Matt Stoller: Did Geithner Really Undermine Obama on Nationalizing Citigroup?

By Matt Stoller, the former Senior Policy Advisor to Rep. Alan Grayson and a fellow at the Roosevelt Institute. You can reach him at stoller (at) or follow him on Twitter at @matthewstoller

The fight over the future, in the form of the fight over who writes the history of the Obama years, has begun in earnest.

Ron Suskind’s book on the early years of the Obama White House is the first salvo in the question of “what went wrong”. Suskind’s book has sparked enormous controversy, thanks to its claims of gender bias and weakness on the part of the executive. Interestingly, Suskind’s underlying assumption, that the policy framework pursued by Bush and then Obama failed to deliver broad prosperity, is not disputed by anyone.

So this book, and the ensuing controversy and pushback, is entirely about blame. Is our current policy framework due to management choices or intellectual choices? Answering this question is important, because it indicts different groups of people for how the crisis has been handled.

Suskind’s most significant claim is that Geithner undermined Obama’s order to consider nationalizing Citigroup. In the passage in which Suskind makes this claim, Obama is speaking in a bit of code, using the precedent of the Swedish nationalization of their banking system when it went insolvent, versus the Japanese plan to retain their existing banking structure. Here is Suskind’s passage on how Obama, though boxed in by advisors, was leaning towards the nationalization plan.

Obama’s response to this cul-de-sac: outside readings. Rather than “first, do no harm,” by the first week in February his preferred phrase was “Sweden not Japan.”

Yet, here’s a Nightline interview of Obama from Feb 10, 2009.

So you’d think looking at it, Sweden looks like a good model. Here’s the problem; Sweden had like five banks. [LAUGHS] We’ve got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the problems in terms of managing and overseeing anything of that scale, I think, would — our assessment was that it wouldn’t make sense. And we also have different traditions in this country.

These claims are tough to reconcile. Obama was publicly saying that nationalization wouldn’t work. Suskind has him privately saying “Sweden not Japan.” So either Obama was lying publicly, Obama was changing his mind, or Suskind got it wrong.

Which one is it? I don’t know, but in some sense, it doesn’t really matter. One fairly simple narrative is that Obama executes the policies he believes in. He thought the bank bailouts would work. He whipped for TARP, he hired people who believed in them, and he has presided over a government that is still putting pressure on state AGs to drop investigations of banks. He is a Third Way-style New Democrat, and Third Way-style New Democrats have certain ideas that translate into policy, and these ideas either do or do not translate into broad prosperity. He was speaking honestly in public.

Suskind takes issue with this theory. His ultimate point is that Obama’s Presidency is affected by management problems instead of ideological problems. And sure, one could make credible arguments about management. To make this claim, however, requires a concession that Barack Obama was explicitly lying in that interview. It requires believing that he was not a naif, that he was a politically cynical liberal playing 11 dimensional chess, outfoxed by an even more cynical Treasury Secretary who is somehow still employed as Treasury Secretary.

Could this be true? When combined with the consistent pro-foreclosure/anti-prosecution policy axis of the entire government under Obama, well, I find it very hard to believe. In fact, it’s very similar to making the argument that the war in Iraq was prosecuted incompetently, not that its very design was problematic. In saying that it’s not the king’s advisors, it’s letting all the media boosters and center-left validators of Obama in 2008 let themselves off the hook for mistakes. Instead, they ask, “where did our inspiring Obama go?” And again, it’s fascinating to note that no one is arguing that the policy framework worked, which is an ominous dynamic for his reelect team, considering that it’s 2011.

Those elites who indulged their political fantasies in 2008, and accept the narrative of the king’s advisors, either misread Obama or they themselves agree with his ideas but cannot accept the implications of their preferred policies actually not ending up in broad prosperity. And this cannot be reconciled with the notion that Obama believes in what he believes in and executed his policies based on the track record that was readily available.

So, Sweden not Japan? Or your lying eyes?

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  1. CB

    It was probably foreshadowed in Obama’s campaign rhetoric about NAFTA style trade agreements followed by Austan Goolsbee’s (alleged) assurances to the Canadian government that it was just political positioning. Everyone (alleged to have been) involved has stoutly denied the story but, frankly, it rings true. Given Obama’s backroom deals with big pharma and the hospitals which set the ACA parameters before it was drafted, the yada yada on NAFTA was just campaign hot air. Obama has a kind of repulsive predictability. I’ve known people like that. You literally can’t believe a word they say. It’s a rare surprise when they walk what they talk.

    1. beowulf

      The US Canada Free Trade Agreement was signed in 1989. Between the Everglades and the Bering Strait, you will be hard-pressed to find a single American opposed to it. NAFTA was the follow-on agreement enacted 4 years later adding Mexico to the free trade zone.

      Its the issue of US-Mexico relations that is still a hot issue nearly 20 years later (as last night’s debate made apparent). Presumably, Goolsbee made this point to Canadian officials.

      1. CB

        Then why deny it? It was a hot yes-you-did no-we-didn’t issue. If you’re correct, there was no point in concealment.

        1. beowulf

          It was a stupid issue to bring up unless he was willing to make Mexico a political issue (which inevitably leads to questions about border fence, E-verify, etc).

          Since the Obama campaign wasn’t willing to go there (and risk pissing off Mexican-American politicians), they quietly told the Canadians to keep their shirt on and then changed the subject.

