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Economist gives the bottom line on Timmy

Buried in the hagiography (see here for a salutary corrective) this sentence:

Mr Geithner and Mr Summers [and their boss] want to preserve the banking system largely as it is.

Why?

Seriously, why? Because they've done such a good job managing risk? Because of their sound business practices? Because their CEOs are models for little children to emulate? Why?

Should the government keep dumping our money into an enormous hole? Opinions differ.

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Submitted by jawbone on

I mean, where is Geithner going to go for a job after being Secty of Treasury? Academia? IMF? Summers? Not back to Harvard, I dare say. Obama? One would think he could make a fine living without depending on the Big Bankster Boiz, but perhaps he isn't comfortable without a surer thing, one that will mean actual wealth.

Who knows? Maybe... The Shadow knows!

oceansandmountains's picture
Submitted by oceansandmountains on

end up comfily ensconced in some private equity firm, well-insulated from the economic reality everyone else faces. Obama will probably end up president of some university somewhere--his ego would probably need the adulation.

koshembos's picture
Submitted by koshembos on

Geithner and Summers may side with the banks. Summers, the smart one, believes that he can push them towards recovery; he doesn't care about the crisis in ten years with all its financial and moral implication.

We didn't vote for either of them; we voted for Obama. And he is the one who should have protected the country from the hubris, arrogance and recklessness of the banks. He has enough advisers to tell him that he going to give away the store. Krugman, Stiglitz and Johnson were repeating the message week in and week out.

Obama cared only about his presidency and went on the screw us all.

Davidson's picture
Submitted by Davidson on

Here's a great takedown of that mentality by Johnson:

The question now is: Do leading financial institutions have enough capital to muddle through, or are their solvency problems so serious that we will experience continuing reduction in lending (often known as deleveraging), a deeper recession and a slower recovery?

If we are in the territory of serious capital deficiency (i.e., in the ballpark of the I.M.F.’s $275 billion G.F.S.R. estimate), inaction on banks has at least four adverse consequences:

* Banks will misallocate capital because of the perverse incentives that come from being undercapitalized; there is less incentive to make careful decisions when you think you may be out of business next year.

* The recession will be deeper because of greater uncertainty regarding the stability of our financial system. Uncertainty is highly debilitating for all long-term decision-making; it undermines investment and makes banks even less willing to lend. The I.M.F.’s World Economic Outlook (start with Chapter 1), which came out on Wednesday, puts on a brave official face, but is really not encouraging — global growth at a record minus 1.3 percent this year and only plus 1.9 percent next year (aside: reasonable growth, as measured by the I.M.F., is 4 to 5 percent per annum).

* The Fiscal First strategy implies a large buildup of public debt to bail out industry and banks, and to provide a fiscal stimulus. While we “wait and see” on banking, our national debt grows, thus raising the taxes that all of us (and our children) have to pay down the road. A broader redistribution of post-tax income away from ordinary taxpayers continues.

* In geopolitical terms, China is taking advantage of United States weakness to strengthen its claim on natural resources and build political ties by providing finance to weaker nations. To maintain its political position, the United States needs to be decisive in economic terms and get back to growth sooner.

This is all “irreversible damage,” so the real choice involves weighing different kinds of damage and — to be honest — different interests.

gqmartinez's picture
Submitted by gqmartinez on

Obama's (and the Dems) legacy doesn't look very promising if he continues down his (and their) current path. He was marketed as a person who listens to different views and asks the important questions. He seems to be listening to very limited viewpoints and not even considering some very important questions.

I had low expectations to begin with and even I'm disappointed.

Davidson's picture
Submitted by Davidson on

I agree. Obama's legacy is looking mighty dim at this point. I never bought the "change" line in that he would listen to all points of view and/or do what was necessary rather than what was politically convenient (to a select few). Just on single payer alone, no one could trust someone who poisoned the well on health care with his Harry & Louise ad stunt. But still, I was desperately hoping I was wrong (I still do). I fear that if Obama fails, the United States as a country and an idea fails.

To me, the most important crises Obama is dealing with are the bankster hijacking of our government and holding Bush & Co. accountable for their war crimes and shredding of the Constitution. If Obama fails on the first, which seems increasingly likely, the rest of his domestic policies, no matter how brilliant, will go down with the economy. If the Obama administration fails on the second, our "democracy" will suffer a fatal blow.

Right now, I'm just hoping that Obama, at least, takes the strong strides necessary to combat global warming. I feel like we're living on a knife's edge.

Side note: I hadn't realized that Lambert also linked to Johnson's "irreversible" damage post (on Baseline, instead of the NYT blog). Oops. Great post, though. Read it.

Submitted by lambert on

... after a few months. (Though I think the clock started ticking when Lehman went tits up, not in November.)

That said, I absolutely agree that letting the banksters run the country poisons everything else -- phase 2: WTF???? -- and if that doesn't get rolled back there's no space to get anything else done (except write checks to the banksters). And that includes global warming. Somehow, I'm not seeing the phrase "green oligarchy" as polling well.

Davidson's picture
Submitted by Davidson on

Yes, if Obama lets the banksters win, everything else basically falls apart. I mentioned global warming in a desperate effort to salvage something in my head. I just finished watching Poisoned Waters on PBS so I was, like, "Well, at least, I should have clean drinking water and not suffer a global climate catastrophe." I was hoping that somehow, at least, we could have that. It's truly frightening to think otherwise (so I try not to).

Yes, I'm living in (somewhat) denial.