, but I think it was in a major interview) getting pissy when challenged about his change promise and saying he was responsible for change?

      So Obama had to have approved the bank friendly policies, they were well in motion before this Citigroup directive. And he should have taken Geithner to the woodshed or worse had there been a refusal to act on a direct and major order.

      1. Andrew P

        Well, the “order” to Geithner sounds more like a friendly message to the banksters, Chicago style – “support me or else”. I’m sure the big donors had a little chat with Obama, put their cash on the table, and Obama told Geithner to forget about that Citi thing.

  20. thelonegunman

    ‘”I don’t slow walk the president on anything,” Geithner told Suskind.’

    sure you don’t…

  21. Brett

    Good post. Also, why would Obama just want Citigroup nationalized and broke up and not Bank of America? At the time, Bank of America was near failure — many, many people were calling for Bank of America to be nationalized and warning that it would become a zombie bank if it wasn’t (which ended up being true).

    Also, it’s good to refresh everyone’s memory of what happened during those days. I completely forgot about the leaked Citigroup memo — they are definitely seasoned veterans of saving the rich elites. They pulled that one out of a hat, and it worked a lot to calm the calls for nationalization.

  22. rapier

    The blub of the story I read described Obama as saying he wanted “reconstruction of the major banks”.

    So I am going right down the middle here. I think Obama sort of wanted that but had no real clue what it really meant. It was just sort of political itch. On the other side the request made no literal sense for Geithner. There was either takeover by the FDIC or…………… Or what? Geithner was going to call the FDIC in right before he went to work helping the starving in sub Saharan Africa for no pay. In other words never. Geithner has said in round about ways that ‘breaking up’ the big banks was outside his authority and was systematically dangerous. That so doing would have caused more systematic dislocation.

    So I think the whole story is sort of half true on both sides. Maybe there were winks and nods but I think Obama like all financial outsiders is forced to defer to the high priests of money.

    1. Andrew P

      I think he was just sending a friendly message to the Banksters, through the medium of Geithner. “Nice TBTF bank you have there. It would be a real crying shame if the FDIC had to resolve it.”

      I’ll bet the Banksters put a few hundred mil in his reelect camapaign, just to be on the safe side.

  23. terry

    Some of you are so pathetic.
    An economic crisis? Really? Tell me, how the f*** do you reignite an economy that was feeding off of a bubble that was never meant to be?
    Seriously folks, that bubble was a damn fraud. It was like an ATM machine giving free money then it got fixed. Bush wanted 5 million minorities in homes. Problem was, they ain’t have the effing jobs to pull it off. But Now throw in pumped into the economy from Greenspan.
    Now throw in Amerigquest, Fanny Mae and Freddy Mac and a whole lot of corruption and you have a bubble from hell. Now, again, how do restore that mess??
    Even if we cut ALL the taxes we couldn’t fix this problem.
    The congress and the feds are going to have to create entirely new ways to solve this problem or our asses are headed for a depression.IMHO.
    If FDR was alive and saw this he would: ” WHERE IS AMERICA’S INDUSTRIAL REVOLUTION AND WHAT THE FU*** HAPPENED TO THE MIDDLE CLASS?!”
    And another thing, WW2 got us out the great depression. So why hasn’t this 4 trillion dollar war aided America in some way? Oh I forgot, the bankers and the top 2% have taken all the loot for themselves. This is a pathetic country.

    1. F. Beard

      Now, again, how do restore that mess?? terry

      What? All those nice houses built were just an illusion?

      All we need to fix this mess is to put the banks out of the counterfeiting business and bailout the entire population. It’s pretty much that simple – reform plus a bailout. The reform allows the bailout and the bailout allows the reform.

      Lord Acton predicted this:

      “The issue which has swept down the centuries and which will have to be fought sooner or later is the people versus the banks.”

      Why not now? Have the baby boomers forgotten their populist, progressive roots?

      1. skippy

        Strangely the debt crisis was kicked down the road, till, their so called golden years – cough – surgical years came into effect.

        Skippy…revolution or some semblance of healthcare, of course depending on your $$$ accounts – investments….eh.

  24. skippy

    President or Strawman Post, its getting blurry to my old eyes. Hell the complexity in today’s world might just be to much for 19th 20th century governmental structures (see world).

    Skippy…kinda like a drug user chasing that one perfect high (USA post WWII), but, can never get it again… confluence of events and brain chemistry just don’t work that way…perpetual melancholy.

  25. Donna Miller

    Abraham Lincoln: I wanted to use the Army to win the war, but McClellan blew me off.

    Harry Truman: I wanted to avoid getting bogged down in a war in mainland China, but MacArthur blew me off.

    Ronald Reagan: I wanted to cut taxes, but the IRS blew me off and kept collecting taxes at the old rates.

  26. Doug Terpstra

    Thank you, Yves. “Shameless lying” indeed. Your logic here is inescapable — a clear and compelling debunking of the latest Obama campaign propaganda. And your last video link (Metanoia) is worth watching again, a brilliant composite of these bald-face campaign lies. Because the theater curtains are now so threadbare and transparent, renewed attempts to resurrect this false messiah are increasingly disgusting and pathetic. Well done.

  27. Namazu

    This sounds very much like the episode from Bob Woodward’s book which describes Obama being rolled by the generals on the Afghan troop escalation.

  28. mk

    Obama could have chosen real regulators to join his administration instead of putting the same people in charge who caused the problems. He could have chosen people like Sheila Bair and Bill Black, but he didn’t. He is a smart man who knew what he was doing. He is responsible.

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