  2. SteveA

    One reason Citi has not been declared insolvent is this: over 60% of Citi’s deposits are held through offshore offices. Why does this matter? Because U.S. law explicitly excludes offshore deposits from insurance coverage, and many of the countries in which Citi takes deposits have no deposit insurance of their own. The U.S. would be in the same position that Iceland was in with its offshore depositors.

    There are other reasons for allowing Citi to do its zombie stagger from quarter to quarter, but the deposit insurance issue is a significant factor.

    1. Yves Smith Post author

      Agreed, but I’ve mentioned that on the blog repeatedly (the then $500 billion in uninsured overseas deposits), you referred to it, and it would take all of a two minute explanation or a four paragraph memo to Obama to tell him it Citi could not be resolved (you’d have destabilizing runs at all its foreign ops, which would cause all kinds of havoc and piss off pretty much everyone with us). More specifically, the issue is GTS, which is an international cash management system used by big international corps, that’s how most of the deposits come about. The deposits and foreign ops also mean a monstrously complicated BK. And it would be politically unacceptable to guarantee $500 billion of deposits of really big multinationals who should have been smart enough not to use Citi (the defense is that the GTS system apparently has great reporting which is why it is so widely used).

      So we both explained it really easily. The idea that Geitner would play evasive games when this isn’t hard to explain why Citi can’t be resolved (as in politely say why Obama’s assignment was not worth doing) makes no sense.

      1. Up the Ante

        The idea that Geitner would play evasive games when this isn’t hard to explain why Citi can’t be resolved (as in politely say why Obama’s assignment was not worth doing) makes no sense.

        It confirms who Geithner is working for, why would he rock the boat he’s in .. as an ex-Kissinger Associate??

        1. Yves Smith Post author

          The perils of writing at 5:00 AM. The “he said, she said” re Geithner and Obama as reported does not add up, given the obvious impossibility of resolving Citi (you could have done nationalized it, but it likely would have been a “you own it a really long time like Continental Illinois” scenario and becomes hugely controversial and Obama by picking Geithner and Summers had made it clear he was into orthodoxy, not controversy. That makes the situation not that hard to explain, and the reported Geithner evasiveness weird) . I’ve speculated that the Citi request was an ass covering exercise by Obama and Geithner understood that and gave it low priority. Who knows. The point is I suspect something critical has been omitted in the stories now told by the key parties that squares this apparent disconnect.

          1. Up the Ante

            “.. it likely would have been a “you own it a really long time ..” ”

            That is an important aspect as Obama does not appear to have any intention of ‘owning’ events during his term. THAT intention is unmistakeable, and from a purely political animal.

            Purely political events for these animals, they care not for its content. To assume otherwise of them is to bemuse them.

        2. Jason Rines

          No no. CURRENT CFR stooge. The only silver lining in any of this is the people have really awoken to hold people accountable. Any of you watching the demonstration on Wall Street? The MSM didn’t report it except for MSBC recently. Here is a link to the live web-cam of the event. Thousands now there:

          My contacts are emailing me telling me the people have brought supplies to stay there as long as possible and sharing rides, water and food. A national event of protest is scheduled in front of every Federal Reserve office in the country on October 16th.

          As a side bar, some senior leadership reading this should know that the demonstrators have no faith in leadership that the political leadership can regain control of the banking sector and if this protest fails that they plan on literally coming back this spring with pick axes and jack hammers to physically dismantle the NY Fed piece by piece.

          A shame the American people woke up a decade too late, the funds have long been stolen and put into fungible investments. The Central Banking model is finished.

          Their system is a dead man walking now but they will do until damage geopolitically before they make their final exit which spurs a ME war in 2013 and war in North Korea becoming WW3. I said this stuff back in 2001 on places like FreeRepublic and was booted for being ‘tin foil’. Now Stratford has identical projects. Human nature doesn’t change, if you study it enough the patterns become obvious.

          The inevitable and ultimate conclusion of the CB system that preyed on our failed human imperfection exacerbating the natural sequence of boom bust. And it didn’t have to be that way, Ben Bernanke could have done his job as steward and pulled the punch bowl away, giving him time to evolve the franchise to be more democratic and transparent.

          I read the article by Edward Harrison in meeting with President Clinton. The time to influence the influencers is over. I did what I could in that area and saw some smidgeons of tangible results. Any other specific advice is now useless. Do what is right for your own individual national people and perhaps you will survive then prosper. Nothing else left to say now. The global financial system is completely breaking apart. Trade wars have begun and where trade stops, armies follow.

          If I am Mr. Harrison my goal would not be further attempt to gain access to the inner circle for this purpose of influencing influencers.

          Oh yeah, it doesn’t take too much digging (nothing clandestine)of reading Chinese communications and how they are going to expose good old Billy. Watch for that around late 2014 or 2015. His time to be an American first is over and all the real players are beginning to view him as a liability.

          Old Billy is not good for near term or intermediate plans for the Chinese. The Chinese do not like traitors. They will not accept bankers or politicans that sold out their sovereigns to remain in China. It is bad in their perspective because when they launch the reserve currency they want full confidence from the investment community and old, rotten eggs are bad for confidence. Love it, the crooks are going from hero to goat overnight as it should be.

