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Worrying and Puzzling Over Obama and the Banks

By   Follow Me on Twitter     Message Andrew Bard Schmookler     Permalink
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I've been feeling more pain, again, where I contemplate the situation before us. It was a wonderful time, from Election Eve through the Innauguration.

But now we've gone a ways into this administration, and not everything I see is as reassuring as I'd like.

So I'm worrying. I'm worrying that our guy, Obama, may blow it, that he may be making mistakes that would be too costly to countenance.

Here are two things I believe to be true:

1) The success of Obama's presidency depends upon his successfully rescuing us from this financial/economic disaster he inherited. If he succeeds, the American people will follow him to all kinds of good places, and he will be the Transformational President that he has it in his heart and soul to be, and that I devoutly hope that he'll be able to be. But if he fails at this, the American people will turn away from his leadership.

That's a shame, since fixing the economy is not as right down Obama's alley as the kinds of things that are of the heart and soul and vision and moral conviction. But that's the hand he's been dealt.

2) The second thing I believe is that the key to solving the economic problem --declining production, rising unemployment, falling markets-- is properly addressing the banking problem. Get the banking situation squared away OK, and we'll bottom out and at least sooner or later rise, and people will feel OK. We know how to do "recession," and that's a whole lot better than the scary position the economy is in now.

We need for Obama to be very, very competent right now. And in some ways he does seem competent. But the economists I find most persuasive now on the issue of the banking crisis –people like Paul Krugman and Robert Kuttner and Dean Baker—seem deeply concerned that the Obama/Geithner approach is wrong-headed and inadequate.

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So I’m worried: so much rides on his getting this right.

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And I’m puzzled: why are the Obama-ites not following the path that not only liberals like Krugman, but also conservatives like Alan Greenspan, now espouse?

Should I believe that Geithner knows better than Krugman and the others? I somehow doubt it. Besides, Geithner and Krugman seem to me members of the same tribe of mainstream/liberal economists, both outstanding of kind, who speak the same language and likely understand the situation in similar terms. (And Geithner himself is quoted from the 1997 financial crisis saying the very kinds of things that would point toward doing what Krugman et all say to do.)

But if that’s so, why the gap between Krugman’s prescriptions and Geithner’s medicines?

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Here’s one idea that occurs to me:

Perhaps the Obamites have combined a strategic political decision with their economic/financial decision.

Perhaps they sized up the situation, and saw that they could not take too many radical steps at the outset --and passing three-quarters of a trillion dollars as a stimulus package is a radical step-- and thus on this banking crisis they were going to use the failed approach for a little while, until its inadequacy becomes so clear that people beg Obama to do what he already knows he has to do, which is to do what Krugman et al want them to do.

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Andy Schmookler, an award-winning author, political commentator, radio talk-show host, and teacher, was the Democratic nominee for Congress from Virginia's 6th District. His new book -- written to have an impact on the central political battle of our time -- is (more...)
 

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