David Sirota: "Obama’s Team of Zombies" (Updated: Frank Rich on Geithner)

David Sirota at Salon gives a concise, brutal assessment of Obama’s economic team and its priorities.

We’ve now had two bait and switch Presidents in succession. Bush promised “compassionate conservatism” and dragged the country far to the right, enriching those at the top of the food chain and leaving everyone else with the empty promise of “trickle down economics.” Obama promised change, but his economic team is slavishly loyal to the interests of the financial elite who steered the financial system onto the shoals and now expect all of us to patch the hull and somehow get it back into navigable water. Yes, we have some gestures to appease the downtrodden, like restrictions on private jets and largely meaningless promises of salary caps (Lucien Bebchuk, a Harvard Law professor and expert on corporate governance, described how they do little to restrict total comp). Summers and Geithner are proteges of Robert Rubin, former Goldman co-CEO, and they are proving true to form, promoting even more borrowing in a doomed-to-fail-or-be-counterproductive effort to achieve status quo ante, the very conditions that lead to this shipwreck. Paul Volcker, who is enough of an old-fashioned banker that he might have been able to exert a moderating influence, appears to have been marginalized.

And we also like the fact that he highlights the use of “newspeak”, as we did in a post on one of Team Obama’s bank rescue trial balloons.

From Sirota:

America was told that finally, after years of yes men running the government, we were getting a president who would follow Abraham Lincoln’s lead, fill his administration with varying viewpoints, and glean empirically sound policy from the clash of ideas. Little did we know that “team of rivals” was what George Orwell calls “newspeak”: an empty slogan “claiming that black is white, in contradiction of the plain facts.”…

Of course, that lockstep [defense policy] uniformity pales in comparison to the White House’s economic team — a squad of corporate lackeys disguised as public servants….

Now, this pinstriped band of brothers is proposing a “cash for trash” scheme that would force the public to guarantee the financial industry’s bad loans. It’s another ploy “to hand taxpayer dollars to the banks through a variety of complex mechanisms,” says economist Dean Baker — and noticeably absent is anything even resembling a “rival” voice inside the White House.

That’s not an oversight. From former federal officials like Robert Reich and Brooksley Born, to Nobel Prize-winning economists like Joseph Stiglitz and Paul Krugman, to business leaders like Leo Hindery, there’s no shortage of qualified experts who have challenged market fundamentalism. But they have been barred from an administration focused on ideological purity.

In Hindery’s case, the blacklisting was explicit. Despite this venture capitalist establishing a well-respected think tank and serving as a top economic advisor to Obama’s campaign, the Politico reports that “Obama’s aides appear never to have taken his bid (for an administration post) seriously.” Why? Because he “set himself up in opposition” to Wall Street’s agenda.

The anecdote highlights how, regardless of election hoopla, Washington is the same one-party town it always has been — controlled not by Democrats or Republicans, but by Kleptocrats (i.e., thieves). Their ties to money make them the undead zombies in the slash-and-burn horror flick that is American politics: No matter how many times their discredited theologies are stabbed, torched and shot down by verifiable failure, their careers cannot be killed. Somehow, these political immortals are allowed to mindlessly lunge forward, never answering to rivals — even if that rival is the president himself.

Remember, while Obama said he wants to slash “billions of dollars in wasteful spending” at the Pentagon, his national security team is demanding a $40 billion increase in defense spending (evidently, the “ludicrous” faction got its way). Obama also said he wants to crack down on the financial industry, strengthen laws encouraging the government to purchase American goods, and transform trade policy. Yet, his economic team is not just promising to support more bank bailouts, but also to weaken “Buy America” statutes and make sure new legislation “doesn’t signal a change in our overall stance on trade,” according to the president’s spokesman.

Indeed, if an authentic “rivalry” was going to erupt, it would have been between Obama’s promises and his team of zombies. Unfortunately, the latter seems to have won before the competition even started.

Update 2/8, 12:45 AM: An only slightly less caustic take on the Obama economic team comes from the New York Times’ Frank Rich:

The new president who vowed to change Washington’s culture will have to fight much harder to keep from being co-opted by it instead. There are simply too many major players in the Obama team who are either alumni of the financial bubble’s insiders’ club or of the somnambulant governmental establishment that presided over the catastrophe.

This includes Timothy Geithner, the Treasury secretary. Washington hands repeatedly observe how “lucky” Geithner was to be the first cabinet nominee with an I.R.S. problem, not the second, and therefore get confirmed by Congress while the getting was good. Whether or not this is “lucky” for him, it is hardly lucky for Obama. Geithner should have left ahead of Daschle.

Now more than ever, the president must inspire confidence and stave off panic. As Friday’s new unemployment figures showed, the economy kept plummeting while Congress postured. Though Obama is a genius at building public support, he is not Jesus and he can’t do it all alone. On Monday, it’s Geithner who will unveil the thorniest piece of the economic recovery plan to date — phase two of a bank rescue. The public face of this inevitably controversial package is now best known as the guy who escaped the tax reckoning that brought Daschle down.

Even before the revelation of his tax delinquency, the new Treasury secretary was a dubious choice to make this pitch. Geithner was present at the creation of the first, ineffectual and opaque bank bailout — TARP, today the most radioactive acronym in American politics. Now the double standard that allowed him to wriggle out of his tax mess is a metaphor for the double standard of the policy he must sell: Most “ordinary Americans” still don’t understand why banks got billions while nothing was done (and still isn’t being done) to bail out those who lost their homes, jobs and retirement savings.

As with Daschle, the political problems caused by Geithner’s tax infraction are secondary to the larger questions raised by his past interaction with the corporations now under his purview. To his credit, Geithner, like Obama, has devoted his career to public service, not buckraking. But he still has not satisfactorily explained why, as president of the New York Fed, he failed in his oversight of the teetering Wall Street institutions. Nor has he told us why, in his first major move in his new job, he secured a waiver from Obama to hire a Goldman Sachs lobbyist as his chief of staff. Nor, in his confirmation hearings, did he prove any more credible than the Bush Treasury secretary, the Goldman Sachs alumnus Hank Paulson, in explaining why Lehman Brothers was allowed to fail while A.I.G. and Citigroup were spared.