      2. Fiver

        Don’t see why something being against the Law would preclude it given all the other laws we know were ignored by Geithner and the Fed. I rather suspect other countries’ would have moved rapidly to insure the deposits, and immediately collar Bernanke and Treasury to pay back them up. We KNOW China’s interests were given clear priority. It would have been a contentious move, but hardly impossible. Isn’t it precisely because so many things were deemed “impossible” as opposed to “tough” that are up to our ears in failed policy?

      3. Nathanael

        Blow the megabanks up. Blow them ALL up.

        Who the fuck cares if putting Citi in bankruptcy also takes down Deutsche Bank, Goldman Sachs, JP Morgan Chase, Barclays, etc.? They’re all bankrupt and they all need to be shut down.

        It’ll take down insurance companies and hedge funds too. Big whoop, they’re almost as guilty. And it’ll take down some pension funds, but most of those were raided already, so there’s not that much left there.

        Legitimate smaller industrial and commercial businesses can’t get loans from these megabanks anyway and their deposits are insured, so *they* would lose nothing.

        The benefits outweigh the downside, IMNSHO.

  3. Roger Bigod

    The narrative of Suskind’s book seems to be that Obama wanted a “progressive” approach to the problems, but he was too impressed by credentials and his good intentions were frustrated by Summers, Geithner, etc. It so happens that this is exactly the narrative that is most favorable to his re-election campaign. I think Suskind is a good guy who tried to give accurate reportage, but the fix was in with his informants.

    There’s the secondary issue that reinforces the main theme: all the villains were nasty old sexists. Suskind left out part of a quote that made Obama look good, which has led to much screaming and wailing that he was biased.

    The most cynical (so probably correct) interpretation of the CitiCorp matter is that some of the oligarchs wanted to take it out as they had done with Lehman. A real application of the Swedish approach would have included BAC and the festering corpses of Fannie and Freddie. If Suskind’s account is accurate, Summers wanted to look at nationalizing CitiCorp at first, but changed his mind after Rahm got to him. Do you really think they had a high-minded policy discussion of moral hazard and the externalities of regulation in the modern economy?

    1. Mattski

      “Do you really think they had a high-minded policy discussion of moral hazard and the externalities of regulation in the modern economy?”

      A pithy reminder, if we need one, of the level at which much of the WH discourse really takes place–cronies, political calculation, and testosterone. There’s a continuing danger that almost any attempt to rationalize Obama’s actions carries you out of this corrupt realm and into the airy strata of idealism, where he’s always bound to look better.

      That’s not to deny that he IS something of an idealist, and if nothing else the Suskind book (or excerpts I’ve read) seem to clarify what kind: neoliberal. What we need is a new economic calculus based in use value; what progressives in the Democratic party should demand, at the very least, is someone in a Keynesian vein who at least believes in intervening on behalf of the poor and working people.

    2. TK421

      “Obama wanted a “progressive” approach to the problems, but he was too impressed by credentials”

      But, of course, there were people with impressive credentials telling him to do the right thing (Krugman, Volcker, etc.) that he totally ignored.

    3. John Emerson

      “The narrative of Suskind’s book seems to be that Obama wanted a “progressive” approach to the problems, but he was too impressed by credentials and his good intentions were frustrated by Summers, Geithner, etc. It so happens that this is exactly the narrative that is most favorable to his re-election campaign.”

      I doubt this. One of the standard attacks on Obama is that he is a lightweight with no administrative experience. This narrative makes him look like exactly that. It also makes it look as though he doesn’t understand economics, which detracts from his cool, wonky, imperturbable “trust me” image.

      I think that, in general, Democrats and especially liberals fail to understand that voters want a strong, decisive leader, John Wayne or Captain Kirk. To the degree that liberals are aware of this factor, they tend to ridicule it wrongly as anti-intellectual and macho. A President is a leaders not just an administrator or a super wonk.

      1. Roger Bigod

        You’re probably correct about most of the electorate, who aren’t going to pay any attention to Suskind’s book. But it will appeal to the moderate-leftish group who want to believe Obama was sincerely trying to do the right thing. I think that was the calculation of his re-election team. They’d rather have him appear weak than duplicitous.

  4. chris

    The influence of lobbyists and big money was clear when the tarp was just used to make the banks look better instead of getting the toxic assets into the open and written down. The Sweden Plan wouldn’t fly because of people wrongly believe that we live in a free market capitalist society so the banksters were able to get the bailout rather have several of the banks taken over by the government and cleaned up…..The percentage of execs still at the helm of the major banks that were a significant cause of the economic meltdown is very high ……what more do you need to say about the status of the economy……????? The same people are playing who created the system that melted down the world economy…….And it all seems to have gotten washed over with the ceo’s like dimon, pandent and others still acting as heros and rock stars …..I don’t care what or why Obama didn’t do this or that with Citi, I just want to know how you can get the type of job security that when you have to take billions from the government to stay afloat you never have to worry about losing your job.

  5. Richard Kline

    There is zero public or policy evidence that Obama ever considered, let alone advocated, for a Swedish solution. In November, 2008, he vetted and designated a raft of economic advisors and nominees who, individually and collectively, would not in any way _stand_ for a Swedish solution: some of them WERE bank executives, and the others all worked for, er with, said executives. Thus it strains credulity far past breaking to posit—sans any evidence beyond Suskind’s word—that Barack Obama ‘wanted’ or ‘considered’ a Swedish solution in February, 2009.

