Krugman: "Obama Dithering on the Banks"

[edhopper]

http://www.nytimes.com/2009/03/06/opinion/06krugman.html?ref=opinion

Obama's failure to take the necessary steps of nationalizing the big banks may doom his entire agenda. I am really disappointed in his actions so far and am coming to the conclusion that Geithner was a very bad choice.

[burythehatchet]

1. I'm not ranting AT you but

what really pisses me off is the "moderate", "sensible" people who always believe that we should give the benefit of the doubt because its a Dem administration. The day Geithner was announced many among us died on the inside. How much intellect does it take to recognize that the people who were part of the problem are NOT THE SOLUTION.

[Captain Hilts]

4. The whole point of being Dem is to see 'grey' where others see just black or white.

That's not acceptable to a lot of people now that Mr. Obama is in the White House.

We have to keep leaning on him and the Congress.

[burythehatchet]

17. I don't disagree; I see gray in everything. No, there is no black and white

but one must still decide one way or the other, and when we form a perception of what is right (not white), then the decision should be clear.

The very simple problem here is we see what is wrong (not black) and yet we continue to decide in favor of what has shown to be wrong.

[the other one]

49. I hope that isn't the point of being a democrat.

Some things are unambiguous, such as individual rights and justice.

[Winterblues]

6. And Obama was a US Senator before becoming President

I believe some here might suggest that our Congress was also a substantial part of the problem. :shrug:

[sandnsea]

8. What did Geithner cause

Which companies did he direct to sell bad derivatives? When did he advocate these mortgage investment securities?

I've only known that he worked for Treasury in New York and unraveled the Bear Stearns fiasco and the core and depth of the problem.

[galloglas]

40. Bad derivatives ??

all derivatives are bad. It is the nature of the things. It has allowed everyone involved to capitalize (read: Become the house, or the casino) when creating these "risk management" vehicles.

Everyone who knows anything has seen this day coming since the days of the Glass-Steagall demise! Unless, of course, one was on the take, or complicit, since that dark day. And with Mr. Geithner, as others, all of them knew the risks and all of them were, in their positions of public trust, simply collecting their own monies and waiting to blame someone else for the impending debacle.

Obama should dip into the ranks of those who, based on conscience, said "Fuck this!" and bailed out of the pool of paid financial prostitutes we have seen on Wall Street since the era of "deregulation" began.

[sandnsea]

50. I'd seriously like an example

of when Geithner collected money on derivatives, or any other of these atrocious investment vehicles, or advocated for ever increasing expansion of the sub-prime market. I don't know that part of his history and am trying to figure it out.

[paulsby]

56. all derivatives are NOT bad

the futures markets were invented (in scandinavia iirc) in order to allow producers and consumers to hedge risk and monetize time risk.

those are all good things.

for example,

if i have a potential of 40,000 bushels of wheat in my fields that will be harvested 6 months from now, and the price of wheat is good right now, i can short the equivalent of 40k bushels of wheat. this means if wheat prices go down, i have locked in my price, because the amount i lose on my future crop is offset by the amount i gain on my short.

if i am a consumer of wheat (bread company), i can similarly hedge risk by going long the equivalent of the amount of wheat i need 6 months from now, and realize similar hedged benefits.

of course derivatives can also be used for speculation. ANY investment vehicle - stocks, gold, bonds, real estate, pokemon, whatever can be used to speculate.

derivatives are not ipso facto bad.

[EFerrari]

35. Yep. n/t

[ixion]

2. I agree with Mr. Krugman

I was disappointed with Obama's actions as well. :(

[Captain Hilts]

3. I understand where he's coming from but don't understand a lot about the banking crisis. nt

[NJmaverick]

5. This disaster was years in the making

only a fool would think it can be resolved in a matter of weeks or even a couple of months.

Our nation enjoyed some of their best economic times under President Clinton. Obama has much of his old economic team. That team didn't turn stupid in the last 8 years. Quick fixes and half asses solutions are not the way to solve the problem. Give Obama the a reasonable amount of time and you will see positive results.

[dkf]

7. Looks to me like Obama has moved on to Healthcare.

I'm really banging my head here.

[NJmaverick]

11. The banks are undergoing stress tests now

It would be foolish to put forth a plan for the banking sector, until the results of those tests are known. This isn't the Bush administration where they take actions with out knowing the facts.

[TheCoxwain]

53. That is BS ... Geithner has not provided any details for the test .. so how can the banks be

undergoing stress tests when no one knows what the tests are?

It is this uncertainty that is driving a lot of people insane

[edhopper]

10. But you see

what he and Geithner keep offering are half ass solutions. If they do not tackle this straight on and keep trying enemic small steps. (ie, keep throwing billions at insolvent banks) no amount of time will matter.
And for the record the "give him time" meme is a strawman argument. No one is asking why it isn't fixed by now, we are saying his policies will not fix it at all.

[NJmaverick]

14. So you want them to follow the Bush model of actions before knowledge

the banks are now under going stress tests to see where they are at. How foolish would it be to propose or take actions until those results are known and accounted for?

[edhopper]

18. Nationalization

is off the table. They won't even talk about it. And pretty much every economist I have read is saying the big banks are insolvent and need to be nationalized.
Stop with the straw man arguments.