Citigroup had one highly visible asset that Lehman did not: Robert Rubin, the former Clinton Treasury secretary who sat passively (though lucratively) in its executive suite as Citi gorged on reckless risk. Geithner, as a Rubin protégé from the Clinton years, might have recused himself from rescuing Citi, which so far has devoured $45 billion in bailout money.

Key players in the Obama economic team beyond Geithner are also tied to Rubin or Citigroup or both, from Larry Summers, the administration’s top economic adviser, to Gary Gensler, the newly named nominee to run the Commodity Futures Trading Commission and a Treasury undersecretary in the Clinton administration. Back then, Summers and Gensler joined hands with Phil Gramm to ward off regulation of the derivative markets that have since brought the banking system to ruin. We must take it on faith that they have subsequently had judgment transplants.

Obama’s brilliant appointees, we keep being told, are irreplaceable. But as de Gaulle said, “The cemeteries of the world are full of indispensable men.” You have to wonder if this team is really a meritocracy or merely a stacked deck. Not only did Rubin himself serve on the Obama economic transition team, but two of the transition’s headhunters were Michael Froman, Rubin’s chief of staff at Treasury and later a Citigroup executive, and James S. Rubin, an investor who is Robert Rubin’s son.

A welcome outlier to this club is Paul Volcker, the former Federal Reserve chairman chosen to direct Obama’s Economic Recovery Advisory Board. But Bloomberg reported last week that Summers is already freezing Volcker out of many of his deliberations on economic policy. This sounds like the arrogant Summers who was fired as president of Harvard, not the chastened new Summers advertised at the time of his appointment. A team of rivals is not his thing.

Americans have had enough of such arrogance, whether in the public or private sectors, whether Democrat or Republican. Voters turned on Sarah Palin not just because of her manifest unfitness for office but because her claims of being a regular hockey mom were contradicted by her Evita shopping sprees. John McCain’s sanctification of Joe the Plumber (himself a tax delinquent) never could be squared with his inability to remember how many houses he owned. A graphic act of entitlement also stripped naked that faux populist John Edwards.

The public’s revulsion isn’t mindless class hatred. As Obama said on Wednesday of his fellow citizens: “We don’t disparage wealth. We don’t begrudge anybody for achieving success.” But we do know that the system has been fixed for too long. The gaping income inequality of the past decade — the top 1 percent of America’s earners received more than 20 percent of the total national income — has not been seen since the run-up to the Great Depression….

The neo-Hoover Republicans in Congress, who think government can put Americans back to work with corporate tax cuts but without any “spending,” are tone deaf to this rage. Obama is not. It’s a good thing he’s getting out of Washington this week to barnstorm the country about the crisis at hand. Once back home, he’s got to make certain that the insiders in his own White House know who’s the boss.

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  1. Anonymous

    Anyone who did not accept Obama’s campaign rhetoric about small donations and actually looked at the financial backers behind Obama isn’t surprised.

    He is going to be the corporate gift that keeps on giving. Behyond his bank and insurance backers, his work with Lugar on commodities trading, his ties to Pakistan, his leave no corporation behind healthcare, his love of Volcker and Reagan…. Some of his true believers are going to be walking around shell shocked.

  2. bornagaindem

    gee and David Sirota was part of the media that gave us this completely unqualified president. Obama is no different than Bush -slightly different rhetoric but essentially way out of his depth on everything. the ship of state is going to crash and burn and it will be painful to watch

  3. Boomka

    Of course, many of us are not surprised in the least by this. Obama was obviously a PR project, well executed.

    I mean, take the fact that we were first told that he was qualified to be a president based on a single speech he gave. I remember when I first heard that I laughed, until I realized they were serious.

    The problem is, many people in US realize that there is no democracy here. But for majority of them, the answer has been in political apathy. What should Americans do? My opinion is that we should forbid campaign donations from any private parties and make all politicians compete based on fixed amount of money specified by law and provided by the taxpayers.

  4. doc holiday

    Obama and his alleged lack of experience in real policy making is being tested by those that have stronger backbones and better lobby connections (and experience with bribes).

    I hope Obama takes this opportunity to grow a backbone faster than Lincoln, who was initially tested by inept generals and poor strategies.

    As some may recall:

    Historian Allan Nevins argues that Lincoln made three miscalculations in believing that he could preserve the Union, hold government property, and still avoid war. He "temporarily underrated the gravity of the crisis", overestimated the strength of Unionist sentiment in the South and border states, and misunderstood the conditional support of Unionists in the border states.[23] In connection with Nevins's conclusions, it is interesting to note an incident from this period reported in the memoirs of William Tecumseh Sherman. Then a civilian, Sherman visited Lincoln in the White House during inauguration week, with his brother, Ohio Republican John Sherman. This meeting left the future General Sherman "sadly disappointed" at Lincoln's seeming failure to realize that "the country was sleeping on a volcano" and the South was "'preparing for war.'"

    Despite his inexperience in military affairs, Lincoln wanted to take an active part in determining war strategy. His priorities were twofold: to ensure that Washington, D.C. was well defended; and to conduct an aggressive war effort in the hope of ending the war quickly and appeasing the Northern public and press. McClellan, a youthful West Point graduate and railroad executive called back to active military service, took a more cautious approach. He took several months to plan and execute his Peninsula Campaign, with the objective of capturing Richmond by moving the Army of the Potomac by boat to the peninsula between the James and York Rivers. McClellan's delay irritated Lincoln, as did his insistence that no troops were needed to defend Washington, D.C. Lincoln insisted on holding some of McClellan's troops to defend the capital, a decision McClellan blamed for the ultimate failure of the Peninsula Campaign. … blah, blah, blah

    although McClellan was meticulous in his planning and preparations, these attributes may have hampered his ability to challenge aggressive opponents in a fast-moving battlefield environment. He chronically overestimated the strength of enemy units and was reluctant to apply principles of mass, frequently leaving large portions of his army unengaged at decisive points.
    McClellan's Peninsula Campaign in 1862 ended in failure, with retreats from attacks by General Robert E. Lee's smaller army and an unfulfilled plan to seize the Confederate capital of Richmond. His performance at the bloody Battle of Antietam blunted Lee's invasion of Maryland, but allowed Lee to eke out a precarious tactical draw and avoid destruction, despite being outnumbered. As a result, McClellan's leadership skills during battles were questioned by U.S. President Abraham Lincoln, who eventually removed him from command, first as general-in-chief, then from the Army of the Potomac. Lincoln was famously quoted as saying, "If General McClellan does not want to use the army, I would like to borrow it for a time." Despite this, he was the most popular of that army's commanders with its soldiers, who felt that he had their morale and well-being as paramount concerns.