    Which brings us to: Why do we hear all this passing mention from Suskind now, in Autumn, 2011 anyway (aside from the material fact that a Suskind wouldn’t stand to make nearly as much if he got a book out in 2013)? Well the same banks that should have been seized in 2009 (2008, 2007, . . .) are a) still dead, and b) going to fail spectacularly on the presently ensuing next leg down in the markets and economy, RIGHT IN THE MIDDLE OF THE CAMPAIGN SEASON. It was obvious that a Swedish solution should have been pursued, and this little problem of ‘what was desired but not done’ will, more than any, haunt Barack Obama as he fundraises and campaigns for a second term. So “to Swede or not to Swede” or even better “I was for it before they made me be against it” sells a lot better than “I whored for the master because everybody else did too.”

    In a larger sense, I don’t care a fart in a high wind what Barack Obama ‘wanted to do’ or ‘where his heart lies.’ What matters is what he actually did: Grovel to the bankers, sell out the country, and betray his electoral base. That is what he did; ergo, that is who he is. Politics are about what you _DO_, not what you say. Come campaign season, Barack Obama is, one can see, having a hard time selling the record of what he has done and thus is to his supporters, among others.

    To me, the best possible outcome of the present market trauma would be for a spectacular implosion between now and November, 2011 turning Barack Obama into a certifiable carbon shadow on a blast wall such that the Democratic Party has to abandon him on the lip of the primary season, leading to a wild scramble for the Democratic candidacy. Now _that_ would be truly entertaining.

    1. Yearning to Learn


      In my opinion it doesn’t matter if he lied in his Nightline interview or not.

      he has lied so many other times that it hardly matters. In fact, I’m struggling to think of something important that he said that wasn’t a lie.

      He told us to look forward, not backward, so that he could stab us in the back.

      But golly geez, he just really really WANTED to do a Swedish system, and to close Guantanamo Bay, and to stop our foreign wars, and to bring a Public Health Plan to congress, yaddah yaddah yaddah.

      As for the Swedish consideration:
      yes, maybe he did say “Sweden, not Japan”. But that didn’t mean he wanted to DO what the Swedish did… it only meant he wanted the Swedish OUTCOME and not the Japanese OUTCOME. Wait… what? You mean we have to nationalize a bank endangering campaign contributions? Nevermind.

    2. freepressmyass

      “To me, the best possible outcome of the present market trauma would be for a spectacular implosion between now and November, 2011 turning Barack Obama into a certifiable carbon shadow on a blast wall such that the Democratic Party has to abandon him on the lip of the primary season, leading to a wild scramble for the Democratic candidacy.”

      LOL. You’ve made my day, Richard.

    3. Up the Ante

      “That is what he did; ergo, that is who he is. Politics are about what you _DO_, not what you say. ”

      And left the stage to Bill Clinton, one day, to explain administration policy. See, he delivered the transparency he’d promised.

      As for the first commenter’s “repulsive”, well, that’s the kind of politics you get when you continue Bush’s policies.

  6. Cian

    Suskind takes issue with this theory. His ultimate point is that Obama’s Presidency is affected by management problems instead of ideological problems.

    Well the ideology of the Obama administration is management. Which may be part of the problem here too.

    I think the larger narrative of the book that Obama was out of his depth is probably true; trouble is given what we know of his beliefs, I can’t really see that it would have helped significantly. He’s the last of the true believers in (US style) neoliberalism. Which makes him Hoover in our current drama. What that makes Rick Perry is anyone’s guess.

    1. Ignim Brites

      “Well the ideology of the Obama administration is management.”

      Yep. It is pretty much the core assumption of the American meritocracy that the forces of economics, nature, psychology can be tamed by enlightened technocrats; the best and the brighest, etc. Its all crumbling now. The twilight of the brights.

        1. JasonRines

          Nothing dull Monday about watching the next President execute draconia land. As usual, we’ll pendulum to the opposite direction before finding balance. Plenty of camps of winners and losers to view and lots of fireworks surrounding it. I doubt you’ll be bored.

    2. Yves Smith Post author

      It is actually a huge diss to Hoover to compare him to Obama, even though we all understand that the comparison is of their Presidencies, not of their careers more broadly. Becoming the President ruined the reputation of Hoover, who would have gone down in history as a great man otherwise. Hoover was a hugely accomplished person, both in business and from a philanthropic standpoint. It has been argued that he saved more lives than anyone in history:

      Hoover liked to say that difference between dictatorship and democracy was simple: dictators organize from the top down, democracies from the bottom up. Belgium faced a food crisis after being invaded by Germany. Hoover undertook an unprecedented relief effort with the Commission for Relief in Belgium (CRB). As chairman of the CRB, Hoover worked with the leader of the Belgian Comite National de Secours et Alimentation (CN), Emile Francqui, to feed the entire nation for the duration of the war. The CRB obtained and imported millions and millions of metric tons of foodstuffs for the CN to distribute, and watched over the CN to make sure the German army didn’t appropriate the food. The CRB became a veritable independent republic of relief, with its own flag, navy, factories, mills, and railroads. Private donations and government grants supplied an $11-million-a-month budget.

      For the next two years, Hoover worked 14-hour days from London, administering the distribution of over two and one-half million tons of food to nine million war victims. In an early form of shuttle diplomacy, he crossed the North Sea forty times to meet with German authorities and persuade them to allow food shipments, becoming an international hero. The Belgian city of Leuven named a prominent square Hooverplein after him.

