Yellen or Summers?

In a front page article, today's Times suggests there are "some gender overtones" stirring in Obama's choice to be the next chair of the Federal Reserve.  Personally, I'm pulling for Janet Yellen, but not because I think it's time for a woman to be at the helm.  It's because I think Lawrence Summers is a terrible choice.

Back in the Clinton administration, Summers, along with his guru Robert Rubin, was instrumental in talking Clinton into signing the Gramm-Leach-Bliley Act into law.  In case you've forgotten, that's the one that overturned Glass-Steagle, encouraged already large financial firms to transform themselves into too-big-to-fail behemoths, and made the 2008 financial crisis inevitable.

Why oh why would Obama want to install one of the architects of too-big-to-fail as the single most important regulator of the fat cat firms?  Could it be because Wall Street wants him there?

Janet Yellen, we are told, was an important voice in Bernanke's ear, encouraging expansionary monetary policy.  As head of the Fed, she is unlikely to tighten up too soon — and it's pretty clear that she would continue quantitative easing and low interest rates for as long as they're needed.  Well, they're still needed.

The last thing we need is the return of the Rubinites.

Clinton in blackface

Anybody who knew me back in the nineties will recall that I was no fan of Bill Clinton, the Democrat who made me feel nostalgic for the liberalism of the Nixon administration. If you happened to notice me driving down the road on November 12, 1999, when the radio announced that Clinton had signed the repeal of Glass-Steagall, you'd have slowed down and moved into the most distant lane in an effort to avoid a total lunatic.

So now, after eight disastrous years of Bush, we have Obama -- putatively "the change you can believe in." Okay, I believe some changes have taken place. From Bush, we seem to have moved about halfway back to Clinton.

I'm not blaming you for this, America. It's not as if you had a hell of a lot of options -- and electing a (sort of) black guy made a lot of people feel like they were voting for change. The problem was that real change never was an option. The plutocrats were in charge, and they remain in charge. Lehman Brothers, Goldman Sachs, JP Morgan Chase, and UBS were among Obama’s top contributors. They gave him the early lead in the “money race” that made his candidacy viable.

In return, he let Robert Rubin create his economic team. Rubin, lest we forget, spent 26 years with Goldman-Sachs before he joined the Clinton administration. Together with acolyte Larry Summers and free-market ideologue Alan Greenspan, he quashed the regulation of derivatives and championed the repeal of Glass Steagall, making the current financial meltdown inevitable. Shortly before I found myself in my car, screaming at the radio, Rubin left the Clinton administration to sign on as senior advisor to Citigroup. Still working in that capacity, he signed on as chief financial advisor to Barack Obama.

So, what would you expect -- specifically, what would you expect of Rubin protégé Timothy Geithner, other than more "lemon socialism?" The private sector will "join" with the public sector to buy toxic assets from the afflicted banks that so generously supported Obama, and reap the rewards of any profits that might be made. Losses, of course, will be absorbed by taxpayers.

Clinton -- either one -- would have behaved no differently. On the other hand, if Hillary were president now, it's possible that a few other decisions would have been less Bushlike. A couple that come to mind are Obama's failure to overturn the Bush order allowing "faith-based" organizations receiving government funds to discriminate, based on religion, in hiring; and the continued use of "state secrets" as an excuse to protect Bush administration war criminals.

Well, maybe she'd have been no better. The same oligarchs who supported his campaign supported hers as well.

"Bad" bank? Why not a "GOOD" bank?

The more I read about the "bad bank" idea, the less I like it.

Obama, by any rational measurement, is a major improvement over W -- but the same might have been said of any of the Democratic primary candidates, or of Wile E. Coyote, or Richard M. Nixon, or even Oprah. Where Obama falls down, though, is in surrounding himself with Clintonistas who instinctively herd towards what they perceive as the "center." They don't seem to have noticed that "liberal" isn't a dirty word anymore, nor that while the right is as bombastic as ever, fewer are listening. And so, Geithner and Summers and the rest of the Robert Rubin protegés are having their way: nationalization remains verboten, and it looks like the American people as a whole will have to eat the losses racked up by the banking industry -- not just the industry's stockholders and bondholders.

It's true that Obama owes a debt to Wall Street, which provided the funds that let him take the lead in the "money race" early in the primary season. It was that lead which got him serious attention from the media, which in turn enabled him to mount a successful campaign for the small contributions that won him the presidency. Honestly, though, I don't think he owes the bankers over a trillion dollars -- at least not our trillion dollars.

So, instead of wasting taxpayer money on a bad bank -- a kind of financial sin eater that would absorb the toxic assets of possibly zombie banks and transfer them to current and future taxpayers -- why not use the remainder of the TARP funds to create a good bank, government owned and operated, which would provide loans directly to businesses that will create jobs and creditworthy individuals who want to make major purchases? There are plenty of out-of-work bankers available to organize and staff the new bank, and the vast majority of those had nothing at all to do with the derivitives failures that caused the current mess.

Yes, I know. That would be socialism. Shame on me for being both unregenerate and unrepentent. It wouldn't have to be permanent, though -- the good bank would exist just long enough for zombie banks finally to stumble into their graves. After that, the good bank's assets could be sold -- at a profit -- and we all could go back to private banking again.