Stiglitz: Obama/Geithner Plan Makes Fools Of Taxpayers


THE Obama administrationís $500 billion or more proposal to deal with Americaís ailing banks has been described by some in the financial markets as a win-win-win proposal. Actually, it is a win-win-lose proposal: the banks win, investors win ó and taxpayers lose.

And it is not even gonna work to "save" the financial industry:

So what is the appeal of a proposal like this? Perhaps itís the kind of Rube Goldberg device that Wall Street loves ó clever, complex and nontransparent, allowing huge transfers of wealth to the financial markets. It has allowed the administration to avoid going back to Congress to ask for the money needed to fix our banks, and it provided a way to avoid nationalization. But we are already suffering from a crisis of confidence. When the high costs of the administrationís plan become apparent, confidence will be eroded further. At that point the task of recreating a vibrant financial sector, and resuscitating the economy, will be even harder.

But Krugman Stiglitz always hated Obama, and a Nobel in Economics does not mean squat and . . .

Speaking for me only

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    The hits just keep on coming (5.00 / 9) (#1)
    by lilburro on Wed Apr 01, 2009 at 09:11:54 AM EST
    and again, Obama seems unperturbed.  Basically, all the world's major economists, except the ones who work for Obama, hate this plan.  Am I right?  Dean Baker wrote an interesting piece about the Admin's animus against Krugman yesterday.  To quote that Newsweek piece (or Huffpo's quote from Newsweek):

    "You know, I think the administration is trying to ignore Krugman, quite frankly," Thomas went on. "But they can't entirely because he has a big voice. You know, that platform of the New York Times, that's a big platform. And he's got his Nobel Prize. You have to take him seriously and can't just ignore him."

    But actually, that little Newsweek cover shouldn't just have Krugman's head on it.  A cover that accurately captured the opionion toward the plan would have a ton of heads on it...Stiglitz, Johnson, Kwak, Martin Wolf, Dean Baker, etc.  Oh, and all of us little people who are saying "WTF?"

    That would be a hell of a magazine and I'd like Obama to read it.

    At what point (5.00 / 11) (#3)
    by Ga6thDem on Wed Apr 01, 2009 at 09:27:10 AM EST
    is Obama going to have done enough to start losing the support of the people who have been with him since the primaries? He's not going to listen to anything you guys tell him because the majority of you guys never made him listen to you. He was able to do whatever he wanted and no one felt that he should be held accountable ever. Well now we have the fruit of all that coming to pass. Is there a point where Obama has passed enought Reaganesque plans that people are going to ask him to step down?

    Er, never? (5.00 / 3) (#6)
    by lambert on Wed Apr 01, 2009 at 10:22:55 AM EST
    It's authoritarian followership, just with a different authority.

    No matter what, there will  be 25% who support Obama, just as there was for Bush (and to give him credit, Obama is not insane. There is that).

    And Bush was able to rule, if not govern, on that base. So hold on to your hat!


    So you're saying that the notion (5.00 / 6) (#14)
    by Radix on Wed Apr 01, 2009 at 11:32:58 AM EST
    of complaining about him during the primaries and adding the caveat of, "I'm going to vote for Obama anyway", wasn't helpful? Go figure.

    Exactly. (5.00 / 1) (#16)
    by Ga6thDem on Wed Apr 01, 2009 at 01:23:46 PM EST

    Step down? (none / 0) (#20)
    by BobTinKY on Thu Apr 02, 2009 at 10:42:06 AM EST

    I supported Obama in the primaries and most emphatically do not support the Geithner Plan.  However, and barring some unforeseen gross corruption scandal, I support this administration through 2012.  Should Obama, for example, reduce SS benefits, I will look to support a more liberal candidate in 2012.  I may look anyway if the Geithner Plan is implemented and fails as I believe to be inevitable, depends on severity of
    the failure and effectiveness/sincerity of any subsequent remadial mmeasures.  But step down? No.  That is ludicrous.

