Stating the obvious six months after the fact, the NYT tells America that Paul Volcker's not being listened to, splashing on today's front page, "Volcker Fails to Sell a Bank Strategy."
The aging (82 years old), giant (6-7) former Fed chairman was marginalized months ago by Barack Obama, relegated to do-nothing, dog-and-pony panel called the President's Economic Recovery Advisory Board.
Volcker's voice — particularly his view that the megabanks be reined in from their risky behavior — was drowned out way early this year by the nattering of Larry Summers, the current administration's version of Karl Rove. (See my "Obama de-regulates Larry Summers, reins in Volcker," March 26.)
Polls are usually bullshit, but people pay attention to them. The public is the last group of people to know what kind of health-care bill will emerge from Congress and the White House. Fact is that some kind of change will be made, has to be made. Whether it turns out to be "reform" is another matter. Intensive lobbying for the insurance industry and Big Pharma make that an almost impossible task, as this story doesn't note.
FDIC Chair Sheila Bair was already marginalized by the Obama Administration — despite the curious fact that she's pursued a more progressive and people-friendly agenda than the yes-we-can president has. Compared with Obama's conservative aides Larry Summers and Tim Geithner, Bair's out in left field. And now, with her op-ed in the yesterday's Times ("The Case Against a Super-Regulator"), Bair just has to be headed for a permanent benching.
Why the American Prospect's Tim Fernholz calls Bair's op-ed "opaque" is opaque to me. Bair is pretty clear in her criticism of giving the Fed all-encompassing power. But where she really hits home is when she pins the blame for the Wall Street meltdown on the big banks. (No wonder the administration doesn't want her to have any hand in regulating the big banks.) Bair, a former aide to Bob Dole, comes straight out with it:
The principal enablers of our current difficulties were institutions that took on enormous risk by exploiting regulatory gaps between banks and the nonbank shadow financial system, and by using unregulated over-the-counter derivative contracts to develop volatile and potentially dangerous products.
That's the problem, all right, but Bair isn't just rehashing. Her fear is that a super-regulator would focus on just the biggest banks and that would mean even more consolidation in the banking industry.
Progressive outlets keep wailing at Obama with suggestions to do this and that. They haven't realized that the Obama economic crew (especially Summers and Geithner) is hardly an improvement over Henry Paulson. Bair has at least been consistent. She started shouting into the wind last October against Paulson's bailout plan with her cries for social welfare over corporate welfare:
"Why there's been such a political focus on making sure we're not unduly helping borrowers but then we're providing all this massive assistance at the institutional level, I don't understand it. It's been a frustration for me."
Climate-change activists are parading in front of the Brandenburg Gate today as German Chancellor Angela Merkel flies off to D.C. for talks with President Barack Obama.
More to the point, the German press's love affair with Obama has definitely cooled. Der Spiegel has no qualms about pinning the donkey's tail on Obama, doling out harsh criticism of U.S. economic policies in "German Chancellor Visits the Debt President."
"The president may have changed, but the excesses of American politics have remained, the German mag's Gabor Steingart writes. "Barack Obama and George W. Bush, it has become clear, are more similar than they might seem at first glance."
Yikes.
Obama even has his own Dick Cheney, Steingart contends:
Obama's Cheney is named Larry Summers. He is Obama's senior-most economic advisor, and like the former vice president, he is a man of conviction. The financial crisis may be large, but Summers' self-confidence is even larger. More importantly, President Barack Obama follows him like a dog does its master.
Obama and Merkel disagree not only about how to quell the global economic crisis but also on Germany's role in fighting the Afghan War.
Merkel may be grandstanding a little when it comes to her criticism of the U.S.'s trying to spend its way out of the recession; she faces an election this fall and wants to look tough, as the AP and other U.S. outlets note.
But she and many other European leaders no doubt are miffed by such episodes as one that Steingart's story points out:
The crisis, Summers intoned last week at a conference of Deutsche Bank's Alfred Herrhausen Society in Washington, was caused by too much confidence, too much credit and too many debts. It was hard not to nod along in agreement.
