Just this morning, I sent a message to Chuck Schumer, reminding him that Larry Summers bore significant responsibility for the crisis of 2008. Summers was one of the great champions of bank deregulation during the Clinton administration, and we all know where that got us.
Thanks to a few Democratic senators not attached by an umbilicus to Wall Street (Schumer not among them), it seems Larry got a little nervous. He's not accustomed to rejection, and doesn't handle it well. Anyway, I'm especially glad the next Fed chair is likely to be Janet Yellen. According to Larry, girls don't do math.
If Barack picks that other "potential," whose name I can't remember now, I hope Michelle gets Barack alone in some remote room in the White House (the Fillmore room?) and beats his ass. I don't support Yellen because she's a woman, but because she will provide the kind of continuity we need to get out of our current mess. I hope she will lead in establishing some regulations Bernanke thought were out of reach, without throwing everything out of kilter.
Can the Fed address income inequality? Really, I don't see how. That's Congress's job, and the "People's House," like the people, are mostly assholes. (By the way, the three most assaholic members of the House were in Egypt last week, blaming the Muslim Brotherhood for 9/11. The people who vote for Louie Gohmert, Michelle Bachman, and Steven King, in my opinion, are excellent arguments against representative democracy.)
Showing posts with label Larry Summers. Show all posts
Showing posts with label Larry Summers. Show all posts
Sunday, September 15, 2013
Tuesday, September 21, 2010
Summers's gone!
Larry Summers, Robert Rubin protégé and unrepentant free-marketeer, has announced his resignation from the Obama Administration, effective shortly after the midterm elections.
“I will always be grateful that at a time of great peril for our country, a man of Larry’s brilliance, experience and judgment was willing to answer the call and lead our economic team. Over the past two years, he has helped guide us from the depths of the worst recession since the 1930s to renewed growth. And while we have much work ahead to repair the damage done by the recession, we are on a better path thanks in no small measure to Larry’s wise counsel," said Our President, fingers crossed behind his back.
According to the Wall Street Journal, Summers is leaving because he is approaching the end of a two-year leave of absence from Harvard, and if he doesn't go back by January he loses his tenure. Maybe they have it right. Given the attitudes of Harvard women, without tenure he just might be be joining the other 14.9 million unemployed Americans.
Also according to WSJ, his most likely replacement will be Anne Mulcahy, the recently retired CEO of Xerox. She is credited with "saving" the corporation by, among other things, cutting 30% of its workforce — but perhaps, as a more "hands on" executive type, she will turn out to be less ideological than her predecessor.
Needless to say, I'm not at all sorry to see Summers go. That leaves Timmy Geithner as the sole survivor of the original Obama economic team, so maybe he'll be "resigning" soon too. How much difference will the changes make? It's hard to say. Elizabeth Warren's appointment offers some room for hope, but I still can't imagine our next Treasury Secretary being Robert (the right Bob) Reich or Joseph Stiglitz. Too bad.
“I will always be grateful that at a time of great peril for our country, a man of Larry’s brilliance, experience and judgment was willing to answer the call and lead our economic team. Over the past two years, he has helped guide us from the depths of the worst recession since the 1930s to renewed growth. And while we have much work ahead to repair the damage done by the recession, we are on a better path thanks in no small measure to Larry’s wise counsel," said Our President, fingers crossed behind his back.
According to the Wall Street Journal, Summers is leaving because he is approaching the end of a two-year leave of absence from Harvard, and if he doesn't go back by January he loses his tenure. Maybe they have it right. Given the attitudes of Harvard women, without tenure he just might be be joining the other 14.9 million unemployed Americans.
Also according to WSJ, his most likely replacement will be Anne Mulcahy, the recently retired CEO of Xerox. She is credited with "saving" the corporation by, among other things, cutting 30% of its workforce — but perhaps, as a more "hands on" executive type, she will turn out to be less ideological than her predecessor.
Needless to say, I'm not at all sorry to see Summers go. That leaves Timmy Geithner as the sole survivor of the original Obama economic team, so maybe he'll be "resigning" soon too. How much difference will the changes make? It's hard to say. Elizabeth Warren's appointment offers some room for hope, but I still can't imagine our next Treasury Secretary being Robert (the right Bob) Reich or Joseph Stiglitz. Too bad.