    I lived and supported Clinton's DLC administration depsite numerous policy disappointments.   I can take 4 years of Obama if it is his inclination also to co-opt certain Republican policies in a futile attempt to head off GOP attacks, or out of fear of the havoc irate Masters of the Universe may create in response to a truly progressive agenda.   Both Clinton and Obama were/are vastly superior to the GOP alternative. But, as you seem to appreciate, Reaganism has infected our politics to an unseemly degree when Democratic presidents feel the need to worship at St. Ronnie's altar or be attacked as something less than American.  That has to change.  

    Events, I believe, will change this unfortunate and damaging dynamic.  I'd prefer the managed change of a committed, progressive President and Congress to the unavoidable sort of change brought on by an even greater economic disaster.  Unfortunately, the latter seems to be our current trajectory.  Changing course on the Giethner approach would go a long way to putting us on the path to more managed change.


    Look, the problem is the Fed Reserve itself (5.00 / 1) (#4)
    by SeeEmDee on Wed Apr 01, 2009 at 09:32:22 AM EST
    It needs to be abolished. Why allow what a amounts to an organization full of private bankers to 'manage' the nation's money they way they've 'managed' Wall Street? Thieving b@st@rds! Get rid of it - and them! - and return to having Congress printing interest-free money.

    There are risks to (none / 0) (#13)
    by Radix on Wed Apr 01, 2009 at 11:26:26 AM EST
    returning to a "Bank of the United States model". Those risks will need to be looked at.

    I think we have a twofer here. (5.00 / 5) (#5)
    by inclusiveheart on Wed Apr 01, 2009 at 09:36:37 AM EST
    Geithner et al reflexively protect Wall Street at all costs - it is hard not to call their plan "trickle down" at this point - and they probably are so terrified by the problems inside not only the big banks, but also across the financial sector that they are going to try to avoid any real accounting no matter what happens - for fear that if the truth of the matter came to light they'd be held responsible for bringing down the world economy.

    Their problem though is that the chances that they can keep the empty vaults a secret long enough to refill them are not great.  More betting from "the best and the brightest".  The fact that Obama and Geithner are both at the G20 apparently trying to stave off Europe's demands for better regulation, at least to me, suggests that they really are trying to hide the ugly truth.  If we were to start regulating the derrivitives market tomorrow, we'd likely find out what they don't want us to know.

    Yep (5.00 / 5) (#7)
    by lambert on Wed Apr 01, 2009 at 10:24:52 AM EST
    After two years, we STILL don't know how big the Big Sh*tpile really is? I'm thinking that's no accident...

    Your President will listen and lead. (5.00 / 1) (#9)
    by oculus on Wed Apr 01, 2009 at 10:59:58 AM EST
    It's in all the headlines.

    My president is being just about as big a (5.00 / 2) (#10)
    by Militarytracy on Wed Apr 01, 2009 at 11:08:15 AM EST
    jacka$$ at this very moment as the last one always was :(  Man I'm ticked.  The Axis of Evil, Weapons of Mass Destruction, Mission Accomplished, and Listening and Leading.

    and (5.00 / 2) (#11)
    by Inspector Gadget on Wed Apr 01, 2009 at 11:17:20 AM EST
    hope and change :)

    Yup, I HOPE he CHANGES (5.00 / 9) (#12)
    by Militarytracy on Wed Apr 01, 2009 at 11:18:22 AM EST
    The only change I've seen (none / 0) (#19)
    by Edger on Thu Apr 02, 2009 at 06:27:19 AM EST
    is that people think there's been a change.

    April 02, Gallup:

    Obama is enjoying a high 61 per cent job approval rating in America for his handling of foreign affairs, but has suffered a marginal slump in public backing on his tackling of the financial crisis, a national opinion poll has said.

    The approval on the foreign front is up by seven points since February, the Gallup said in its latest opinion poll on Obama released yesterday.

    His job approval rating for handling the economy at 56 per cent is down by a slight margin of three points. This is, however, higher than his rating for handling the federal budget deficit of 49 per cent, it said.

