Background on President Obama's personnel choices and tactical decisions for financial

[bertman]

recovery. This article says it all. http://www.huffingtonpost.com/kevin-phillips/the-tricky-2009-politics_b_174887.html

Despite its recent uptick, the stock market has plummeted since Barack Obama's January inauguration. The Republicans seek to blame the man and his policies, with which most Americans take issue. Still, it's more common for the hope invariably surrounding new presidents to spark a rally.

That was certainly true in the depths of the Great Depression and the 1932 presidential election. Back then, new chief executives took the oath in March, and Franklin D. Roosevelt's first months in office sent the battered stock market indexes soaring. People could almost smell the hope in the Spring air,. By June 1933 the battered Dow Jones Industrial Average had climbed by some fifty percent.

Democratic strategists and activists should be concerned over the contrast. Although it's too early to reach conclusions, it is useful to take a hard look at what's going on in the ever-changing politics of finance.

Back in early 2008, I published a book entitled Bad Money: Reckless Finance, Failed Politics and the Global Crisis of American Capitalism. It did well, and now is about to come out in a much-expanded and updated new post-election edition on March 31. Politically, it holds Wall Street, the Federal Reserve and the Republicans principally responsible for what went wrong over 25 years of financial greed and complicit Washington regulatory negligence. In party terms, the GOP gets 70 percent of the blame and the Democrats 30 percent. When I finished the new additions in January, however, I was skeptical about whether Obama would be able to bring about the needed changes and reforms in U.S. finance. His team had become too entangled with with the financial sector and its massive political contributions. Besides, too many of his top appointees were recycled senior Democrats from the Clinton administration's own tech mania, deregulation binge and stock bubble and crash of 1997-2000.

Still, I had voted for Obama in November. Even at New Year's, I hoped that the indications of the new administration's continuity with the failed financial bailout policies of the Bush administration would dissipate by Spring. I assumed that by the time I had to book tour in April, some long-neglected indictments of the financial sector would be on the table, and that debate over the bailout and over the disastrous misjudgments of the Federal Reserve Board would remain open. I would not have to criticize Obama himself.

Now, with April only two weeks away, that may be too hopeful.

... ... ... ...

Go to the link to finish the article.

[snowbear]

1. Not many people there agree with Mr. Phillips..

.
.

I especially like this one comment:

The president's plan has only barely gotten off the ground and we're pronouncing it DOA? No one knows the ultimate solution to the financial mess, neither pundit nor expert. Fortunately, the experts are now in charge.

For a while I despaired that true to Democratic tradition we would self-destruct with all our self-centered carping, but there is good news. The twenty-four hour news cycle has finally callused our fright-flight sensibilities. We no longer knee jerk. The people understand that the President is doing something substantial, that he is not listening to pundits, but charging straight-ahead with what he said he'd do. Confidence is slowly rising. By this time next year things will finally be looking up...for ordinary folks.

Bravo, President Obama.

[amandabeech]

2. Everyone should read this article, including President Obama.

Kevin Phillips is real straight shooter and he offers more on the background of Pres. Obama's picks for economic advisers, treasury secretary and head of the SEC and the Commodity Futures Trading Commission ("CFTC").

I phone banked for Obama and of course, I voted for him believing that economics was his weak point. He had too many Univ. of Chicago Milton Friedman acolytes running around for my taste, but I believed that he would bring in other voices once he picked his team.

I was wrong, and Phillips puts it much better than I ever could.

I cannot believe that Kashkari, Hank Paulson's right hand man is still at Treasury doing bad things wearing an Obama administration hat. The Bush guy is still the Comptroller of the Currency, which is an important bank regulatory post.

If Obama is really going to get traction with our economy and respect abroad, he has to dump the Clinton/Bush Wall Street team that is now in place and bring in some people who were critical of the current team in the beginning or have subsequently seen the error of their ways and are ready for their public confessions.

[bertman]

3. Agreed, amandabeech. I found the dollar amounts of the bribes, er I mean campaign

"donations" to be telling also.

[amandabeech]

4. Indeed.

I think that Rahm Emanuel was probably as bad a choice as Summers and Geithner.

I wish more people here would look more closely at the economic staff Obama has chosen. There are a few Bush holdovers and a bunch of warmed-over Clinton deregulators and moneymen. They did not serve President Clinton well and they will not serve President Obama well, either.

If President Obama's supporters can't tell him that he's goofed with these appointments, who can?

[dkf]

5. Wow. Clinton signed legislation to remove Citigroup merger roadblocks?

Was THAT the reason he did it?

Wow wow wow.

[amandabeech]

6. Yes. Repealing Glass was one of the dumbest things that he did.

Recycling the people that encouraged it will not serve President Obama well, in my estimation.

For the life of me, I cannot figure out what the President is doing with these retreads who have been shown to have been tragically wrong. In today's parlance, this crew constructed a large part of this epic fail.

What gives?

[depakid]

7. Not a pretty picture

One should remember that unline Obama's economic team, Phillips was one of those who predicted the meltdown- and was especially critical of derivatives years ago.

[PufPuf23]

8. "Myron Scholes, intellectual godfather of the credit default swap,

says blow 'em all up.

Myron Scholes, whose Black-Scholes option pricing model provided the intellectual underpinning for modern derivatives markets, thinks one particular derivatives market—that for credit default swaps—is due for a Red Adair style rescue. Or a Fred Adair style rescue.

Red Adair put out oil well fires by setting off gigantic explosions at the wellhead. "My belief is that the Fred Adair solution is to blow up or burn the OTC market in credit default swaps," Scholes said this morning. What that means, he elaborated, is that regulators should "try to close all contracts at mid-market prices" and then start up the market anew with clearer rules and shorter-duration contracts.

This was at a conference at New York University occasioned by a new collection of papers on how to fix the financial system, authored by a bunch of NYU Stern School faculty. Scholes kept saying Fred Adair. Sometimes he'd notice and correct himself, sometimes he wouldn't. The FT's John Gapper, who was on a panel with Scholes, finally speculated that this was because the government response to the financial crisis has been such an unwieldy mix of Fred Astaire (dancing around the problems) and Red Adair (doing something to fix them). Scholes did not disagree.

The blow-up-the-CDSes option is intriguing, and I'm going to check in with Scholes later to see if he wishes to elaborate. But for now, a few more notes from the panel, which was moderated by Paul Volcker and also featured NYU finance professor Matt Richardson:"

see link


http://curiouscapitalist.blogs.time.com/2009/03/06/myron-scholes-intellectual-godfather-of-the-credit-default-swap-says-blow-em-all-up/

[Teaser]

9. Kevin Phillips: racist bastard.

.

[bertman]

10. Interesting comment, Teaser. I've read Kevin Phillip' articles and heard a number of his

commentaries over the years, and never once got a whiff of racism. Where did that come from?

[debbierlus]

11. Obama's economic policies are corporatist through & through

Trillions to banks - no meaningful government control or oversight. They do what they please, don't increase lending, and use the money to purchase other banks. And, advocate against the Employee Free Choice Act.

It is disgusting. Obama is PART of it. Can we PLEASE stop seperating Obama from the people HE appointed and thus the DECISIONS he ENDORSES...