Friday, September 3, 2010
I Like Reich
In his op-ed piece in today's New York Times, Robert Reich did something that always makes me happy — he agreed with me. Look back one posting to this blog and you will observe that I attributed our current economic woes to "the gap between the rich and the rest of us." Reich goes into the subject in depth, tracks the history of the gap, and offers some very constructive ideas for reducing its size. I consider Reich's article required reading for anybody who really wants to understand what happened to our economy and what should be done to repair it.
As I have observed in the past, Obama picked the "wrong Bob" to form his economic policy team — Rubin rather than Reich. Both served in the Clinton administration, although Rubin was far more influential even back then. Back in April, I referred to Rubin acolytes Geithner and Summers as "zombie slaves of the financial industry." Both seem to have been gnawing a very little bit at their marionette strings (please excuse my mixed metaphors) but, sadly, cognitive dissonance makes it impossible for either one to abandon faith in the infallibility of markets and embrace genuine change.
Minority leader John Boehner says Obama should fire Geithner and Summers. I agree, but feel quite confident we would disagree on the matter of potential replacements. I like Reich.
Our President, adhering to the Bill Clinton school of politics (possibly including loss of Congress at the midterm), persists in striving for "moderation," and continues to make me feel ill. He seems to have made Peter Orszag and Christina Romer feel ill as well, by ignoring their advice and sticking with Summers (read Rubin.) While I would love to have Elizabeth Warren as head of the new consumer protection agency, if she even is nominated to the position by Obama, I promise to risk lower back injury by posting a picture of myself with my foot in my mouth. Our President is far too cowardly to endorse any policy radical enough to make a real difference, so nothing much is likely to happen until 2012.
Anyway, read Reich's analysis, and think about his proposals. The man makes a hell of a lot of sense.
As I have observed in the past, Obama picked the "wrong Bob" to form his economic policy team — Rubin rather than Reich. Both served in the Clinton administration, although Rubin was far more influential even back then. Back in April, I referred to Rubin acolytes Geithner and Summers as "zombie slaves of the financial industry." Both seem to have been gnawing a very little bit at their marionette strings (please excuse my mixed metaphors) but, sadly, cognitive dissonance makes it impossible for either one to abandon faith in the infallibility of markets and embrace genuine change.
Minority leader John Boehner says Obama should fire Geithner and Summers. I agree, but feel quite confident we would disagree on the matter of potential replacements. I like Reich.
Our President, adhering to the Bill Clinton school of politics (possibly including loss of Congress at the midterm), persists in striving for "moderation," and continues to make me feel ill. He seems to have made Peter Orszag and Christina Romer feel ill as well, by ignoring their advice and sticking with Summers (read Rubin.) While I would love to have Elizabeth Warren as head of the new consumer protection agency, if she even is nominated to the position by Obama, I promise to risk lower back injury by posting a picture of myself with my foot in my mouth. Our President is far too cowardly to endorse any policy radical enough to make a real difference, so nothing much is likely to happen until 2012.
Anyway, read Reich's analysis, and think about his proposals. The man makes a hell of a lot of sense.
Wednesday, April 28, 2010
13 Bankers
I just finished reading Simon Johnson and James Kwak's 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. It provides the most cogent narrative of events that led to the crisis in finance, the crisis itself, and the responses of those in power. There is plenty of blame to go around: Ronald Reagan, Phil Gramm, Bill Clinton, Robert Rubin, Alan Greenspan, both Bushes, and an host of other government figures who bought into the myth of the "efficient market hypothesis," as well as those ruthless sons of Moloch who created the complex financial instruments that maximized the profits of megabanks while destabilizing the world's economies.
Johnson and Kwak are much nicer to Barack Obama than I think warranted, perhaps because they want to persuade him that the regulatory reform bills currently struggling through Congress are inadequate, and that he should really be thinking ahead to breaking up the banks that are "too big to fail." They attribute his timidity to being part of (and entirely surrounded by) the New York—Washington mindset that maintains that bigger is better, not to having been co-opted by the big bucks banks have thrown his way.
Maybe they're right, or maybe they just have some compunction against saying that the President of the United States is a pawn of the oligarchs. Me, I have no such compunction: the President of the United States is a pawn of the oligarchs. There. I said it.