    > Forget the backbone, grow some balls Obama and defend America, as you swore to do!

  5. Koshem Bos

    Sirota goes with the same old bromide that he and his fellow prejudiced guys have gone with since they blamed everything on Clinton. This camp now divides the original fact-free Clinton hate to political blame, it’s Rahm, and economic blame, Summers and Geithner.

    In the primaries I sided with Hillary and never thought too much of Obama. Now, however, we are in free fall and we should give team Obama a chance.

    It’s way too early to pronounce failure or any verdict for that matter.

    Explaining to Sirota the real issues are way of his pay grade, suffice to say: Sirota shut up.

  6. Andrew Bissell

    Bush promised “compassionate conservatism” and dragged the country far to the right, enriching those at the top of the food chain and leaving everyone else with the empty promise of “trickle down economics.”

    This is pretty wide of the mark. Bush loved expanding government across the economic *and* personal spheres. He even signed into law new securities regulation, although Sarbanes-Oxley of course did nothing to prevent the financial crisis. Adding new Medicare entitlements and ramping up public spending hardly seems “far right,” unless “right” has now come to mean tax cuts funded by public borrowing.

    All of which is *not* to say that Bush’s entire presidency was not one long string of unbroken promises.

    I also love how Sirota ties government guarantees of bad debt to “market fundamentalism.” Riiiiight. I guess if “ideology” is a curse word to you, there’s no need to actually understand what they say, or represent it honestly.

  7. Andrew Bissell

    Guess I should also mention, while I have *numerous* differences with Sirota, it’s good to see that more and more people from the left are seeing through the Obama administration’s smokescreen and calling them out on it.

  8. Anonymous

    These people are not zombies by any stretch of the imagination. Thieves yes, zombies definitely no.

  9. The Group of Dirty

    Taleb / Roubini – j’accuse – petition for Rubin et al. to pay back their bonuses (Independent.co.uk)

    “Nassim Nicholas Taleb is making ripples again. The brilliant author of The Black Swans has set up a petition on his Facebook page calling on the US government to force bankers to give back their bonuses. Taleb tells me that more than 800 people have signed up to the cause – a number that is growing daily. His co-conspirator is another great mind, the New York University economist Nouriel Rou-bini, which is nicely unpredictable as Taleb doesn’t rate economists. But Roubini is rather different as one of the few forecasters to have warned years ago that the world’s economy was heading for the buffers…”

  10. James from Hampstead

    “Bush promised “compassionate conservatism” and dragged the country far to the right,”

    Don’t need to read any further. Anyone who thinks Bush was a conservative, let alone someone who dragged the country “far to the right” has his head up his ass.

  11. Moopheus

    I am disappointed that Obama is relying on guys like Geithner and Summers, and appears to be going with a warmed-over version of Paulson’s Tarp to address the banking problems, as has been discussed here much. On the other hand, I’m not convinced Clinton or McCain would have done any better–they all know the same people, after all–and I’m pretty certain McCain would have been worse. And he’s made a lot of good choices in other areas. All of this just means that Obama’s election didn’t end the way our political process works here, and we shouldn’t expect it to. Which means the onus is still on, you know, us, to make our voices heard and take what actions we can to keep the democratic process functioning.

  12. step314

    Somehow I think it unlucky to criticize Obama much at this point. How ever he wants to run the country, probably he wants to be true to himself in doing so. He strikes me as a person who is much more likely to listen to those who have an air of Harvard respectability about them. If his reasonable critics are saying after only two weeks that he already is destined to be controlled by Kleptocrats, maybe the prophecy in some sense will prove self-fulfilling, because it does seem somewhat, shall we say, not audaciously hopeful? I can’t imagine his personality viewing such harsh assertions as anything but distasteful and indicative of the common black-and-white hysterical thinking he comes across as especially disliking. He’s not going to listen to people like that, whom he’ll view as controlling. I agree with Sirota that he is getting dreadful advice when it comes to the banking system. But at least he is doing something that could be beneficial, namely the stimulus package. We should say also what he is doing right. Especially if his good advisers are respectful and polite enough, Obama may come to distinguish his good advisers from his bad, and policies that work from policies that don’t, and even better maybe he’ll come to a better understanding of economics so that he won’t have to mainly rely on advice of recognized experts. Pragmatically, since there is no election for a while, it is now preferable to talk about the pluses and minuses of particular policy options than about how good or bad Obama is doing.

  13. DoctoRx

    Had the same rxn to Boomka that BHO was a credible President. Therefore was always for NObama. Have been saying (and blogging) for some time that the new Admin was one of continuity w the old on financial matters.

    On policy, it would be symmetrical and tragic if we followed conventional (i.e. Keynesian) economics and got a depression because it was outdated, just as Hoover et al followed conventional thinking w Smoot Hawley.

  14. Don

    Real and far reaching social change requires more than changing party leadership in the Executive and Congress. It requires, at risk of sounding a cliche, that it build from the grassroots – wide ranging social movements that constitute a critical mass. The votes that placed Obama in office did not constitute such a mass social movement, however much some may wish to believe.

    Remember, the job makes the man, not the reverse. The institutional weight behind the status quo are immense, and moving that ship will require much more than what one might realistically expect to come out of D.C. And while we are conditioned to ‘believe’ in leadership, as in Great Man theories, in this case believing that Presidents have power that exceeds by far what is actual – said notion will likely suffer. Lets hope so.

    On a strictly subjective note: I don’t own a TV and so have seen little of Obama on television. This past weekend I spent three nights in a hotel (having been required to my remote mountain cabin to enter a small urban area, however distasteful), and watched more boob tube that I can stomach. In any case, I found it humorous the transparently scripted drama being played out, of the ruling party and the opposition party playing their assigned roles, with the media playing up the celebrity celebration, a celebration for which the news media will no doubt grew increasingly tired of. I also got the chance to read the NYTimes and simply could not get over the photo and the four generals standing firmly erect behind our great leader who inspires hope. When it comes to foreign policy, any idea where the real power lies? I am talking of the only bubble remaining: the Obama hope bubble.

