All Blog Posts from Econwatch

This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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Dressing up executive compensation as the salvation of regulatory reform is the best Halloween costume of the year.


Limiting executive compensation is a terrific way to appease the masses and make it look like you're doing something without having to embark on the hard work of true regulatory reform. Of course it bugs us to watch Wall Street honchos going back to business as usual, but let's not take our eyes off the ball here - there are lots of scary issues that need attention and I'm not sure compensation tops the list.

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This post by Jill Schlesinger originally appeared on CBS' MoneyWatch.com.

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Why is everyone surprised to learn that Treasury Secretary Timothy Geithner's speed dial is filled with Wall Street CEOs? Even before the financial crisis, when he was running the New York Fed, Geithner was delighted to act as the nerdy wanna-be for the exclusive power club, garnering invitations to corporate dining rooms from his former mentors.


In fact, Geithner was chosen as Treasury Secretary precisely because he was wired into the big banks. There's a reason that Wall Street cheered his nomination to the post. For all of its talk about change, the Obama Administration is filled with recycled Clintonistas, like Geithner and Lawrence Summers, who were at the forefront of deregulation.

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With Federal Reserve Chairman Ben Bernanke's term expiring in January, the White House faces a big decision on whether to reappoint him.

Bernanke has taken hits among lawmakers for his handling of the federal bailout of the financial system, but he's enjoying solid support on Wall Street, according to a Wall Street Journal report Thursday ($).

Forty-three of 46 private sector economists support Bernanke's reappointment, according to a Journal poll, though some polled noted his decisions have not been flawless.

Bernanke supporters cite his bipartisan efforts to lift the country out of a severe financial crisis as well as a desire not to "change horses midstream." But his reappointment will require Senate confirmation, where he's drawm criticism from key figures on both sides of the aisle.

So as President Obama considers Bernanke's future, the Journal looked at some possible alternatives:

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While the U.S. economy is showing some "glimmers of hope," as President Obama likes to say, the end of the downward spiral is not in sight.

Speaking on NBC's "Meet the Press" yesterday, White House Director of the National Economic Council Lawrence Summers said that despite mixed statistics after a period with no positive data, the economic recovery is "a long road and it is going to take time."

Mr. Obama has made similar comments at a speech on April 14 at Georgetown University, saying that "by no means are we out of the woods."

Summers pointed to the efforts of the Obama administration in nearly 100 days in office to get the economy back on track. Long term, the country needs a less leveraged economy, he said, with a much better regulatory financial system; a culture of savings and elimination of marketing credit in ways that addict people to it; and getting the government back to the place it had in the 1990s, when it was a contributor rather than a drain on the economy.

But Summers cautioned, "We can't know with certainty what is going to happen next."

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While the U.S. economy is showing some "glimmers of hope," as President Obama likes to say, the end of the downward spiral is not in sight. Speaking on NBC's "Meet the Press," director of the National Economic Council Lawrence Summers said that despite mixed statistics after a period with no positive data, the economic recovery is "a long road and it is going to take time." Mr. Obama made similar comments at a speech on April 14 at Georgetown University, saying that "by no means are we out of the woods."

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The Washington Post has reported on the healthy 2008 earnings of some of President Obama's top advisors, including Lawrence Summers, chairman of the National Economic Council.

Summers, one of the principle architects of the economic recovery plan, took home $5.2 million from D.E. Shaw, a hedge fund in which he was a managing director, and $2.7 million in speaking fees from several financial companies that received TARP government bailouts.

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Speaking at the Brookings Institute today, Lawrence Summers, Director of the White House National Economic Council, said that Treasury Secretary Timothy Geithner is dealing with the economic crisis in a "difficult and courageous way."

“The easy thing to do would be to lay out a nine point plan with the illusion of specificity and a sense of certainty of what the future would bring," Summers said. “We saw a half a dozen from the previous administration....it's just that they were different each month."

Summers, a former Treasury Secretary himself, continued, "Our approach is based on deeds and not words." He said that the Obama administration's approach is based on laying out a framework and recognizing the complexity of the problems, such as the inter-linkage between the toxic assets of the banks and capital markets.

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Lawrence Summers, Director of the White House National Economic Council, at left, gave a speech at the Brookings Institution in Washington this morning detailing why the economic crisis started and defending the Obama administration's strategy for combating it.

As for the cause, Summers said the recession came from the "spontaneous correction of financial excesses."

He then threw out some staggering numbers about how bad things have gotten.

"On a global basis, $50 trillion dollars in global wealth has been erased over the last 18 months. This includes $7 trillion dollars in US stock market wealth which has vanished, and $6 trillion dollars in housing wealth that has been destroyed," he said. "Inevitably, this has led to declining demand, with GDP and employment now shrinking at among the most rapid rates since the second World War."

Summers, the former Treasury Secretary under President Clinton and former president of Harvard University, was professorial in describing the crisis and relating it to prior downturns. But to boil things down, he said it comes down to an "abundance of greed and an absence of fear on Wall Street" that led to the bubble. The recession and crisis were in turn caused by the reverse of that.

"In the past few years, we’ve seen too much greed and too little fear; too much spending and not enough saving; too much borrowing and not enough worrying. Today, however, our problem is exactly the opposite," Summers said. "It is this transition from an excess of greed to an excess of fear that President Roosevelt had in mind when he famously observed that the only thing we had to fear was fear itself. It is this transition that has happened in the United States today."

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The White House has some economic advice for the rest of the world – spend, spend, spend.

Larry Summers, President Barack Obama's top economic adviser, is urging world leaders to increase public spending in hopes that a coordinated increase of global demand will lay the groundwork for an economic recovery, reports the Financial Times.

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