Obama is not a stupid man, and even with Geithner and Summers talking into both his ears at once, he should be able to figure out that "too big to fail" is "too big to exist." Hell, even Alan Greenspan, despite what had to be major cognitive dissonance, came around to that point of view. As anybody who's been paying attention understands — including, of course, the bankers — the megabanks have an implicit government guarantee, just by virtue of their size and systemic importance. That is the only reason they can borrow at significantly lower interest than smaller banks — a fact that should be obvious to all.
Wall Street, naturally, has its knickers in a twist over the very limited reforms the Democrats are trying to enact, and is very likely to shift major chunks of its political contributions over to the Republicans — who remain stubbornly opposed to government doing anything at all. Will that be enough to persuade Obama to stop licking their $2000 shoes, and get serious?
Certainly not until his second term — if he gets one.
.....(later the same day).....
Okay, maybe he's not a total pawn — maybe he's just doing his usual "splitting the difference" routine. Halfway between doing nothing (as the bankers would prefer) and the right thing (breaking up the megabanks into smaller units that could be allowed to fail) is the usual, half-assed, universally unsatisfying compromise. That's what we got for health care, and that's what we'll get for financial reform.
So maybe he's not that much a pawn of the banks. Maybe he's just a pussy with no strong beliefs at all — a pussy who wants to be loved and/or re-elected.
Whatever. If it happens to be respect he wants, he's not getting any from me.
Johnson and Kwak are much nicer to Barack Obama than I think warranted, perhaps because they want to persuade him that the regulatory reform bills currently struggling through Congress are inadequate, and that he should really be thinking ahead to breaking up the banks that are "too big to fail." They attribute his timidity to being part of (and entirely surrounded by) the New York—Washington mindset that maintains that bigger is better, not to having been co-opted by the big bucks banks have thrown his way.
Maybe they're right, or maybe they just have some compunction against saying that the President of the United States is a pawn of the oligarchs. Me, I have no such compunction: the President of the United States is a pawn of the oligarchs. There. I said it.
Obama is not a stupid man, and even with Geithner and Summers talking into both his ears at once, he should be able to figure out that "too big to fail" is "too big to exist." Hell, even Alan Greenspan, despite what had to be major cognitive dissonance, came around to that point of view. As anybody who's been paying attention understands — including, of course, the bankers — the megabanks have an implicit government guarantee, just by virtue of their size and systemic importance. That is the only reason they can borrow at significantly lower interest than smaller banks — a fact that should be obvious to all.
Wall Street, naturally, has its knickers in a twist over the very limited reforms the Democrats are trying to enact, and is very likely to shift major chunks of its political contributions over to the Republicans — who remain stubbornly opposed to government doing anything at all. Will that be enough to persuade Obama to stop licking their $2000 shoes, and get serious?
Certainly not until his second term — if he gets one.
.....(later the same day).....
Okay, maybe he's not a total pawn — maybe he's just doing his usual "splitting the difference" routine. Halfway between doing nothing (as the bankers would prefer) and the right thing (breaking up the megabanks into smaller units that could be allowed to fail) is the usual, half-assed, universally unsatisfying compromise. That's what we got for health care, and that's what we'll get for financial reform.
So maybe he's not that much a pawn of the banks. Maybe he's just a pussy with no strong beliefs at all — a pussy who wants to be loved and/or re-elected.
Whatever. If it happens to be respect he wants, he's not getting any from me.
Tuesday, April 20, 2010
Financial regulation
On health care, the Obama administration sat back and waited for Congress to come up with something — anything. On financial regulation, the bill came straight from the administration, and it sailed right through the House.
Obama, as I've noted in the past, picked the wrong Bob — Rubin, rather than Reich. That left us with Geithner and Summers, zombie slaves of the financial industry. I'd feel a lot happier about the package from the White House if it had been written by people less ideologically committed to Wall Street. When a bill starts out weak, it only can end up as an even weaker law.
Oddly enough, I find myself in agreement with the likes of Richard Shelby and John Cornyn on at least one point: it is time to revisit the 1995 repeal of Glass-Steagall, one of the most unfortunate legacies of Robert Rubin's time in the Clinton administration. Commercial banks and investment banks should, once again, be separate — if for no other reason than to reduce the overall size of the largest institutions. Even if that were done, though, there are some institutions which would need further whittling down to ensure that there no longer are any that are "too big to fail."
