Obama Turns The Page Backwards

The Nation: He Has Signaled A Return To The Clinton Presidency And A Continuation Of The Failed Policies Of President Bush

(The Nation)  This column was written by William Greider.

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A year ago, when Barack Obama said it was time to turn the page, his campaign declaration seemed to promise a fresh start for Washington. I, for one, failed to foresee Obama would turn the page backward. The president-elect's lineup for key governing positions has opted for continuity, not change. Virtually all of his leading appointments are restoring the Clinton presidency, only without Mr. Bill. In some important ways, Obama's selections seem designed to sustain the failing policies of George W. Bush.

This is not the last word and things are changing rapidly. But Obama's choices have begun to define him. His victory, it appears, was a triumph for the cautious center-right politics that has described the Democratic party for several decades. Those of us who expected more were duped, not so much by Obama but by our own wishful thinking.

Let us stipulate that these are all honorable people, smart and experienced veterans of Washington combat. But they represent the Democratic party that mainly sees itself as managerial--making government work better. The long era of conservative dominance has taught them to keep their distance from big reform ideas that promise fundamental change of the system. Their operating style is incremental and cautiously practical. They conscientiously avoid (or actively block) propositions that sound too liberal or radical. Alas, Obama is coming to power at a critical moment when incrementalism is irrelevant. The system is in collapse. Financial chaos won't wait for patient deliberations.

Events have confronted Obama with a fearful symmetry between past and present, illustrated by his choice of economic advisers. On Friday, we learned that Timothy Geithner, president of the New York Federal Reserve, would become his new treasury secretary and Larry Summers, who held the same position in the Clinton administration, would be the White House overseer of economic policy. On Monday, Geithner was busy executing the government's massive rescue of Citicorp--the very banking behemoth that Geithner and Summers helped to create back in the Clinton years, along with Federal Reserve chairman Alan Greenspan and Robert Rubin, Clinton's economics guru. Now Rubin is himself a Citicorp executive and his bank is now being saved by his old protégé (Geithner) with the taxpayers' money.

The connections go way beyond irony. They raise very serious questions about where the new president intends to lead and whether he has the nerve to break from the weak and haphazard strategy of the Bush administration. It has dumped piles of public money on the largest financial institutions and demanded little or nothing in return, hoping for the best. Geithner has been a central player in the deal-making, from Bear Stearns to AIG to Citi. The strategy has not only failed, it has arguably made things worse as savvy market players saw through the contradictions and rushed out to dump more bank stocks.

On Wall Street, Geithner is known as a highly competent technocrat, well versed in the financial complexities. But he has also been seen as a weak and compliant regulator of Wall Street firms, someone who did not seem the storm coming. Occasionally, Geithner would anguish publicly about the accumulating time bombs like credit derivatives and urge bankers to do something, but he did not use his supervisory powers to compel action. In bailout negotiations with Wall Street titans, Geithner and the Federal Reserve were spun around like a top more than once.

No wonder the stock markets rallied explosively when they heard Geithner would be their new boss in Washington. They think he is their guy. Summers may be a brilliant economist--everyone says so--but he, too, is a club member in good standing and now manages a huge hedge fund while he advises Obama. The president-elect needs to get a "second opinion"--someone from outside the financial club who can explain the flaws in the rescue strategy preached by Bush's treasury secretary Henry Paulson and Tim Geithner at the New York Fed.

Their approach has clearly been designed to preserve what's left of the Wall Street establishment and maintain the supremacy of the largest financial firms while the taxpayers pick up their losses. That model has failed and too many smart people know why. The bailouts have been too little too late and aimed at an impossible objective--persuading private capital investors to believe in the phony assurances proffered by the bankers. AIG, the insurance giant taken over by the feds, has turned into a bloody hemorrhage. Citigroup will be another and may soon be joined by other major banks demanding the same favorable terms. Wasting more public money on insolvent mastodons is the least of it. The real scandal is it doesn't work. It can't work because the black hole is too large even for Washington to fill. Government should take over the failing institutions or force them into bankruptcy, break them up and sell them off or mercifully relieve everyone, including the taxpayers.