    It will serve us as long as it does, and that may not be for all that much longer, but its real importance was in getting him elected. Now that that has been accomplished . . .

    Saying these things runs the risk of finding oneself ostracized from liberal companions, who find such thoughts pure cynical – convenient means of discounting the credibility of contrary views.

  15. Todd Wood

    What did you all want, Jesus Christ? I agree that Obama is a PR President, but let him completely screw up before you say that he completely screwed up. While a PR President, he could still lead us in the right direction. You are an idiot to expect too much from anyone man.

    Yea, sorry, Obama is not your Daddy. He is not Jesus Christ. He is coming on with the nation in the toilet. We are lucky not to have Caligula in office, right now.

    You all are a bunch of morons. Like Newt Gingrich playing like he has lessons to teach Obama. FU.

  16. Anonymous

    Let’s face it the American public, for the most part, don’t appear to be bright.

    The previous GOP administration gave away $1 trillion in taxapyer to favored Wall Street firms and the public is focused on Super Bowls.

    Ken Lewis, whose bank paid a pittance for nearly $150 billion in CDS on CDOs (risk sold by the taxpayer for a fraction of fair value) can come on CNBC and prattle on about not needing ‘anymore’ TARP money.

    People only get the government that they deserve.

  17. Anonymous

    John from Hempstead,

    I know ad hominem attacks are a no-no on this blog, but you are an idiot.

    Bush did say he would be a compassionate conservative. That’s a fact.

    And how can you not cal massive tax cuts to the upper classes, large scale outsourcing (often to cronies, with little in the way of controls, particularly in Iraq), the trampling of individual rights (wireless wiretaps, the end of habeus corpus), and opposition to abortion, to name just a few, NOT a swing to the right?

    This is just calling a spade a spade.

  18. Nick

    Bush pulled us far to the right? Surely you jest. Massive spending on every front, ridiculous protective tariffs, even more spending and then “campaign finance reform”.

    Bush was markedly to the left of Clinton.

  19. Yves Smith

    I’ve see we’ve had two charges of idiot so far. I’d appreciate it if we try to attack arguments and not get so personal.

    As for “let’s give Obama a chance”, the point is that Obama has picked as the key members of his economic policy team two individuals, Geithner and Summers, who were big-time architects of the current mess. They are die hard advocates of the financially-driven system that has served us so well (not). They are, as Willem Buiter so aptly put it, prime examples of cognitive regulatory capture. They are the last people who would be able to admit the current model is broken and try to figure out what, if any, elements are worth preserving and which need to be scrapped.

    Doc’s comparison to Lincoln’s generals is apt. Unfortunately, I don’t have the sense that Obama is the sort who will change personnel at the top until abject failure is evident, and by then it will probably be too late. Defeat on the battlefield is easier to recognize than in economics, where it is too easy to ascribe blame to factors other than bad policy.

  20. Yves Smith


    I suggest you read Dean Baker’s “The Conservative Nanny State.” He illustrates in nauseating detail how the measures of the last eight years, including the expansion of government, were not to the benefit of the poor and middle, the traditional targets of the left, but the upper classes.

    Bush’s moves, including his spending policies, aided big business and the investing classes. That can hardly be depicted as left wing. And his social policy cannot be described as liberal either.

  21. Todd Wood

    When I ran a successful business, I could have run it into the ground, despite who I had working for me.

    So, Yves, if Obama succeeds, will you blame his unconventional success on his conventional side-kicks?

    There are just so many things wrong with the imaginary integrity of Sirota’s argument that it angers me.

  22. Nick

    Yves, I’m sure that argument can be made. All I’m saying is that greatly expanding government spending and reach is not what I would necessarily refer to as “right wing”.

  23. Anonymous

    The US is full of corrupt officials. You will never recover, because your government no longer believes in its country. You had a president and vice-president whose sole objective was to bring their country to its knees to be sold to the highest bidders.

    The only solution would be to have a team of Untouchables clean it up.

  24. charlie

    Yves, I was thinking of trying to send you an email in regard to your views on Obama. I found it hard to actually distill your views down, but after seeing this post I’ll give it a shot.

    Obama is a politician, and will do what politicians do: listen to their advisors, read the papers, and make a decision. I don’t believe much in the regulatory lock-in argument — whether Sumner is a creature of Wall Street or not is a question for the Inquisition, not the secular state.

    I think the key think is to establish what are failures. 10-12 percent unemployment. It hurts, but we can live with that. 5-6 percent inflation? Painful, but in reality the official rates don’t capture real inflation anyway (compare the cost of harvard in 1980 to today). Deflation? I don’t think we can live with that. Corporate zombies — as long as the Chinese buy our bonds we can last 10+ years that way.

    So at what point do you draw a line and say “obama’s policies have failed?” I’ve been saying for several months we are in the Great Depression (not at the absolute level, but at the rate of demand destruction). We’re now looking at 2 quarters of G.D. rates of destruction, and if you think Obama’s policies won’t work maybe another 2-3 before that reality kicks in and the feedback loop becomes live. Shorter version: fall of 09.

    What I’m not sure about, economially, is there a trigger point for the next feedback loop to go live, as we can really live with this level of pain. The great depression ran from 29 to 32 without that much significant blowback (bonus march being one exception).

  25. scrollbar

    re:Of course, many of us are not surprised in the least by this. Obama was obviously a PR project, well executed.

    I mean, take the fact that we were first told that he was qualified to be a president based on a single speech he gave. I remember when I first heard that I laughed, until I realized they were serious.

    The problem is, many people in US realize that there is no democracy here. But for majority of them, the answer has been in political apathy. What should Americans do? My opinion is that we should forbid campaign donations from any private parties and make all politicians compete based on fixed amount of money specified by law and provided by the taxpayers.

    That sort of reform would be wonderful, but what are the odds of our elected officials shaking up the status quo like that? It would kill the two-party system, so I’d imagine it would be near impossible to push through.

    While we’re dreaming, another reform I’ve been thinking of: using a runoff voting system. This would completely eliminate the whole game of “you’re throwing your vote away!” being an excuse for not voting with your conscience.

