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Obama’s Economic Misfits Finally Get It

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Posted on Jun 17, 2009
AP photo / Charles Dharapak

National Economic Council Director Lawrence Summers, left, and Treasury Secretary Tim Geithner.

By Robert Scheer

          Now they tell us.

          On Monday, two men with considerable responsibility for enabling the banking meltdown confronted the error of their ways. Not directly, of course, for accountability is hardly the mark of either Lawrence Summers, the top White House economic adviser, or Treasury Secretary Timothy Geithner.

          Their careers have long been fueled by error. Summers was one of the leading prophets of radical financial deregulation in the Clinton administration. And Geithner, as head of the New York Fed, looked the other way during Wall Street’s collapse and then responded by opening wide the spigot of taxpayer dollars to resuscitate Citigroup and AIG.

          What they wrote this week in a joint Op-Ed article in The Washington Post is a condemnation of the Wall Street shenanigans they once abetted and celebrated. I hope their apparent sudden conversion to common sense indicates the seriousness of the banking regulation plan that President Obama will present to Congress today.

          “Over the past two years, we have faced the most severe financial crisis since the Great Depression,” they wrote, placing the blame squarely where it belongs, on the unregulated derivatives markets they once gushed over. “The current financial crisis had many causes ... in the widespread use of poorly understood financial instruments, in shortsightedness and excessive leverage at financial institutions. But it was also the product of basic failures in financial supervision and regulation.”

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          What irony that Summers, who as Bill Clinton’s treasury secretary pushed through legislation guaranteeing “legal certainty for Swap Agreements” and banning the regulation of securitized mortgage debt, should now admit that “securitization led to an erosion of lending standards, resulting in market failure that fed the housing boom and deepened the housing bust.”

          According to Summers and Geithner, the Obama plan to be revealed today promises that all derivatives dealers will be “subject to supervision, and regulators will be empowered to enforce rules against manipulation and abuse.”

          If such language is ever passed into law, I hope that Brooksley Born is in the gallery and gets the standing ovation she deserves. That’s the woman who, when she headed the Commodity Futures Trading Commission, warned that the derivatives market needed to be regulated. Summers and his predecessor as treasury secretary, Robert Rubin, destroyed Born’s career because she dared to accurately predict today’s crisis.

          But better late than never, although it’s a shame that Obama’s economic whiz kids are only now getting serious about cracking down on Wall Street hustlers after first guaranteeing their toxic paper with trillions of taxpayer dollars. Nor should we assume that the Obama plan will not be subverted by the financial industry lobbyists, whose enormous campaign treasure chest, now financed by taxpayers, allows them to slice and dice congressional voting blocs the way they did subprime mortgages.

          Already there’s a joker in the deck of the Obama proposal in that it relies heavily on the Federal Reserve, which on the regional level is fully controlled by the very financial industry firms that it is expected to monitor. Summers and Geithner write that “all large, interconnected firms whose failure could threaten the stability of the system will be subject to consolidated supervision by the Federal Reserve.” Like we never heard that one before.

          Because of bad deregulation laws, those large, interconnected firms were allowed to grow to the point where their failure indeed threatened “the stability of the system.” What we need to do is return to the basic principle of the New Deal-era Glass-Steagall Act (which Clinton reversed) that broke up “too big to fail” financial conglomerates because, by definition, when such companies threaten to fail, we taxpayers are left picking up the tab.

          It was depressing that the president told The Wall Street Journal on Tuesday that he favors “a relatively light touch when it comes to the government ... in terms of financial regulation.” And that “[w]e had a regulatory system that was outdated that did not encompass the non-bank sector.”

          Nonsense. We had a regulatory system inherited from Franklin Roosevelt’s New Deal that for 60 years sustained a wall between the traditional heavily regulated banks and the non-bank hustlers on Wall Street who should have never been allowed to play their funny money games with people’s savings and home mortgages. That wall was torn down by President Clinton at the behest of Wall Street lobbyists and now must be restored if there is to be true reform. The reforms presented by Obama are an important start, but I worry they do not face up to the reality that financial conglomerates too big to fail are too big to be allowed to exist.

Click here to check out Robert Scheer’s book,
“The Great American Stickup: How Reagan Republicans and Clinton Democrats Enriched Wall Street While Mugging Main Street.”


Keep up with Robert Scheer’s latest columns, interviews, tour dates and more at www.truthdig.com/robert_scheer.



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By BobbieBoo, June 17, 2009 at 8:45 am Link to this comment

ED….  I think the “IT” you are refering to is what “IT” is they will be getting shoved up their asses while serving time in prison.  However, I’m sure they will enjoy it… at least they enjoy doing it.

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G.Anderson's avatar

By G.Anderson, June 17, 2009 at 8:29 am Link to this comment

Or is it, that since it looks like deriviative regulation is unavoidable, they’ve decided the easy way to sabotage it, is to be a part of it.

Creating Faux regulation, of which they are a part, to appease the public, yet ensure future profits for their friends, and the crooked financial industry.

Derivatives should not be regulated, they should be completed outlawed.

