My Brother Says It’s Obama’s Economy

In Suskind's Confidence Men Raises Questions About Obama's Credibility, my brother Dan Froomkin makes the case for the prosecution against Obama’s management of the economic crisis.

It starts with Obama’s bold but unfulfilled promises:

In October 2008, he promised to "take on the corruption in Washington and on Wall Street to make sure a crisis like this can never, ever happen again."

And one day before he was elected president, he told a Florida audience: "Tomorrow, you can turn the page on policies that have put the greed and irresponsibility of Wall Street before the hard work and sacrifice of folks on Main Street."

Obama’s most seminal speech on the crisis was his March 2008 address at Cooper Union. There, he laid part of the blame for the disaster on Clinton-era financial deregulation, including the 1999 repeal of the 1933 Glass-Steagall Act. That repeal, which broke down barriers between commercial and investment banking, led to the growth of financial behemoths that were able to take enormous risks with impunity because they were "too big to fail."

"[I]nstead of establishing a 21st century regulatory framework, we simply dismantled the old one, aided by a legal but corrupt bargain in which campaign money all too often shaped policy and watered down oversight," Obama said. "In doing so we encouraged a winner take all, anything goes environment that helped foster devastating dislocations in our economy."

But in fact, Obama appointed an economic team that was either not up to boldness, or set against it.

While the appointments of these men and a slew of similarly pedigreed subordinates reassured the financial markets, their leadership undermined Obama’s populist promises.

Many of them had already spent their interregnum feeding at the Wall Street trough.

Dan’s extensive tying of Obama’s top advisers to millions in Wall St. remuneration will undoubtedly anger many inside the Beltway, where it’s not considered polite to suggest that government servants — especially those taking a pay cut to be powerful — might be motivated by money. But whatever one makes of that, it is telling that so many of the key Obama economic team were men (yes, men) with Wall Street affinities and salaries.

I haven’t read Suskind’s book, and I don’t have a clear theory for the root causes of the Obama failures on the economy. Yes, they got dealt a crisis. But they wasted it, after Rahm Emanuel promised not to.

The list of failures is long: the administration failed to be more aggressive pushing for a stimulus, it failed to demand, much less get, an equity stake in the banks you and I paid to bail out, it failed to do anything at all meaningful to help underwater homeowners, and did next to nothing to punish anyone responsible for the financial debacle economically — much less criminally. Those are clear, real failures, they were not (with the possible exception of the stimulus which required Republican support that certainly could not have been guaranteed even with a more confrontational strategy) hard to foresee nor all that hard to prevent. Nor, unlike the underlying economic problem itself, are any of them things you can blame on George W. Bush.

That the GOP seems poised to choose its nominee between someone utterly unprincipled and someone crazy and dangerous as well as unprincipled, suggests Obama may be lucky. That luck may get him re-elected. It’s a certainty that if re-election happens, it won’t be because of his handling of the economic crisis.

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3 Responses to My Brother Says It’s Obama’s Economy

  1. Altoid says:

    *Sigh*. As Delong says so often, the cossacks work for the czar, meaning in part that they don’t do what the czar doesn’t want them to do.

    IMHO Obama really doesn’t understand much about how economies really work, in the basic sense of money passing from hand to hand vs money stuffed in mattresses, or doesn’t care about it, and what he does understand is fatally compromised because at heart it seems to be Chicago law-and-economics. He might not have been interested in anything remotely economic until he got to Chicago but in any event he might just be too young to have gotten basic Keynesian macro in his intro economics class, assuming he took it in the early 80s, and this is a Keynesian situation par excellence. It’s a lack that many congresscritters of his age seem to share, and I think it’s a cohort thing.

  2. Patrick (G) says:

    I’ll agree that Obama’s grasp of economics as president seems weak; more beltway-driven conventional wisdom than a coherent set of principles or ideas. But I recall him having once had a reputation as an excellent Constitutional Law scholar which makes his DoJ all the more disappointing.
    We have a mortgage industry where the big players devolved into a criminal cartel. Where the financial intermediaries shafted borrowers and investors with callous disregard of everything ( including their legal and contractual obligations) except their own bottom-line. Predatory loans, negligent underwriting, securitization failures, documentation fraud, all sorts of other frauds. The evidence of these is not that hard to find if you look for it. AG Holder promised an investigation over a year ago; but individual state AGs seem to have done more and better investigating. At the federal level, More effort and manpower seems to have been dedicated to negotiating a settlement with the scofflaw banks than investigating their misdeeds. My conclusion then is that the Obama/Holder DoJ is corrupt.
    Unfortunately, I don’t believe that either Romney nor Gingrich would be an improvement on that score. So yes, Obama is lucky in his opponents.

  3. Brett Bellmore says:

    Perhaps they wasted their crisis. I suspect they merely used it for what they wanted, rather than what they’d led people to think they wanted. And are counting on all the useful idiots persisting at usefully being idiots.

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