    Here’s to hoping…

  26. Anonymous

    Taking a page from Jim Sinclair’s writings, when all else fails and fails miserably, Volcker will emerge front and center to stem the dollar’s fall after nearing .52. His fix will only appease our foreign debt holders leaving the taxpayers to continue clawing their way back to just treading water.

    It’s interesting to see some calling for large bear rallies or retracements. I can’t discount those calls while reviewing past history. Sucker rallies to glean profits.

    Corporations sacrifice their own to aid their bottom lines causing the natives to get hungry and restless. From here it is only a short trip to depression. Hoping the silent majority who’s spendthrift ways can effect a bottom sooner than later.

  27. Brad

    Jesse’s Cafe Amercain has a crosslink about JP Morgan Bonuses that is fairly stunning. Airing that here, if it passes muster, may help the case for reality available to majors looking for a prebuilt story, even if watered down as in mish/schiff/wsj. In the spirit of honest argument, avoiding cynical retreat and synthesizing strong viewpoints will have long term gains. I’ve never considered paying the ny times but paying yves has occurred to me a good idea. (And there’s the future of journalism.)

  28. Yves Smith


    I don’t know how large the business you ran was, but a President, given the span of activities of the Executive Branch, has to do a lot of delegating. Micromanagers like Jimmy Carter generally do not do well. He really can’t step in and shore up a Cabinet member discovered to be weak the way a private businessman can.

    The problem with Obama’s economic picks aren’t that they are conventional per se. Convention would be fine if it had worked well. But it hasn’t in the economic realm.

    The story that I heard about Obama that troubles me most is that in law school, it was a standing joke than whenever Obama spoke in class (and mind you, he was generally well liked) he would always give a very nuanced and articulate statement of something absolutely conventional. So I am concerned that his selecting the team he did doesn’t simply reflect a bias towards picking known, seasoned quantities in troubled times, but also reveals an unwillingness to shake up the status quo too much, even in areas where that is what is clearly needed.

    As I too often say, it would be better if I were proven wrong.

  29. killben

    David Sirota understands that this Emperor has no clothes…


    One simple question,
    How do you think a Man who says he symbolises change BRING ABOUT CHANGE WITH THE SAME TEAM .. ok, NOT SAME BUT SO SIMILAR AS TO BE UNIDENTIFIABLE … & assigns a side-play to the only guy who is likely to DO SOMETHING..



  30. Waldo

    There is a simple way to stop a good portion of the corrupt behavior in Congress.

    Simple: term limits.

    Where would we be if Bush could serve another term! Washington set the precedent and Congress made it law after FDR.

    Two terms for senators and three terms for reps.

    There is so much in-place corrupted motives by all the 20-year plus congressional leaders (thugs).

    If the economy here in the States gets as bad as some of these very bright bloggers say then we need to learn and gain from the oncoming pain.

    Criminally prosecute Bush and get an Amendment for congressional term limits – maturation step for our Democracy.

  31. Jim Lippard

    Sirota’s take on Hindery is ludicrous. Obama was right not to seriously consider him. Just Google “Hindery Global Crossing” and “Hindery Daschle”.

  32. Anonymous

    Dear learned economists:

    I appreciate reading your sharp debates!

    I am wondering how you parse Nouriel R’s pronouncements recently, on Bloomberg tv. He praises Summers and Geithner (at least at some level), and then (it seems to me) gives angst-ridden (?) comments on what *should be* happening… Is he praising with faint damns, which are apparent to the cognoscienti (sp?)? As a Byzantinist, I can appreciate this sort of thing (if that’s indeed what it is)…

    very best wishes from linda in chicago

  33. bionic

    Why does this surprise anyone? All you had to do to find out what was coming is to look up the list of Obama’s campaign contributors – GS, JP Morgan, etc are top contributors. Or look at it this way, who has money now – the easy answer of course is those who regulate the money flow – bankers. Looking through the list of top contributors for all three “serious” contenders (including Clinton and McCain) we find those same bankers’ names. The could be no other outcome…

  34. Todd Wood

    I am not happy with his picks, either. But, we just got through with an administration focused on destroying the government, so who is Siorta’s audience?…people who are have had their head in the sand for the last eight years?…people who really don’t understand how bad things are?…people who believe that Galbraith instead of Summers could have saved us from the abyss?

    Come on. But, I know that an article like Siorta’s is good to kick Obama in the ass to keep him and his administration on the right path, or hope that it will.

    We are completely corrupt. We would completely fail, if the Fed. Gov. could not pull out its giant credit card and keep us going by the income of future generations.

    Obama will be a complete success, if he doesn’t stab us all in the back and leave us to die in a dirty gutter…hell, he will be the best president we’ve had in 40 years, if he does just that!

    Blog that!

    If this were a battle field, I’m trying to decide what orders I would give: “fix bayonetes,” “broken arrow,” or “fire artillery on my position.”

    I would order number three. The enemy is within the perimeter, hence: Obama’s zombie problem.

    Blog that!

  35. Todd Wood

    So, WalrusBank,

    Are you saying that the .com and, now, housing bubble has proven Rogers wrong?

    Stocks are down, now, to their highs of 1996? What is your point?

  36. Edwardo

    Obama is out of his depth, and he has proven, time and time again, that he is as conventional as they come. His reputation for being some sort of new, supremely gifted visionary leader is the result of very effective public relations acting on a large, despondent, and quite frankly, impaired segment of the electorate under the spell of a strange zeitgeist.

    Obama is no Lincoln in the making. He is much closer to far less successful Presidents of more recent vintage. That will become evident to even Obama’s most die hard supporters by the end of the year.

  37. Benign Brodwicz

    It is gut-wrenching to be fooled twice in a row. And so quickly!

    Minorities of Americans support either the bank bailouts or the stimulus bill.

    A pastor once told me of a study about how congregations treat succeeding priests after a pastor has had an affair with a parishioner: the next three pastors are chewed up and spit out by the congregants.

    Americans had their trust abused by Bill Clinton, who despite his solid fiscal performance was a true scumbag repugnant to many–and then, of course, there was W.