    See you at the soupline.


    I still believe Obama has both the intellectual (none / 0) (#21)
    by BobTinKY on Thu Apr 02, 2009 at 10:46:20 AM EST
    capacity and political survival skills to change once the Geithner Plan consequences become apparent.  Hopefully that will be before it fails, but that is seeming to be more and more unlikely.  

    Once the Plan fails in practice I remain convinced Obama will see the error of his ways and adjust.  But will there then be enough time  & resources to right the ship?    That is the question.


    It's up tp us then.. (none / 0) (#24)
    by lambert on Thu Apr 02, 2009 at 01:12:04 PM EST
    to "make the consequences apparent." Who else will?

    ok, i have this weird theory, (5.00 / 1) (#17)
    by cpinva on Wed Apr 01, 2009 at 06:26:12 PM EST
    supported by absolutely no empirical data or confirmable, unrelated, third-party evidence:

    a. the obama transition team, and obama himself, truly had no clue exactly how bad things really were, prior to the inauguration.

    b. having been in office for roughly 2.5 months, pres. obama, not a trained economist (or, for that matter, having much background in accounting/finance), still really is sort of hazy on exactly how bad things are, and (more importantly) why they are.

    he really hasn't a clue how to fix it, relying on his "experts in the field" to come up with a plan. nothing wrong with that, shows he recognizes his own limitations, what a smart person would do.

    c. his "experts" either don't truly realize just how badly bolloxed things are, and assume a slight tinkering will fix the problem, or do realize how bad they are, but can't wrap their collective minds around the radical actions necessary to fix it. either way, we lose.

    d. krugman, stiglitz, et al, not having to concern themselves with the potential political (and ego) fallout, can be far more honest and aggressive in both their analysis and recommended fixes. this makes the "official experts" look bad, and their little egos get bent.

    as a result, instead of listening to what krugman, stiglitz, et al have to say, and maybe even reaching out to them for help, they get their little ego panties all in a bunch.

    e. meanwhile, back at the ranch, the economy continues swirling down the toilet.

    just a theory.

    Obama (none / 0) (#18)
    by cal1942 on Thu Apr 02, 2009 at 12:11:07 AM EST
    is a management type not a leader. He chose advisors based on the input of those with whom he was associated.  Like some very high level managers he doesn't really want to think about details, he only wants reports.

    My concern is just the opposite (none / 0) (#22)
    by BobTinKY on Thu Apr 02, 2009 at 10:50:07 AM EST
    he has leadership skills unparalelled in today's politics.  Oratory, charisma, intellect.  

    If I worry about anything it would be his management skills, is he hands on enough in questioning Geithner for example.


    Oratorical skills (none / 0) (#23)
    by cal1942 on Thu Apr 02, 2009 at 01:05:54 PM EST
    can be tools of leadership but does not constitute leadership.

    Leadership is taking people where they haven't been, of identifying a problem and leading the way to a real solution even if breaking with tradition. Leadership is hurling defiance at your critics.

    Contrast with FDR who took a radical step his 2nd day in office and consider as well his 1936 campiagn speech when he said he welcomed the hatred of certain forces.  Can you imagine Obama making a move like that or a speech like that.

    Obama's no leader, he's a manager and not necessarily a good manager.


    Open Left has some great pieces up (none / 0) (#2)
    by iceblinkjm on Wed Apr 01, 2009 at 09:13:13 AM EST
    regarding Obama and his recent turn to Reaganism to solve our financial problems. Obama is a fool.

    Hmmm... (none / 0) (#15)
    by KoolJeffrey on Wed Apr 01, 2009 at 01:10:29 PM EST
    The [Diageo-Hotline] Poll finds more voters say the country is on the "wrong track" (49%) than say the country is headed in the "right direction" (39%). However, the percentage of those saying "right direction" is up seven points from 32% in last month's Poll and the percentage saying "wrong track" is down six points from 55%.