Stock markets rallied again with the salvage of Citigroup. But not everyone in Wall Street was cheering. Christopher Whalen of Institutional Risk Analytics, the bank monitoring firm that has repeatedly been right about the banks when the government officials were wrong, had harsh words for the deal. "Pretending that Citi is going to be a going concern I think is silly," Whalen said. "We should be thinking about breaking this company up and redistributing the assets into stronger hands."

Will Timothy Geithner or Larry Summers advise the next president to face reality and throw in the towel? One hopes so, because Whalen warns: "By embracing Geithner, President-elect Obama is endorsing the ill-advised scheme to support AIG directed by Hank Paulson et al at Goldman Sachs and executed by Tim Geithner.... This scheme to stay AIG's resolution cannot possibly work and, when it does collapse, Barack Obama and his administration will wear the blame."

Barack Obama is too smart and perceptive to let this happen to his yet-unborn presidency. Maybe he should find out what Whalen knows.

[actornaught]

There was never an Obama Recession, inspite of how many times rush lunkhead and his fellow Lying Point parrots try to repeat it. What they were talking about should''ve been called the Unknown Recession, since that''s what the Market Manipulators were really afraid of.

BUT, the bit of improvement we''re seeing now CAN be accurately called the Obama Recovery, since BO has decided quite effectively to remove some of the Unknown.

So how much have rush & hannity been talking about the Obama Recovery?

[bjcone8559]

Obama is bringing in ''those who know''. If I am given a management position because I know the ''ins-and-outs'' of the business and the CEO says ''Do This''... I may not agree that ''this'' should be done, but, I am one of the few who knows how to do it. You people need to calm down. Finally, we have a real leader. Just watch.

[standlee5]

He is a surrogate Bill Clinton and it makes you wonder if this was the plan all along. It''s Bill''s third term and Hillary was just a distraction so obama could slide under the radar of media scrutiny.

[element51]

Quite a diversity of opinion in the room. It seems that about half are supportive of Obama and want to see the country improve and the other half want to see him fail miserably and for the country to totally go down the tubes. It is odd to me that so many actually want Obama to fail. Why would anyone want to see the country destroyed? What would they be saying if McCain had won and was doing basically the same thing? It also seems odd that they have deemed Obama a failure before he is even sworn in. And since Bush is still president, where is he? What is he doing to try to help solve the problems? I have no doubt that the Obama bashers on here will have answers to all the questions I have posed. It will be interesting to see what kind of insults and hate comments they come up with.I suggest that we put aside all this sour grapes ***** and hope that things will improve. After all, it''s in all our best interest for things to get better.

[frb01]

I see a whole bunch of different voices in the room, people like Warren Buffet, Paul Volcker and the like. I don''t see a team Clinton revisited, and what other choice is there, bring in a totally inexperienced group like Carter did?

[onarollagain]

As we get closer and closer to inauguration day, I am more and more thankful that I was one of the 48% of Americans that saw through the rhetoric and saw the shallow man who now is not following through with anything he has promised...same old Washington; he can''t bring all the troops home in 16 months because Iraqi parliament has more sense than he does and adopted a more reasonable plan for full withdrawal in 2011..hurray for the Bush victory in Iraq. Just wait until obama reneges on his tax plan and nnounces there will be no tax cuts, there will be no increase tax on the wealthy, there will be no increase on capital gains...Wall Street will rebound faster than in fell when eveyone pulled out after Obama was elected. He has to do it and I am going to laugh all the way to the bank.

[wardoglrs]

Americans are truly the most ignorant people on the planit

[bobgee_1999]

The Conservatives, predictably, have already started attacking Obama -- who hasn''t even assumed office yet -- of being too Liberal. Now the Liberals are attacking Obama for being too Conservative.

Well, good. If he''s pissing off both extremes, then maybe he''ll actually accomplish something.

[mitch5511]

This opine is a bit premature. Obama hasn''t even been sworn into office yet. Just because some of the old Clintonites are being selected doesn''t mean a *** thing. Obama''s directives are what they will have to obey.

Just take a deep seat and a faraway look. K?

[ddaryl1]

anyone who thinks Bush was better, or actually did anything right is a FOOL.

a rotting carcas would be better then Bush