Geithner-Summers Approach To Bank Bailout Increasingly Under Attack

[depakid]

White House Confidential
by Robert Kuttner

<Note: These memos fell into my hands. I cannot guarantee their authenticity--RK>

From: BHO

To: Rahm Emanuel

Subject: The Banks

Extremely Sensitive

Rahm,

I'm concerned that I'm getting only one viewpoint on how to solve the banking crisis, from Larry and Tim. A kind of echo-chamber effect sets in where they talk mainly to Wall Street and to each other, and different views are not heard. Larry is a very effective gatekeeper.

They both seem convinced that bailing out outfits like AIG and Citigroup, using even more money both from Treasury and the Fed, is the only way to go. And nobody inside the administration is really challenging them on the economics.

The problem is that neither the financial markets nor public opinion is buying it. My recovery package can't work if the banks keep dragging down the economy, and time is not on our side. We're burning through money that will be very difficult to get Congress to replenish if we blow it this time.

We've had some good strategy conversations about the politics. Limiting executive pay helps. So do these trips outside Washington where we can identify with ordinary people. But the Republicans are eating our lunch on the A.I.G. bailout, and Lou Dobbs is making us look like allies of the people who caused the crisis. The press is full of stories about people from Countrywide and the hedge funds profiting a second time, as purchasers of underwater bonds. We can survive all that--if Larry and Tim's plan actually works. But I'm beginning to wonder.

Could you set up some conversations with some well informed people who have a different view? What's your advice on how to handle Larry and Tim? We can't very well go behind their backs. Larry is keeping a low profile, and letting Tim take all the heat even though Larry totally shares the approach. Tim is all alone. He doesn't have a senior sub-cabinet official confirmed yet to help him. A chorus is building calling for his head. Do we want to set up some very discreet one-on-one conversations with critics, or bring Larry and Tim in, too?

Also, Rubin is constantly on the phone to everyone. His fingerprints are all over this mess, but people still take him seriously. Is he looking out for the system, or for Citi and Goldman? I'm beginning to have buyer's remorse that we hired so many of his protégés.

BHO

More: http://www.huffingtonpost.com/robert-kuttner/white-house-confidential_b_172918.html

[Demeter]

1. Wishful Thinking on Kuttner's Part

and anyone else who's been following along.

[izzie]

2. I would think ,first fix the laws that made the mess but then

I guess giving more money to the people that made the mess seems like a better first step. I do not under stand that really.