  7. Norman

    In the company here, flim flam man comes to mind. Ah, wouldn’t that make this whole up coming “KABUKI” performance complete, with a wild west performance from the Demo’s, like what’s going on in the Repub’s camp? Ride em cowboys/girls.

  8. mg

    Watched Susskind on Tavis Smiley last night. His point is that Rahm, Timmy and Larry were running the show regarding the banks, econ. directions. At best they would slow walk Obama’s directives, at worst they wouldn’t follow them at all.

    Sussking and Smiley talked for a few minutes on Timmy disregarding Obama’s plan to nationalize Citi. Susskind said he spent 35 minutes w/Geithner on this subject, two pages of quotes from Geithner are in the book. He said after you read the quotes you’re left with no other opinion other than Geithner gamed Obama re Citi. Smiley asked why wasn’t Geithner fired, why he was he asked to stay after disregatding the president. Susskind said that’s a question for Obama

  9. Pitchfork

    Yep, somebody be lyin’.

    The question of restructuring Citi, BAC et al. didn’t suddenly emerge in early 2009, either. That question had been on the table since the fall of 2008. But the great American tradition of bankruptcy had been suddenly recast as “nationalization” (i.e. something only pinko Commies and Democrats would support). In spite of this context, though, Obama had approval ratings better than Mother Theresa. White people were literally crying in the streets they were so pleased with themselves for voting for Obama. After 8 years of Cheney, Obama had a MANDATE for, and America was ready for….(wait for it)… change.

    And yet, nary a peep about a Swedish solution from the man who whipped for TARP. In other words, I trust Suskind’s integrity, but I’m skeptical of the “I would have BK’d Citi were it not for Tim Geithner” meme.

    Great post.

    1. mg

      “, but I’m skeptical of the “I would have BK’d Citi were it not for Tim Geithner” meme.”

      Susskind didn’t go that far. His claim being it was slow walked by Timmy.In a meeting a month after Obama asked for a plan to unwind Citi Romer told him there is no plan, to which Obama raised his voice and replied with, “There better be.” Rahm, Timmy and Larry re-litigated the issue with Obama, then Obama changed course and went with their re-cap plan. In other words, he folded.

      1. Pitchfork

        Susskind didn’t go that far. His claim being it was slow walked by Timmy.

        Right, but the impression Obama would like us to have is that he wanted to / would have done the right thing. Clearly this isn’t at all true. If I had told Timmy to plan for a Citi restructuring, you can bet your goldman sachs I would have waited — a WHOLE month later — for Romer to tell me there was no plan.

        1. mg

          “Susskind didn’t go that far. His claim being it was slow walked by Timmy.”

          “Right, but the impression Obama would like us to have is that he wanted to / would have done the right thing”

          If so, the impression Obama leaves us with is that he has no balls

      2. Yves Smith Post author

        We discussed this in another post. The decision to prop up the banks rather than resolve them had ALREADY been taken, BEFORE March (the book is clear the “directive” to Timmie was in March). Timmie had already announced his plan re what to do with the banks (including the stress tests), he had to have run it by Obama (you don’t announce a fundamental policy program without getting the boss’s approval, remember the announcement of the financial services plan had been delayed, Obama clearly HAD to know what Timmie was up to and that he was committing the Administration, this was ALL over the media, fer Chrissakes).

        The key bit is Administration staffers (apparently annoyed that the media was still not getting Timmie’s message in February) that the banks had enough capital (!) and there was a process in place to assure that any that did not get it would get it from the private sources, and if that failed, the public. This was in FEBRUARY.

        So with that context, consider if your company decided to build a new factory. You’ve already hired the engineers and entered into a TON of contracts to buy equipment AND you have made public announcements that it is building this factory. They your boss, the CEO, says, “I’d like you to do a study of what are strategic options are if we don’t build the factory.” How seriously would you take that? What priority would you give it? The horse has already left the barn and is in the next county.

  10. NYT

    In the space of a year he went from being an unknown newly elected senator, to raising a billion dollars, mostly from billionaires. Hard to believe they didnt do their homework before investing in him.

  11. tyaresun

    My family members helped the Obama campaign. We all voted for Obama. I jumped off the Obama train the day he appointed Larry Summers. It took my young daughter a good two years to jump off the Obama train.

    Obama can blame everyone but himself but he knows where the buck stops.

  12. Paul Tioxon

    I’ll bypass the Obamatizations, and try to figure out the enduring or ongoing problem of the insolvent banks. It seems with the Euro crisis, we have crossed the threshold of a damaging economic downturn, enough so that B of A and Citi may soon to be no more, finito. It will have to be determined how to resolve the mess this time around. It seems the real policy alternatives for whomever is in power, Sarah Palin, Ralph Nader, Happy the Clown, is the Sweden or Japan choice. It seems the Swedish route makes most sense from a vetted policy standpoint. Or am I not getting everything that has been written by the Dissenting Debunkers of NC?

    While “BROAD BASED PROSPERITY” has not been magically arrived at by clicking the Ruby Slippers of the Federal Bureaucracy in the last 33 months, there are hints of policy choices pointing towards nationalization of financial services. The National Student Loan program and the Pell grants are producing broad prosperity and taking young Americans off the street and unemployment lines and placing them in Community Colleges across the country, as well as in lesser brand name public, private and Catholic colleges. There are over 240 Catholic colleges and over 110 traditionally Black colleges. These places, as well as the CC are doing quite well. Young men and women are sitting out the idle status of doing nothing and getting some Human Capital Development.