But then Summers added that the way to bring about an end to the crisis was -- more confidence, more credit and more debt. And the nodding stopped. Experts and non-experts alike were perplexed. Even in an interview following the presentation, Summers was unable to supply an adequate explanation for how a crisis caused by frivolous lending was going to be solved through yet more frivolity.
Steingart isn't laughing. He goes on to list what he calls the "Obama administration's five errors." All of them revolve around our spending money we don't have.
The competition's stiff, because inevitably a new president will wind up appointing a number of stiffs to important jobs. But here are four losers who currently lead the list of President Barack Obama's worst hires:
Larry Summers: Head of Obama's National Economic Council, Summers was a key figure during the Clinton Era in the dismantling of the Glass-Steagall Act. A stalwart friend of big banks, the former Harvard prexy is said to be very smart. So are a lot of schnooks.
Steve Rattner: Head of Obama's auto task force, the investment banker gets this appraisal from a fresh Wall Street Journal story: "No one has played a more central or contentious role in the auto bailout." Rattner's also an investor in Cerberus, the hedge fund that used to operate Chrysler. Not much of a conflict of interest there. Rattner's also the founder of Quadrangle, one of the hedge funds caught up in the pension-fund scandal.
Tim Roemer: Obama's new ambassador to India is a raving anti-environmentalist cloaked as a "moderate Democrat." He's a "distinguished scholar" at the Mercatus Center, the most hardline and notorious anti-environmentalist and anti-regulation agitprop mill in D.C. Mercatus was the Bush White House's chief engineer in rolling back health, safety, and other regulations — kind of the Anti-EPA, if you will.
Tim Geithner: The Treasury Secretary was head of the New York Fed during last year's meltdown and somewhat astoundingly was hired by Obama. No Republican president could have appointed a Treasury secretary friendlier to Wall Street's investment bankers than Geithner. Check out Geithner's inner circle and you have to wonder how he wound up in Obama's.
I must have been really naive to think that Larry Summers wouldn't win a power struggle with Paul Volcker.
During the Clinton Administration, Summers was hot enough to melt down Glass-Steagall, the Depression Era law that kept Wall Street schemers from forming trusts and banks from getting into the securities business.
You know, the law that would have prevented the current overall meltdown and the kind of regulation that former Fed chair Volcker has been pushing for.
So why are Summers and his fellow non-regulator, investment banker Robert Rubin, Barack Obama's golden boys while Volcker's influence is waning?
Over at MonkeyBusinessBlog, Eric Salzman admits he has a "man-crush" on Volcker but then gets serious about the aged Volcker's being taken off the front lines and sent back home to work on "tax reform":
Sending Volcker to go work on taxes for the rest of the year, right after he seemingly disagreed with the Administration over the timing of regulatory reform, smells to me that Larry Summers threw a hissy fit and told the president that he wasn't going to play in the sandbox anymore with Mr. Volcker. Additionally, Mr. Volcker's comments about bringing back Glass-Steagall had to chaff Dr. Larry's butt. Why can't Summers go and do the tax thing? It sounds perfect for him. An academic circle-jerk. Meanwhile, real work needs to be done by real people that have actually solved an economic crisis before. Mr. Volcker is one of the few individuals we have that can lay that claim. Unfortunately, President Obama seems to be making the wrong personnel choice.
If there are fairly clear results in the next few weeks from Treasury Secretary Tim Geithner's latest plans to re-boot the markets, and those results are bad, maybe he'll be forced to exit.
And maybe Larry Summers, chair of the National Economic Council, will ascend to the forefront, which is where he wanted to be all along. Now that Geithner is under fire from all sides, the power struggle between the two has taken a quick turn in Summers's favor. Even this early into Barack Obama's regime, Obama's team is splintering. That could have something to do with this little thing that is a global financial crisis, but still ...
Over at Economic Principals, David Warsh has a lively, shrewd take on Summers, the ex-president of Harvard. Summers is a guy with a sparkling resume who's left wreckage just about everywhere he's been.
It's as good a time as any, though, to review why Geithner is at the Treasury and Summers is not. Exhibit A is the Harvard Russia scandal — a chain of events that played a key role in Summers' dismissal from the Harvard presidency.
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