At this time, the biggest banks have an unfair competitive advantage over smaller banks, in that they can borrow money at lower rates. They get those lower rates because it is assumed that government will not allow them to fail, no matter what pledges come out of Congress and the White House — and they use their surplus profits not to invest in productive businesses, but to place bets in the high-stakes casino Wall Street has become over the past fifteen years.
I can see absolutely no reason for synthetic CDOs to exist. They are nothing but side bets on real economic activity, but bets large enough to disrupt the financial system and create crises. Credit default swaps on synthetic CDOs were a large part of what brought down AIG, and made its government bailout necessary. If the very rich want to make bets on whether bonds they don't own will or will not default, let them open their own betting parlor and gamble with their own money — not with our pension funds.
Other derivatives must be openly traded, on an exchange like the one provided for in the bill now before the Senate Agriculture Committee, but with no exceptions for companies that are particularly large or well-connected. Markets cannot operate properly when they operate in secret.
Naturally, I don't expect much of the current effort to improve financial regulation, but hope it might be a step in the right direction. Yes, my fingers are crossed — but I'm not holding my breath.
Obama, as I've noted in the past, picked the wrong Bob — Rubin, rather than Reich. That left us with Geithner and Summers, zombie slaves of the financial industry. I'd feel a lot happier about the package from the White House if it had been written by people less ideologically committed to Wall Street. When a bill starts out weak, it only can end up as an even weaker law.
Oddly enough, I find myself in agreement with the likes of Richard Shelby and John Cornyn on at least one point: it is time to revisit the 1995 repeal of Glass-Steagall, one of the most unfortunate legacies of Robert Rubin's time in the Clinton administration. Commercial banks and investment banks should, once again, be separate — if for no other reason than to reduce the overall size of the largest institutions. Even if that were done, though, there are some institutions which would need further whittling down to ensure that there no longer are any that are "too big to fail."
At this time, the biggest banks have an unfair competitive advantage over smaller banks, in that they can borrow money at lower rates. They get those lower rates because it is assumed that government will not allow them to fail, no matter what pledges come out of Congress and the White House — and they use their surplus profits not to invest in productive businesses, but to place bets in the high-stakes casino Wall Street has become over the past fifteen years.
I can see absolutely no reason for synthetic CDOs to exist. They are nothing but side bets on real economic activity, but bets large enough to disrupt the financial system and create crises. Credit default swaps on synthetic CDOs were a large part of what brought down AIG, and made its government bailout necessary. If the very rich want to make bets on whether bonds they don't own will or will not default, let them open their own betting parlor and gamble with their own money — not with our pension funds.
Other derivatives must be openly traded, on an exchange like the one provided for in the bill now before the Senate Agriculture Committee, but with no exceptions for companies that are particularly large or well-connected. Markets cannot operate properly when they operate in secret.
Naturally, I don't expect much of the current effort to improve financial regulation, but hope it might be a step in the right direction. Yes, my fingers are crossed — but I'm not holding my breath.
Friday, January 22, 2010
Enough?
Let's hope so.
It seems that Rahm and I think alike — well, not that much alike, but enough so that Our President, yesterday, came out with what I asked for on Wednesday. Obama now appears to be an an anti-big-bank populist — and please note the emphasis on the word "appears."
The official story is that Summers and Geithner were working on it — under the genial and gerontological guidance of Paul Volcker — for months. Yeah, right. If they'd actually believed in restraining the banks, you'd think they might have gotten it out before they lost Vote Number 60 in Massachusetts. You'd also have thought they would have spent less time dumping on Volcker over the past few months.
Summers has to go. Maybe Geithner can stay, considering how he's a total wimp who will take whatever orders he is given. Mind you, I haven't forgotten how Volcker brought on the recession of the early eighties (not to mention the collapse of a few emerging economies) with his tight money policies, but what the hell — presumably it got us out of the stagflation, and Carter would have lost anyway (yes, I believe in Reagan's secret deal with the Ayatollah — a belief reinforced by Iran-Contra.)
So let's see what happens. If it's just a lot of wind, I'll be disappointed, but not surprised. If you want me behind you, Barack, just do the right thing.
It seems that Rahm and I think alike — well, not that much alike, but enough so that Our President, yesterday, came out with what I asked for on Wednesday. Obama now appears to be an an anti-big-bank populist — and please note the emphasis on the word "appears."