    I would suggest, that inadvertently, Obama or whomever may find themselves in a completely unmanageable financial disaster that has to be quickly and definitively resolved in the coming months. The policy alternatives may be more proscribed by the politically and even financial impossibility of following the Japan route, once again. While I have not read Susskind’s book, or even a healthy sampling of those who have, I have found a lot of this BS publishing to be of indeterminate value. Without resorting to deep background sources, clearly Obama has mishandled the major decisions regarding the handling of the financial crisis, not only the Swedish option, but even the simple get the Justice Department out there to prosecute and jail some these crooks option.

    This book coming out now, even if inaccurate to any degree, presents the real policy options of nationalization, and the force that short circuited this option, Tim Geithner. It sets Geithner up as a scapegoat, it sets the policy up as political suicide for anyone following it again, with the ongoing bank bailouts fresh in everyone’s mind. It will be interesting to see what policy alternatives are discussed, who their champions or nemesis were, and how toxic they have become to use so soon. Whether or not Obama is in the WH or not. The personalities do not endure beyond their 4 year terms, the policies resound through the ages.

    I would suggest, that Obama’s nationalization of student loans and expanding Pell Grants is better than sending young men and women into the Parks to clear timber or into the ghetto to pick up trash in abandoned lots and buildings. To those who do not have the capacity to handle college or work force development offered in college, there should be a works program. But this is certainly an object lesson in the value of government programs during this emergency that make a lot of economic sense. Perhaps it will be useful for informing politicians on the Swedish route for banking collapses in the coming months.

    1. citalopram

      The man has yet to fire any one of his staff. Like Carville said, it’s ain’t workin’ and you need to make changes. Yet, this guy is actually maintaining speed straight for that iceberg. It’s just amazing. It’s like they all live in some fantasy world, some bubble. Either he’s really stupid, or really stubborn.

      1. Paul Tioxon

        Peter Orzag, gone, Christine Rohmer, gone, Larry Summers, gone, Rahn Emmanuel, gone. Liz Warren, gracefully bows out, now running for Senate, still, gone. Hmmmm, maybe the upper class does not really fire people with the rent-a-cop escort to the door, but they are gone, all the same. You, know, to get on with their lives, spend more time with their families, fighting their way out the door with Barack and Michelle tugging on each arm, pleading please, don’t go, your country needs you. Yea, no one fired.

        1. citalopram

          Point taken, but what is he doing now policy wise that was different when those people were around? Also, why would Carville claim he should fire a whole bunch of em? Is Carville an idiot? Did anything change as a result of those firings?

          1. Paul Tioxon

            I am not sure James Carville knows the difference between a share of stock or a bond. He knows that Rubin told him that bond holders rule the world as we know it. He also knows what all management does when it does not get what it wants is to either throw money at the problem or fire everyone and bring in fresh eyes and ears and brains.

            Obama has changed a lot of faces, but out right firings that we have no doubt are old fashion being thrown out for incompetence or not being able to get the job done, even if you do not have the power to do get the job are Gen McChrystal, Van Jones, for political faults, the poor woman from the Dept of Agriculture for being too Black, and the woman who let the groupie and her husband sneak past the Secret Service, the Homeland Security snipers on the roof, the CIA spies walking in the crowd, etc.

            And while there is a lot of shuffling in the National Security/Defense arena, Sec of Defense Gates is gone, the CIA director is gone, but a former military general, Petraeus is now DCIA and the former DCIA, a civilian adviser for many presidents, Leon Panetta, is now the Sec of Defense. Got that. But, the ultimate test of a shake up is not always knowing why as much as they are just gone.

            The key is David Plouff, who came back into the WH in January of this year, as a Senior Adviser. He is the campaign manager from 2008 and the day of his return is the day everything changes. So is Carville an idiot, in this instance, yes. The only people left to fire are Geithner and Bernanke with Austan Goolsbee resigning in June. Other than those 2, there are not any senior economic advisers left, and really, Bernanke can’t be fired, Volker is gone as well.

            Since it should be clear by now, that almost nothing will happen in Congress, Obama is in campaign mode. He will raise in excess of $1bb and his ground team has been operating for almost a year now. Don’t expect him to lose because the economy sucks. He did not do it. The republicans are on track to self destruct by over reach. The economy is fucked, the world economy is fucked and the capitalist want to fuck it some more. So, who needs serious economic advice when there is nothing to be done worth mentioning. Or am I missing all of the bad news from the melting Eurozone and bank of America death watch crowd? It is not only terra incognita in the economic policy world but in the world of electoral politics as well. FDR had a shitty economy, and he got elected 4 times. Of course, if Obama does lose, it will be due to conditions so bad, that whoever does get in won’t really matter anyway.

        2. Yves Smith Post author

          Summers wanted to be Fed chair and quit because he thought the job he had was not big enough for him. Warren was never part of the team, she was hired to be marginalized, but that did not go according to plan. My sense is Rahm’s departure was opportunism. Romer was marginalized, and I think the same is true of Orsag, but not by Obama, by Geithner and Summers (they were very tight for a while).

  13. Hugh

    That Obama bought into every aspect of the corporatist kleptocratic agenda except Citi is ludicrous.