    Obama is looking like a one-term president unless he changes his stripes real fast. He was elected by a grass roots movement of people who can actually think, and as one of them, I am not thinking well of President Obama right now.

  38. Doug Wollkon

    Economic philosophy would suggest that no top-down government styled entity will work in the long run.

    Don’t ask Obama to fix a system that is broken. We liquidated $75 trillion in a about 10 years time through credit derivatives, a phantom marketplace that was at least twice the size of the real economy; and we are asking one man to fix such stupidity?

    And yes, we were all stupid to believe that some government entity can fix our problems.

  39. Richard Kline

    Sirota: “We’ve now had two bait and switch Presidents in succession.” Three, and of them Clinton was the worst. The last stand-up guy was Bush pere, who promised to be a muddle-and-bluster-through Yankee bluenose, and more or less was. (Nothing to be proud of, that.) And Obama, co-opted _in the future tense_? Brother, that has been the entire political strategy of Bo Prez since he announced for his first candidacy: “Co-opt me, PLEASE; I’m safe for the Man.” And puh-leeze, let’s eighty-six the Lincoln references, these are spiel and fantasy. It is not impossible that Bo Prez may do something right over the next four years, but he is _nothing_ like Lincoln, and his Administration, for *meh* or worse will go nothing like that of Lincoln. I don’t say that to favor the latter, they are simply entirely different personalities with totally different political philosophies.

    Come Monday, 9 Feb, it will be too, too fitting and choice for a known tax cheat to stand up before the cameras in front of half the nation, and tell the Sheeple why their earnings are going to be simply handed over to the banksters on pallets from backdoor of the Treasury for the rest of our lives, not only free of charge but we’ll pay _them_ to take it. It is one more example of why rules, of law or any other, don’t apply to the gold collar class.

    Everything being done in the District at this time is about posturing; nothing more than that. No one except a few academic economists and small businessfolks really care whether any of the Big Plans really work. Everybody in politics needs to be seen ‘doing something,’ so they are all noisily talking up their pet somethings, but really, no one there knows or really cares if any of these plans are efficacius. This, y’know, a recession, and it will run it’s course, and somebody will take credit for solving it. If they were seen doing something. The craptastic Big Boost Bill is a misconceived mess, too small and sidewise to work but too large for us to afford much of anything more later if we can afford it at all as designed. The Bank of Potemkin financial plan is authorized theft, nothing more. It will not save a bank; it will not stimulate the economy; it will not put a single zombie firm down; it will not end the requests for money: All it will do is come right out of your pocket for the next ten years or more while those holding bad debt take the cash flow and run. . . . It would be far better if everyone inside the Beltway did _nothing_ than THESE somethings. Worse than useless, that’s the ‘leaders of the American people.’

    But for all that, I am, wierdly, for all this to go down. It brings us one day closer to insurrection, and if we can’t save ourselves calmly and rationally that’s the next best thing.

  40. Jojo

    Yves said “The story that I heard about Obama that troubles me most is that in law school, it was a standing joke than whenever Obama spoke in class (and mind you, he was generally well liked) he would always give a very nuanced and articulate statement of something absolutely conventional. So I am concerned that his selecting the team he did doesn’t simply reflect a bias towards picking known, seasoned quantities in troubled times, but also reveals an unwillingness to shake up the status quo too much, even in areas where that is what is clearly needed.”

    But what you describe is the type of person who has, in the past, typically been most successful in politics and the corporate world. So it is understandable that Obama would hew to what has worked for him previously.

    However, this is a different time and Obama needs to recognize this. We need someone who is going to speak forcefully and lay down the law to create a new path forward. Like Lincoln, Obama is going to have to take control, grow a pair of balls and do it fast. Or Obama is going to wind up being a one-term president with the final two years of his presidency being as a lame duck when the Democrats lose their majority in the next elections.

    Obama was elected to make big changes, not continue doing business the old way, which is what seems to be happening by his employing the same people who have been neck deep in creating the problems and profiting from them. We need new blood, Failure to do so may well lead to much spilled blood (speaking both literally and figuratively). The people of the USA are restless, riled up and becoming more disenchanted and dissatisfied daily.

  41. patrick neid

    In the end we are still just discussing the fabric on the chairs aboard the Titanic.

    Mind you, while I am being a fatalist in making this comment, it should be remembered that there were survivors.

    Obama’s choices are irrelevant at this point. As long as he is comfortable with them, so be it. Complaining about certain individuals is to suggest that with the right mix there is a solution. That’s so yesterday. The iceberg has been hit.

    Long forgotten is the trivia that many of the Titanic’s lifeboats set off half empty because the passengers felt comfortable on a boat that could not sink. Today’s “Plans” are inducing the same.

    We are in a debt contraction. There is absolutely nothing that can be done to stop it. The ship of state has been holed.

    All is not lost. There will be survivors. Figure out how to be one.

  42. Anonymous

    Bush is history now but if his policies were calculated to help the investor class and corporate America then he was an even bigger failure than his critics have given him credit for.

    The ironic thing is that over in the UK we have a left of center government pursuing the same basic policies, if you can call them that, as did Bush/Paulson. To imagine they arrived at the same point via a careful analysis of the problem is unlikely. More likely is that both governments are reacting to events not implementing any cohesive policy.

    Unfortunately, that is likely to continue as events move far faster than government policy ever can. Just as Washington was coming to grips with $100 plus per barrel oil the bottom falls out of the market and so the sound and fury of last summers debate on energy policy is undone in a few months by a new reality.

  43. robert

    @ scrollbar

    I agree. Runoffs are a great idea- a majority should elect their representatives- however Obama did win by a majority- how that may have played out if people knew they would have a 2nd chance once their Libertarian or Green Party candidate was eliminated I don’t know.

  44. robert

    Waldo said-

    “Criminally prosecute Bush and get an Amendment for congressional term limits – maturation step for our Democracy.”

    And . . . how exactly does that pertain to the current discussion. I suggest you get your 2 or 3 friends together and demonstrate on the national mall- GO GET EM!

  45. "DoctoRx"

    Frank Rich said: The new president who vowed to change Washington’s culture will have to fight much harder to keep from being co-opted by it instead.

    Does Mr. Rich really believe that an unknown freshman Senator with no accomplishments to point to could become President without already having been part of the establishment?