The official story is that Summers and Geithner were working on it — under the genial and gerontological guidance of Paul Volcker — for months. Yeah, right. If they'd actually believed in restraining the banks, you'd think they might have gotten it out before they lost Vote Number 60 in Massachusetts. You'd also have thought they would have spent less time dumping on Volcker over the past few months.
Summers has to go. Maybe Geithner can stay, considering how he's a total wimp who will take whatever orders he is given. Mind you, I haven't forgotten how Volcker brought on the recession of the early eighties (not to mention the collapse of a few emerging economies) with his tight money policies, but what the hell — presumably it got us out of the stagflation, and Carter would have lost anyway (yes, I believe in Reagan's secret deal with the Ayatollah — a belief reinforced by Iran-Contra.)
So let's see what happens. If it's just a lot of wind, I'll be disappointed, but not surprised. If you want me behind you, Barack, just do the right thing.
Monday, October 26, 2009
Economic reform?
Why are the stock markets doing so "well" lately? Clearly, it's not because the businesses whose shares the markets trade are posting increased profits. Some of the increase in stock prices may be accounted for by the falling value of the dollar — as the dollar weakens, it takes more dollars to buy anything — but that's not the whole story.
Who, we may wonder, is bidding up the price of stocks, and where are they getting the money to do it in this economic environment? Look no further than the investment branches of our banking behemoths, using cheap, government guaranteed credit. To me, it's looking like another bubble — and given the poor shape of a lot of American businesses, it seems pretty obvious that their price to earnings ratios over the past few months have been falling like it's the nineties again.
A lot of people are blaming a handful of conservative Democratic senators for the lame, half baked efforts coming out of Congress for reforming the financial system. I suppose they have their part to play, but the real fault lies with the White House.
If the Obama administration genuinely wanted to bring Wall Street to heel, it could be making a far more aggressive effort than we've seen. Fiddling with executive pay packages may score a few populist points, but in the long run (or even the short run), it means nothing. Some of us remember that the whole corrupt bonus system arose out of efforts to rein in executive pay during the Carter administration.
As for regulating derivatives, there are enough holes in the proposed legislation to accommodate every rat looking for a way through — and damned near as many in the proposal for the consumer protection agency. Instead of breaking up the institutions that were "too big to fail," government has helped them grow even larger through mergers and acquisitions.
Paul Volcker has been out there, crying in the wilderness for genuine reform — rolling back the Clinton administration's gutting of whatever remained of Glass-Steagall, and separating banking's commercial and investment sectors again. The White House will not be doing that anytime soon — at least not as long as two of the three Clintonistas who engineered that gutting remain in power. Robert Rubin may be gone, but he left Larry Summers and Tim Geithner behind to look after the interests of the Wall Street power brokers.
Well, viva Volcker. The White House is ignoring him, but at least he's getting some attention in the press.
Who, we may wonder, is bidding up the price of stocks, and where are they getting the money to do it in this economic environment? Look no further than the investment branches of our banking behemoths, using cheap, government guaranteed credit. To me, it's looking like another bubble — and given the poor shape of a lot of American businesses, it seems pretty obvious that their price to earnings ratios over the past few months have been falling like it's the nineties again.
A lot of people are blaming a handful of conservative Democratic senators for the lame, half baked efforts coming out of Congress for reforming the financial system. I suppose they have their part to play, but the real fault lies with the White House.
If the Obama administration genuinely wanted to bring Wall Street to heel, it could be making a far more aggressive effort than we've seen. Fiddling with executive pay packages may score a few populist points, but in the long run (or even the short run), it means nothing. Some of us remember that the whole corrupt bonus system arose out of efforts to rein in executive pay during the Carter administration.
As for regulating derivatives, there are enough holes in the proposed legislation to accommodate every rat looking for a way through — and damned near as many in the proposal for the consumer protection agency. Instead of breaking up the institutions that were "too big to fail," government has helped them grow even larger through mergers and acquisitions.
Paul Volcker has been out there, crying in the wilderness for genuine reform — rolling back the Clinton administration's gutting of whatever remained of Glass-Steagall, and separating banking's commercial and investment sectors again. The White House will not be doing that anytime soon — at least not as long as two of the three Clintonistas who engineered that gutting remain in power. Robert Rubin may be gone, but he left Larry Summers and Tim Geithner behind to look after the interests of the Wall Street power brokers.
Well, viva Volcker. The White House is ignoring him, but at least he's getting some attention in the press.
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