    Citi was resolvable just not in isolation. It needed to be part of a much wider restructuring and reset of the financial sector. It was only that way that you could resolve the interconnectivity issues. Doing this would also have given us the clout to effect an international settlement. The key would have been to protect small depositors, burn the rich, and do a limited burn on corps doing international business.

  14. Aquifer

    Comments remind me of things i used to say to people in ’08, before the election, much to the consternation of “liberal” colleagues. To whit:
    “Obama is the best investment Wall Street ever made” and their returns on this investment are greater than even i thought….
    “Obama is a mile wide and an inch deep” – maybe it’s actually a millimeter …

    What is very frustrating to many of us who were “sceptics” from the get go is that it did not take a great deal of “expertise” in any field to make these observations – just a little “paying attention” and, further, that so many still refuse to do so …

    1. citalopram

      The American electorate gets what they deserve. They’re naive, slow witted, and thoroughly decadent. They don’t THINK, they just passively take in whatever is spoon fed to them. Tell me, why should I or anyone else for that matter even give a damn anymore? Why should we be shouting into the hurricane?

      We’ve had the biggest crisis in history hit us and it’s like people don’t know why. They’re not curious. They don’t want to learn or question the whole system. Or they believe they talk radio lies.

      1. orionATL

        i share your dissappointment and distemper,

        but it seems fairer to me to say that voters cannot make intelligent decisions when the political information they read and hear is misleading or incomplete.

        1. DP

          What intelligent choice was available to voters in the 2008 Presidential election? John McCain clearly knew or cared little about economics and selected the crackpot Sarah Palin as his VP candidate. Once I spent a little bit of time looking into Palin, my feeling was the only option was to vote for a largely unknown and clearly unqualified Obama.

          1. scraping_by

            That was in the Fall. In the Spring, John Edwards was not perfect but had enough of his blue collar upbringing still hanging off him to give some hope. Still, the dirty campaign that gave us Barry knocked out Mrs. Clinton, his fellow elitist neoliberal.

            And now it’s obvious the playing out of the pussy bomb is vindictive and without legal basis. North Carolina courts look to be as bad as Texas.


          2. CB

            Me, too. I really, really didn’t like him. Thought he was way out of his league. In fact, before he announced, his name would come up as a prospect and my reaction was Who is he? On the basis of a speech at a convention? You’re kidding.

  15. myshkin

    “Which makes him Hoover in our current drama. What that makes Rick Perry is anyone’s guess.”

    Perry might be “Cactus Jack,” John Nance Garner, former Governor of Texas who ran against FDR for the Democratic nomination in 1932 and as his VP running mate, accused Hoover of being a socialist. A more disturbing and ultimately disappointing question, who or where is FDR?

    1. F. Beard

      A more disturbing and ultimately disappointing question, who or where is FDR? myshkin

      Reminds me of this:

      I searched for a man among them who would build up the wall and stand in the gap before Me for the land, so that I would not destroy it; but I found no one. Ezekiel 22:30

  16. Mike York

    The idea that Obama was undecided on the “Sweden or Japan” question AFTER he had already chosen advisers who would certainly not choose Sweden, is on the face of it, completely untenable. Also, if I recall correctly, Obama took the lead BEFORE the 2008 election in arguing for the bail-out at just the moment when a pro-Sweden candidate would have opposed it without taking control of the banks to ensure that they acted in ways that benefited the country rather than themselves. It is clear to me that Obama had already chosen the Wall St path long before he took office.

  17. orionATL

    with respect to susskind’s citibank story, i tend toward the view that it doesn’t matter much whether the bank story is 100% accurate or not.

    it is informative, and it is becoming part of an obama characterology. unfortunately for the prez, the story cuts two ways whether obama wishes it so or not .

    it seems more important to keep in mind that the “candidate obama” who ran as a democrat in 2008 was a fiction, a confection, a character created by obama and his advisor/pigmelion, david axelrod.

    see this nytimes article from april 2007:

    in 2007 this “newly elected senator..” had rented an office building in chicago for the purpose of campaigning for president.

    if the character ” candidate obama” was fictional in 20078 it seems reasonable to expect “candidate obama” in 2012 will be fictional. susdkind’s bank story may end up being important to that fiction without ever intending to be.

  18. Doug Terpstra

    “So either Obama was lying publicly, Obama was changing his mind, or Suskind got it wrong.” – Matt Stoller

    Or . . . Suskind is a collaborator in the latest deceptive campaign propaganda, as the timing of his book suggests. Suskind knows “the way of the world” and surely could have figured it out the manifest contradictions in Timmy’s story line as you have. You easily clinch what Yves deduced last week on this very issue:

    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.

    O’s recent jobs speech was yet another lame campaign-mode attempt to display his populist balls in this depression, but as you suggest, his choice of advisors, his years-long record of regressive policy, and his persistent pattern of premature “capitulation” make itimpossible to hide his elitist agenda. As Yves says, it’s a huge diss to Hoover to compare him to Obama.

    David Michael Green wrote yesterday, “Rick Perry will be the next president of the United States, you can count on that. (A fact which does, believe it or not, have its certain virtues. At the very least it means that both the oleaginous scumbucket, Ken-Doll Romney, and the inner-circle-of-hell traitor, Barack Obama, will both be humiliated in losing.)”

