Obama's "Culture Of Caution" On The Financial Crisis

Mike Lux has a nice piece in the Huffington Post about timid Democrats:

Unfortunately for those of us in the Clinton administration, our too-cautious message, along with the "don't do anything transformative with health care" Democrats -- folks such as Rep. Jim Cooper (D-Tenn.) and Sen. Daniel Patrick Moynihan (D-N.Y.) -- slowed the Clinton health care reform effort enough that it stalled in Congress, which kept our voter base home in the 1994 elections and cost Democrats control of Congress. With our problems far worse now than they were in the '90s, I fear that these cautious Senate Democrats could damage Obama's ability to make big enough change. If that happens, voters who expected big change from Obama will be severely disappointed, and 2010 could be another 1994.


True enough (and props for calling out the now venerated Moynihan) but Lux avoids the critical issue where Obama himself has been timid - the financial crisis. Unfortunately, we spend a lot of time (I just did in my previous post) worrying about the Media, Limbaugh, Michael Steele and other silliness. What matters now, for the politics, is the results of the policies. Whether Democrats will dominate politically entirely depends upon the results of President Obama's policies. And of course, the country is staring at an economic abyss if Obama's policies fail. Update - Matt Yglesias had a very good piece on this:

The is the sense in which Obama is most likely to fail by being too cautious rather than overreaching. There are a number of things—including the libertarian/populist idea of just letting the banks fail—that seem risky, terrifying, and might work. And then there’s the “muddling through” option that’s less terrifying but also certain to fail. A number of people have noted over the years that Obama mixes a progressive agenda with a small-c conservative temperament. Which is, I think, normally a good kind of temperament. But I don’t think it’s a temperament that’s well-suited to this situation.

Read the whole thing.

Speaking for me only

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    Thank you (5.00 / 3) (#3)
    by lambert on Sat Mar 07, 2009 at 09:21:41 AM EST
    The government has thrown trillions of dollars "into an enormous hole" (as the Onion says). And to this day, nobody knows where it went.

    The economic story is going to shape everything -- and as we know from the success of the Conservative movement's success of the last thirty years, politics drives economics, not the other way round. So the left should be trying to drive this story, and in particular, the left blogosohere; I mean, we're supposed to be the experts in creating an alternative narrative, yes?

    So thank you for posting this.

    We now return you to your reguarly scheduled programming. How about that Jindal fella? Look! Over there! Rush Limbaugh! Wow! And did you hear what Sarah Palin did?!?

    [poiunds head on desk]

    I wish I could tell whether Obama's (5.00 / 1) (#5)
    by ruffian on Sat Mar 07, 2009 at 09:39:45 AM EST
    timidity is because he really believes he is going about it the right way, or if he believes Congress will not let him do anything bolder. I have not seen him make any strong public efforts to persuade Congress, even this week on the budget, he lets himself get rolled by Bayh and Feingold?

     I know Obama has a lot to do, but he is the one with the public voice that people support right now. He needs to be The Persuader.

    I get the impression that Geithner (5.00 / 2) (#7)
    by inclusiveheart on Sat Mar 07, 2009 at 09:53:02 AM EST
    Summers and Obama are all hoping that the financial institutions will somehow miraculously turn themselves around without requiring "drastic" (some of us might say "rational" though) action on their part - like nationalization.  The longer they wait though, the harder it is going to be to get out of the hole as it is pretty clear that it is getting deeper everyday.

    I think it's a two-headed problem: (5.00 / 3) (#8)
    by Anne on Sat Mar 07, 2009 at 09:56:55 AM EST
    we have weak leadership in the legislative branch, and we have an executive branch leader who has no history of actually leading people to do anything other than make internet campaign contributions and vote for him.

    The Democratic Congress has the ability, and, I think, a duty, to evince bold leadership, and to work to make the legislation it produces reflect that; Obama has the loudest microphone of all, but he is choosing to whisper into it so as not to offend anyone.

    It pains me a great deal to contemplate that by the time these people figure out that the wishy-washy, let's-all-be-civil-and-friendly approach isn't working, not only will be in much more dire economic straits, but we will have lost the majority, and can look forward to a Republican Congress buddying up to Mr. Bipartisan to create some really damaging legislation.

    Tick-tock; time's a-wastin'.


    I would argue that healthcare (5.00 / 2) (#6)
    by inclusiveheart on Sat Mar 07, 2009 at 09:50:49 AM EST
    is one part of economic crisis where we find Obama being timid.

    The healthcare crisis has now become such a threat to business and workers alike from an economic standpoint that it really should be under the economic umbrealla for all intents and purposes.

    If we could offer a single-payer option to a family of four who are currently paying $1,000 a month in premiums and get that premium down to even to what I consider to be rather high still at $500 a month that is some significant stimulus for this economy.

    Then of course there is the global business side of the equation where we are lagging behind other nations on this front and suffering for it.  Do we really need to continue that idiocy under the current economic circumstances?

    There are countless economic reasons to go forward with a BOLD plan to change the system - to fix our system for real with a Medicare for all option - and yet up until there was hue and cry from the "little people" there were no healthcare advocates for single payer invited to Obama's summit because of course he thinks that he needs to be cautious about this issue too.  Not good.

    We now have decades of evidence that the current system is hurting our country.  I don't think we need to waste any more time to "see how things go". I don't think we can wait and have any reasonable expectation of any of these economic ailments working themselves out - the models are flawed - let's face it and fix it for real now.  

    I Am Not So Ready to Criticize... (5.00 / 1) (#10)
    by santarita on Sat Mar 07, 2009 at 11:42:54 AM EST
    the Obama Administration.  