  46. Michael

    I’m a little bothered by Sirota’s concern about weakening the “Buy America” aspect of the stimulus package. Perhaps he is for protectionism? Trade wars anyone?

    And, there seems to be quite a bit of sentiment to the effect that Obama is “out of his depth”. Excuse me, McCain was out of his depth attempting to run a coherent campaign, much less orchestrating the rescue of the world financial system. A little humility would go be nice here. I really don’t see that much consensus on how to fix this problem, rather just a lot of second guessing.

  47. David Pearson


    The real question is, why the dearth of alternatives to Rubin's proteges? I think the mention of Hindery is indicative. I had a chance to meet him while he was at TCI and I was a PM for a mutual fund company. He was the type of guy who seemed smart but whose accomplishments were always ahead of him.

    Why, for instance, take a job as head of AT&T broadband under notorious empty-suit Michael Armstrong? The Yes network? How is that a relevant experience for Treasury Secretary?

    This is not to focus on Hindery, only to note that the anti-Geithner crowd (of which I am a proud member) offers no alternative but a too-old and probably too-caustic Paul Volker.

    At least Roosevelt could bring people out of academia. With the exception of Roubini and Krugman — both not tempermentally suited for the job — academics today failed as badly as Wall Street did in dealing with or predicting this crisis.

    The solution for Obama is to appoint an "implementor" to Treasury. Someone boring but effective, and with an unimpeachable reputation. Then bring Krugman, Rubini, Smith (Yves), and others into the White House, turning it into a crucible of policy suggestions with rapid-fire decision-making carried out by the executive himself. Sure this is a time sink, and Hillary would have to run foreign policy virtually on her own. That's an acceptable price to pay.

    Is it too late for Obama to do the above? Maybe. But I suspect Geithner will be gone by year end, and Summers can be placed on the Fed Board, leaving Obama another shot at it.

  48. Andrew Bissell

    Bush’s moves, including his spending policies, aided big business and the investing classes. That can hardly be depicted as left wing. And his social policy cannot be described as liberal either.

    So right wing means, “not left wing” now? Conservatism is now defined as “limitless corporatism in the domestic sphere and endless war in foreign affairs”?

    I mean, I’m not a conservative, and I know the traditional left-right spectrum is pretty useless anyway, but this is turning it into even more of a caricature of actual policy positions than it usually is.

  49. doc holiday


    > "Obama was elected to make big changes, not continue doing business the old way"

    The Democrats were also placed into power by the same want for changes a few years ago — and then as now, corrupted morons and retards like Pelosi and Reid have faithfully demonstrated how connected to lobby groups they are and thus, how disconnected they are from the voters that placed them within reach of those fat'n juicy teats that they now worship upon with bulging eyes and dripping saliva, where their cups do run over, and where the cups are half full and never empty. Without a doubt, they effortlessly suck harder everyday with the unbounded energy that could only come from a black hole vacuum in deep and distant space which is connected to the soulless entity of the devil, who provides the playbook for these awful people that are destroying our lives!

    I need to work on that, yah … oh well…

  50. Dan

    Those who have posted comments to the effect that it’s too early to judge, you’re kidding yourselves.

    The moment Obama announced the appointment of Geithner, I knew it was over. Nobody can answer the obvious question about Geithner: how can the man who was at the heart of developments while the current mess boiled over, deliver us from this economic disaster? How will that come about? Geithner is an utter disaster of an appointment, and will bring Obama down. (Ditto for Summers.)

    I also agree with Yves that by the time Obama realizes what a mistake he’s made with his appointments, it will be too late.

    Obama is not deliverying on his campaign promises, at all. It’s more of the same old same old, with a pr spin; this is very, very bad for the country.

  51. Haigh

    What we need is a new nightly business show on TV that takes the top economic blog authors like those on Naked Capitalism, The Big Picture, and Mish’s Global Economic Trend Analysis, and gives a rotating band 5 to 10 minutes each night to challenge all the crap the other shows are dishing out.

  52. Yves Smith


    The fact that many members of the right wing feel betrayed by Bush's expansion of government spending does not make him a left winger. There is a very long list of issues where Bush was firmly in the right wing: the environment, tax cuts for the rich (they were so egregious even Warren Buffett spoke out against them), military buildup (generally speaking, when it's guns v. butter, the right likes guns and the left likes butter), and civil liberties.

    David Pearson,

    I was doing work in the cable industry at the time. FWIW, my understanding was that certain members of the TCI team, including Hindery, stay in the saddle for at least a while at AT&T was a condition of the sale. That, along with non-competes, are not uncommon requirements (and then the new owner and the guys from the acquisition don't get along, the acquirer pushes them out and still has to pay them till the non-compete expires).

  53. Anonymous

    Yves, you have a serious concern troll problem in your comments.

    It would help if you wouldn’t assume Obama is some callow idiot. He isn’t. I’m with michael and david pearson.

    Who would you pick otherwise to do the jobs Summers and Geithner have?

    Do you seriously believe that Obama isn’t unaware of the nationalization option, and if he did, that he rejected it for spurious reasons?

    If you think Obama was so bad, do you seriously believe we’d do better with McCain? Clinton? Edwards and Kucinich has obvious issues with follow through.

    I mean, FDR had two coup attempts during his time for tacking even to the moderately left. There are still insane rich people out there who believes that he was the devil instead of the guy who forstalled even further leftward, redistributionist politics. People are operating with the limits of the politically possible, not within the limits of the imagination of the public. Yes, Summers and Geithner are compromised, but I seriously wouldn’t approve of Sheila Bair either.

    I don’t think you should tone down your rhetoric in your posts, but I think conservobots that spouts the usual “Bush isn’t a conservative” needs to be slapped down with a bit more authority. The issue isn’t that there are obvious solutions–there aren’t. The issue is trying to retrieve an already catastrophic situation.

    We are *doomed*, I think. I’m pretty sure at this point that nationalization wasn’t favored mostly because the system is too big to save, and that we are in Iceland’s situation (with a dash of serious politically unfeasible to reveal corruption) and not in Sweden’s situation.

    In this situation, it’s pretty much all hands on board and the discourse needs to be widened for possible solution and incorporating enough political pressure to push back the bond market people who are fighting teeth and nail to prevent bond cramdowns. Allowing all of this idiotic concern-trollism mitigates against this effort.