      1. JTFaraday

        When the fake libertarian talking heads on CNBC wanted to impose pain on GM, and the fake liberals were concerned about the chaos about to be unleashed on UAW workers, car dealerships, and suppliers in the rust belt, the fake libertarian talking heads on CNBC called it a “managed bankruptcy,” in which some care could be taken to limit chaos.

        Political problem solved. Chaos averted. Bondholders even took a haircut, (thereby, I’ve been told, undermining contract law forever).

        Depredations to contract law aside, I don’t see why a President Private Equity Robber Baron would be opposed to breaking these things up into little pieces and selling them off to his friends, (probably with a big government subsidy attached).

        I bet there’s a constituency out there for that. In fact, I can hear Larry Kudlow already:

        “Free market capitalism is still the best path to prosperity.”

        I still think anyone who launches their campaign with an old fashioned summertime camp meeting is not thinking beyond the primary. But, I don’t know, maybe it will be Perry.

        1. JTFaraday

          All we do know is that Bam doesn’t think like a private equity robber baron, because he didn’t fire Timmy (or the Treasury Boyz from Goldman Sachs).

  19. Phichibe

    As with most of the others here, I don’t believe Suskind’s line of argument. There are only two points that determine a line, and for me those two points are the following:

    1) Obama’s first significant Wall Street backer was Robert Rubin. This occurred in 2006, and I wouldn’t in the least be surprised that Rubin’s defection from the Hilary bandwagon was something he’d pre-cleared with Bill and Hil as a way of covering Wall Street’s bets by corralling the young senator from Illinois.

    2) Once Obama refused public matching funds in July 2008, it was foreordained that he would go light on Wall Street, since raising the $1 billion he’d need for 2012 would be impossible w/o tapping the wallets of the Wall Street power players.

    Think about it: the Obama economics team that he announced two weeks after the 2008 election was exactly what Robert Rubin would have prescribed, and I’m willing to bet that that is exactly how it was put together.

    And as for the question of resolving Citi, ask yourselves the one simple question: what would Rubin do? Would Rubin have recommended nationalizing the bank of which he was a top officer for the previous decade? ‘Nuff sed.

    The rest is theater.


    BTW, I’m convinced that the same economic team would have been named by Hilary had she won the nomination and the presidency instead of Obama. Just read Mark Penn’s disgraceful HuffPost piece denouncing Democratic politicians’ move to “class warfare” to disabuse any notion that Hilary Clinton would have been any different than Obama. (Penn was HRC’s campaign strategist, for those who’ve put the details of the 08 campaign out of their minds).

  20. Glen

    It’s very hard to believe Obama wanted a Swedish solution. It’s much more likely he realized pretty early that the bailout was a huge mistake and this was an opportunity to do a little bit of election year re-writing.

    Funny, the only time I see anything approaching the acclaimed 11th dimensional chess is when he’s hying to his base. He’s very good at that.

    The Democrats need to decide if they want to let Obama run and get shellacked again.

  21. Fiver

    I can’t see why anyone would pay any attention to Suskind’s book at all. It’s just a collection of self-serving, leaving-the-sinking-ship types covering their own pathetic butts having displayed a total lack of courage on the inside.

    Let’s remember back in the day when, for example, Cyrus Vance RESIGNED as Secretary of State because he so strongly opposed Carter’s cave to pressure from the Right to go for a military option during the Iran hostage “crisis” – the one the US is STILL punishing Iran for. Every member of the Obama Admin who could see he’d nailed himself and everyone else to the fortunes of the criminal class was OBLIGATED by their duty to protect the public interest to walk. Who gives a flying f*** what a bunch of serial liars have to say about it now that it clearly didn’t work, when many of these people knew THEN that it COULD NOT WORK? Useless toadies, one and all.

  22. Norm Cimon

    My impression was, from the get-go, that the advisers Obama had chosen – and I mean prior to the election – were straight from the Democratic establishment, many of the same people that Bill Clinton had promoted. Larry Summers is, after all, the exclamation point for the entire process. He’s one of the addled minds who pushed back to insure Wall Street would do whatever it wanted to do whenever it wanted to do it. The results are all around us in eight million lost jobs, trillions of dollars in fake valuations, and endless piles of debt for many, many people.

    Whatever the reason, because it was suggested by others that he get these people on board, because he was a relative neophyte at national politics, because he needed advice and he thought these were the best of the best, in the end it was a mistake. The window of opportunity to act and act quickly, was closed in the blink of an eye, and none of those folks seem to have had a clue. I really feel that, only now, is the realization dawning on Obama of how badly he fooled himself, or how badly others fooled him and themselves.

    That said, a disaster of this magnitude, with greed and stupidity swamping all common sense, doesn’t come along all that often. At least it didn’t before the computer age – but that’s another story.

    The odds were probably slim to none that even draconian action would have got us on the right track. The financial system is now so interwoven what with all the networked computing power, that over-leveraged investments had reached unheard of levels, and even serious triage might not have made any difference. But it was the only thing that should have been on the table – the Swedish model with the sharp knife to kill off the walking dead – and it never happened. The zombie banks still walk the earth three years later.

    The reason that the administration chose, in the end, to look the other way on foreclosures is a simple one to my mind: the banks are as underwater as the mortgage-holders they’re squeezing. If those “assets” in their portfolios are ever marked-to-market, they all stand naked to the world as insolvent.

    This is getting uglier by the minute.

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