    Given the fact that the financial system meltdown really got underway with the collapse of Lehman (although the conditions were in place for such a meltdown before that collapse) which took place in September and the Obama Administration has been in control for less than two months, I'm not sure that it is not moving
    at a prudent speed in coming to terms with the scope of the disaster.

    I read the Yglesias article and found it just another variation of "Let's cure the problem by nationalizing the banks".  Nothing new or creative.  The comments to the article, however, are well worth reading.

    Obama could ask the Fed... (5.00 / 1) (#11)
    by lambert on Sat Mar 07, 2009 at 01:02:29 PM EST
    ... to disclose who got the bailout trillions (which is currently not known). Surely we have a right to know what is done with our money?

    Apparently not. Could have (5.00 / 1) (#12)
    by oculus on Sat Mar 07, 2009 at 01:04:30 PM EST
    been a condition of receiving federal $$, but isn't.

    There is Some Disclosure... (5.00 / 1) (#13)
    by santarita on Sat Mar 07, 2009 at 01:56:53 PM EST
    We know that AIG is a big beneficiary. We know that 9 banks received $25 b apiece from Tarp I.  We know that Citi received - I think it's up to $45 b.  There is a website:  www.financialstability.gov (I believe) that lists the various aid programs.  It's true that it doesn't break out the individual recipients but it is not too hard to tell who some of the recipients are - they are the major capital markets and investment banks both domestically and internationally.  There should be more transparency.  But I am not sure that we will find some vast international conspiracy a la Bernie Madoff.  We will find what has been in place for quite some time - a vast international financial network backed to a lesser or greater extent by individual governments.

    The US has benefitted from having a reputation for good banking and financial oversight.  That reputation has been severely damaged internationally.  One thing that the US government is trying to do is to assure the international community that the US is still a great place to do business.  It can't do that if it spits in the face of the international community and says ""Hey, you dopes. you should have been smarter than to trust in our financial institutions.  Take your lumps and don't bother us any more."


    WSJ article names some recipients of the AIG bucks (none / 0) (#16)
    by jawbone on Sat Mar 07, 2009 at 11:56:18 PM EST
    Link here. Big names: Goldman Sachs, JPMorgan, Deutsche Bank, RBS.  

    Bernhard at Moon of AL noted that the amount of CDS payouts, $150B, tracked the bailout amount given to AIG, $150B. Of that, about 1/3rd was for businesses which bought insurance for actual assets (bonds), real money they expected to be paid back; those were morally right to be paid back.  But 2/3rds were to the hedge funds and Big Bankster Boiz who made side bets, with no actual assets involved, and that is not morally right to do.

    More information is beginning to come out -- I think the public will be furious.

    And, per Wall Street Watch, Wall Street lobbying only cost $5B. For all the lax regulation and looking the other way? Priceless.


    Ooops. My third link is wrong. (none / 0) (#17)
    by jawbone on Sun Mar 08, 2009 at 12:10:40 AM EST
    Should be this.

    From that link, this paragraph about Bernanke from Bob O'Brien of The Sanity Check:

    I think the defining moment for me was when Bernanke responded to the question from Congress, as to whether the American people (and their elected representatives in Congress) would be told to whom all their tax dollars have been given or lent. That single word summed it up perfectly for me: "No."

    It's possible Bernanke said both things.

    For even more background, check out the link at Lambert's post. Long article (I'm waiting to print it out.)


    Bernake himself said he does not know (none / 0) (#15)
    by BackFromOhio on Sat Mar 07, 2009 at 11:51:08 PM EST
    what AIG has done with the $ given to it by the Federal government.  

    If true, then that is (none / 0) (#18)
    by caseyOR on Sun Mar 08, 2009 at 12:21:44 AM EST
    pretty distressing. If Bernancke doesn't know where all the taxpayers money is being spent, then who does? And, if he really is ignorant of these details, then what good is he to us? Isn't anybody minding the store?

    Point is (none / 0) (#19)
    by BackFromOhio on Sun Mar 08, 2009 at 11:19:09 AM EST
    none of the Treasury/Fed Reserve/Eco Adviser types knows.  It is scary to me, too.  

    When the going get's tough (none / 0) (#1)
    by SOS on Sat Mar 07, 2009 at 09:14:25 AM EST
    the tough go shopping.

    Or (none / 0) (#2)
    by SOS on Sat Mar 07, 2009 at 09:17:29 AM EST
    used to anyway.

    I don't really see a 50 seat loss, (none / 0) (#4)
    by tigercourse on Sat Mar 07, 2009 at 09:36:38 AM EST
    no matter how poorly Democrats handle things. We're going to lose House seats since there are some (in Idaho, in Alabama, etc) that we just shouldn't have. Some of our Governors are going to have a rough time as well. But we might actually gain a couple of Senate Seats. Voters will turn against the Democrats, but I don't see them running back into GOP arms in just one cycle.

    Is there a list (none / 0) (#9)
    by Saul on Sat Mar 07, 2009 at 10:19:20 AM EST
    of the bold things Obama could do or should be doing to turn around the economy. Seems to me that all the ideas of rescuing a recession should have already been put in writing many years ago.

    Who tells Obama

    Look these are the things that must be done to turn this economy around?

    Is there a link on this.  Like a spread sheet or matrix that list all of things that must be done to reverse a recession with check marks on those Obama has already done.

    We should not be starting the 2010 (none / 0) (#14)
    by lilybart on Sat Mar 07, 2009 at 10:03:59 PM EST
    campaign talk now. This is very unhelpful to the present moment, to be living in the future.

    We should be talking about how we can best solve the enormous problems now, and stop wasting time predicting doom in 2010 or 2012 or even next year.

    The republicans are too lock-step, but the Dems could be more supportive.