    –doc holiday, I’ve long since thought that Obama is considerably like General George Thomas…


  54. Anonymous

    Thomas has generally been held in high esteem by Civil War historians; Bruce Catton and Carl Sandburg wrote glowingly of him, and many consider Thomas one of the top three Union generals of the war, after Grant and William Tecumseh Sherman. But Thomas never entered the popular consciousness like those men. The general destroyed his private papers, saying he did not want “his life hawked in print for the eyes of the curious.”

  55. robert

    Anonymous said:

    “it would help if you wouldn’t assume Obama is some callow idiot. He isn’t.”

    Thanks for setting everyone straight- without smart educated folks like you I wouldn’t know how to think properly. Also- great idea giving someone advice on their own blog- you must think your advice is pretty damn priceless- personally I would delete your post and block you from any further entries.

  56. Andrew Bissell

    The fact that many members of the right wing feel betrayed by Bush’s expansion of government spending does not make him a left winger.

    I never said it does. You’re engaging in exactly the same kind of hyperbolic thinking that you have bemoaned in your commenters at times.

    The point is, either the terms “right-wing” and “left-wing” mean certain things, and are therefore useful as argumentative shortcuts, or they don’t. And if the Bush presidency, which expanded federal spending every year it was in power, is to be taken as the definition of “right wing,” then IMO the distinction has become useless.

  57. When left is right...

    The “right” are the “fascist” (in the Mussolini sense of the word). This would be a big-5th-appendage-mean-daddy-government run by corporate insiders hostile to “outsiders” that criticize the patriarchy (the drunken frat boy Republican party). Fascists generally side with the mean imaginary-friend religions and vis-versa, which is why you see so many cars with fish AND flags (same goofy beliefs – same part of the brain involved).

    The “left” are the socialists. This would be a big-smothering-mommy-government run by unions and academia – hostile to “outsiders” that criticize the matriarchy (guilt ridden Democrat party).

    BOTH parties MUST increase the size of the government because the “insiders know what’s best for the peasantry”. So, the ONLY difference is whether you like a kiss-azz mean-drunken daddy society or a guilt-ridden codependency mommy society. The end-result will be the insiders collecting the spoils from the politicians owned BY the insiders.

    So, I’m SHOCKED SHOCKED that people are SHOCKED SHOCKED that nothing has changed. Did people forget that Obama is Democrat? The entire PARTY comes with “the guy that wins”, ya know!. The party entourage runs the show. So, we just got over 8 years of fascism. Now we get 4 of socialism. The “insiders” from both parties DO eat in the same restaurants.

    I know it will be 4 years because the Real `merican peasantry resents “mommy” (and so does the fascist priests, e.g. the Bill O’Rielly’s (sp) of the world). And the more mommy tries to help the peasant the MORE she’ll be resented. American socialists canNOT comprehend this (which is understandable as they don’t live WITH these peasants. Who would WANT too?)

  58. Anonymous

    “Who would you pick otherwise to do the jobs Summers and Geithner have?”

    Volcker; he saved us once already, when things were out of control (20% interest rate).

    “Do you seriously believe that Obama isn’t unaware of the nationalization option, and if he did, that he rejected it for spurious reasons?”

    Not spurious; it’s obvious his rejection of nationalization is the wish of big business. His entire economic team is a big business “dream team.”

    Unfortunately for us, listening to big business so much is making the U.S. small, quickly.

  59. doc holiday

    Did Citizen Obama ever explain why he doesn’t want American banks nationalized — in this period of systemic financial collapse?

    I see this (from surfing): “Broadly speaking, the Obama administration has three options, each of which has been tried in similar crises in other countries.

    First, it can nationalize insolvent banks, take their bad assets directly onto the government’s balance sheet and try to manage them at a minimum cost to the taxpayer. This has the advantage of decisiveness — but the huge disadvantage of involving political authorities in the banking business indefinitely.”

    Also, I spotted this, while surfing the pipeline: “Nationalization” Not A Nasty Term
    In the brief weeks that Barack Obama has been president, the n-word has been heard with startling frequency in Washington. We're talking about "nationalization," of course. The plight of the country's banks has become so severe that the GOP's incessant cries of "socialism" during last year's campaign, so ridiculous then, suddenly seem too mild a description for the prospect we face. After all, nationalization sounds less like something Sweden would do and more like an order Hugo Chavez might issue during a rant against capitalism.

    >> The banking system is insolvent and there are no cures to the lack of future cash flow problems, so what is it that is stopping Obama from seeing this clearly and then pretending that he can ring fence a few problem banks and use TARP to stimulate insolvency? We have a multi-Trillion problem and these retards think that a sprinkle over effect (no unlike a trickle down effect or other miracle gesture) will get the option grants rolling again on wall street? I seriously don't get this crap, anymore than I ever pretended to understand the deeper philosophical ramifications of Snow White … or The LHC, etc…..

    Can we please have less bullshit from Obama PLEASE, for The Love Of God!

  60. Anonymous

    “Back then, Summers and Gensler joined hands with Phil Gramm to ward off regulation of the derivative markets that have since brought the banking system to ruin.”

    warding off regulation is aiding and abetting lawlessness.

    Phil Gramm and his cohorts are criminals.

    The politicians and the lawyers who did this are criminals.

  61. Anonymous

    Those of us who thought all of the candidates offered by the Kleptocrats/Republicrats for president last year were a passle of montebanks, con-artists and shysters, (including the Saintly O-Man), are simply howling with laughter reading the “buyers remorse” comments on this blog on a daily basis from all the mindless dolts who freely, willingly, and naively imbibed the Obamamania Kool-Aid, and are now shocked, S-H-O-C-K-E-D, to learn that Obama isn’t the man they thought he’d be.

    It is an astounding thing to witness the scales falling from so many eyes….

  62. Anonymous

    It is gut-wrenching to be fooled twice in a row. And so quickly!

    We’ve been fooled about 9 times in a row.

    Last pres that didn’t lie about “change” was Ford – and he was unelected. Democracy is a fine concept as long as the representation isn’t limited – but the limitation to 435 reps and the limitation of not splitting up states into multiple new ones is creating far too much of a class divide.

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