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By NYCartist, June 17, 2009 at 8:04 am Link to this comment

I pretty much agree with the comments.

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By coloradokarl, June 17, 2009 at 8:04 am Link to this comment

” OK Boys, go tell everyone your sorry” I try to live my life by NEVER saying “I’m sorry” The level of greed these MBA’s leveled against this great Nation is unforgivable. Using the hard earned dollars of simple Americans to “Keep score” with palaces,planes,boats and Bimbos is treason and people need to get castrated. The new wave of college grads are getting a life lesson in getting burned by their own carreer greed. Where is the Peace Corp.?, we seem to need it once again…....

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Ed Harges's avatar

By Ed Harges, June 17, 2009 at 7:57 am Link to this comment

Oh, so they “get it” now? The only “it” that these guys need to get is a long jail sentence.

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By Tokin Lib, June 17, 2009 at 7:54 am Link to this comment

Robert Reich, on TPM, yesterday, articulated three things the Govt must do. And the Geithner/Summers “Plan” does none of them.

1) Stop bankers from making huge, risky bets with other peoples’ money. 2) Prevent any bank from becoming too big to fail. 3) Root out three major conflicts of interest. (1) Credit-rating agencies should no longer be paid by the companies whose issues are being rated; they should be paid by those who use their ratings. (2) Institutional investors like pension funds and mutual funds should not be getting investment advice from the same banks that profit off their investments; the advice should come from sources without a financial stake; (3) the regional Feds that are responsible for much bank oversight should no longer be headed by presidents appointed by the region’s bankers; non-bankers should have the major say, and the regional presidents should have to be confirmed by the Senate.

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By RdV, June 17, 2009 at 6:35 am Link to this comment

To say they “get it” is much too generous when they toss the obligatory bone to keep the pack quiet.
  It has gotten so bad that this is the best we can expect?

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By Anarcissie, June 17, 2009 at 6:29 am Link to this comment

A couple of major con men now have the effrontery to openly discuss their previous con and say, “Yeah, it was a con”, while they continue to construct new cons, and this supposed to be something for us to celebrate?

“And now that your horse is gone, watch how carefully we close and lock the barn door.”

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By rbrooks, June 17, 2009 at 5:59 am Link to this comment
(Unregistered commenter)

Color me unimpressed.

Talk is cheap, especially in this administration. The DLC-heavy Obama administration has perfected the Clintonian tactic of saying one thing and doing another.

Thanks to our president, the future of our country is in the hands of men who continued the deregulation that began in the 80s, and who will profit handsomely from their “solutions” to the lawless casino they created when they leave government and return to Wall Street.

Until Obama jettisons the “experts” who helped to create the mess and replaces them with a team that listens to - better yet, contains - better yet, is headed by - economists who are actually interested in enforceable regulation, I don’t give a rat’s butt what he or any of his Wall Street stooges say about the economy.

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By truedigger3, June 17, 2009 at 5:09 am Link to this comment

Scheer wrote:
“the president told The Wall Street Journal on Tuesday that he favors “a relatively light touch when it comes to the government ... in terms of financial regulation.” And that “[w]e had a regulatory system that was outdated that did not encompass the non-bank sector.”
____________________________________________________

I am not sure what Mr. Scheer is celebrating about
team Obama?. It is the same ole same ole!!!
What did “Obama’s Economic Misfits” finally get??!!
The answer is that they didn’t get anything new.
Obama statement to WSJ proved that, and negated any
talk about any change , no matter how small, by Geithner and Summers.
Is Scheer another mouth-piece and bullshit artist
for “team Obama”??!!

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By Jason!!, June 17, 2009 at 5:01 am Link to this comment

First time he acknowledged that Clinton era policies and cronies caused this whole mess.

But its all after the fact - They stole all the money. Where are the prosecutions? Who is taking back some of the Clintons ill gained fortune?

Just think of the massive scams and thefts Obama is enabling with his cronies and policies…

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By ardee, June 17, 2009 at 4:56 am Link to this comment

I am in complete agreement with the doctor that these two must go. Further, Obama has given ample evidence that he is not the man to address this economic meltdown and theft of our nations assets. He is far, far too beholden to the same financial community that caused the mess and are still in charge even now.

Ultimate responsibility lies , as it always has, with the people of this nation. How bad are things going to have to get before we the people understand how deeply subverted is our governance?

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thebeerdoctor's avatar

By thebeerdoctor, June 17, 2009 at 4:28 am Link to this comment

Robert Scheer goes much too easy on these clowns. From the Washington Post (absolution) piece, Summers and Geithner write: “The goal is to create a more stable regulatory regime that is flexible and effective”. That sounds like Rome, circa 1936. With Obama enabling these creeps to continue, the economic mess he inherited is now his economic mess, which is the same concerning the Democrats with their additional $106 billion funding of the wars. The wars that Obama inherited are most certainly His Wars Now.

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By Lester, June 17, 2009 at 4:22 am Link to this comment
(Unregistered commenter)

We have always known these two are either incompetent or simply bastards that should be banned from earning a living for life.

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