[NJmaverick]

21. You are ignoring the main point, which is the information is not there

yet you are beating up Obama and his team for not acting before they know all the facts. That is insane, in my opinion.

[edhopper]

25. The "facts" have been there

since Lehman went under.

[NJmaverick]

26. Are you serious? The facts are not there, not until the stress testing is done

are you just looking for excuses to bash Obama?????

[edhopper]

29. Yes I'm serious

did you read the Krugman piece? Have you read Roubini, Stiglitz, Reich, Baker and Taleb?

Are you just trying to come up with excuses to support Obama?

[NJmaverick]

37. I read his opinion piece

the guy is selling out his credibility in his attacks on Obama. Sorry but there is no such thing as "informed commentators" in the MSM. Yet Krugman has fantasies that such creatures exist. I don't know if he felt slighted by the Obama administration, because he was passed over, or what. Clearly Krugman is not a source of thoughtful, balanced and intelligent commentary, at this point

[burythehatchet]

34. Don't worry about it man. When the stress test gets done, tune in to CNBC

and follow Kramer's advice. Everything is going to be fine.

[KharmaTrain]

9. Here's The Catch 22

TPM reported today about the understaffing at Treasury. A couple of Geitner's top appointees are having their nominations blocked (what else is new). They're also having problems staffing the departments due to the massive "inbreeding" that has occured between the regulators and regulatees. Most bankers are somehow tied into creating this mess and won't pass the administration's ethics smell test. Also there are those with regulatory experience who are also compromised as their departments fell asleep at the switch at one or several places over the past 20 years. Getting a competent team in place is going to take time...meanwhile the mess continues to pile up.

[tonysam]

13. The Neoliberals REALLY Have to Go

I cannot believe Obama would entrust himself with people whose economic philosophy has helped to ruin this country. And yes, I realize Obama himself subscribed to some of this philosophy, but one would think he has LEARNED by now the "Bush way" doesn't work.

[KharmaTrain]

27. It's A Deep-Rooted Culture...

The Milton Friedman acolytes invaded both Wall Street and the government in the 80's. For almost everyone involved, they've grown up in this culture of "bigger is better" and the infallability of the free market. We saw this attitude go into hyper-drive when the worst of its proponents moved into power in both the boardrooms and the government. It became part of a kleptocarcy that, as you say, ruined this country and still remains entrenched in both the government and on Wall Street.

What alternative is there? I'd like to see Bob Reich brought in, but real reform will mean changing an entire culture that got used to keeping mum while the profits were being made. We'll soon learn through lawsuits the depths of the corruption and cronyism that ran rampant since the "Raygun" revolution.

Cheers...

[burythehatchet]

47. boardrooms and the government = Benevolent Facism

[edhopper]

15. True

but what Krugman is saying is that the policies themselves that Obama and Geithner are putting forth are the problem. Not the implementation.

[KharmaTrain]

20. This Is Uncharted Waters

I tend to agree with Dr. Krugman on his assessment of what is going on, but there's the economic game and the political game. IMHO, Geitner's over his head...I think anyone faced with these staggering losses and numbers would be. The Swedish model is the way to start cleaning up this mess, but the political winds are still against him and thus the baby steps that are both pissing off "The Street" who fear being cut off from their unlimited bail outs and us on the other side of the street who want those responsible for this mess to be held accountable. As always...politicians go for the point of least resistance.

Cheers...

[tonysam]

16. Yeah, That's True.

There are tons and tons of people in the federal government who were put in there by previous Republican administrations, and it will be VERY hard to weed them out.

It's a damned mess. I can hardly stand to read newspapers or watch television because the news is so bad.

[Fleshdancer]

19. Krugman should submit his resume

Seriously though, you bring up a good point. It's hard to accomplish small tasks, much less huge feats such as fixing the entire banking crisis when your department is seriously understaffed. So much for the "smaller government" theory.

[KharmaTrain]

30. Smaller Is The Answer

I also agree with much of what Dr. Krugman says, however, he's also the first to admit he's an academic and isn't limited by the political handcuffs that are always part of such a big decission.

In the end, the lesson that has to be learned is that this country can't afford to have "too big to fail". The era of "deregulation" that allowed for corporations to put profits ahead of national interest, the inability to self-regulate and manipulate markets has to end. There's not really need for new laws as much as reinstating many that were set up during the New Deal. But this takes time and meanwhile the credit crunch squeezes harder...all but paralyzing business and creating more job losses that bring on more foreclosures and bankruptcies. It's a wicked spiral.

We need to strip the toxic assets and either sell off or discount the good assets to the smaller, local or regional banks that are both more responsive to their areas and more likely to get the credit flowing.

Cheers...

[Fleshdancer]

38. I welcome more academics in this particular field right now

I honestly would love to see Krugman really work on this fiasco instead of the idiots who helped create it in the first place. Fareed Zacharia had a few other Nobel winning economists on his show a few weeks ago that basically made the same point Krugman is making now which is that we're not doing enough.

As for what to do, I wish I knew enough to either agree or disagree with you. :D

[edhopper]

31. The problem

is not that "they haven't done it yet". The problem is that what they propose is not going to work, no matter how big a staff they have.

[Fleshdancer]

33. Every job has daily work that needs to get done just to function....

when you're understaffed, this makes it difficult to free yourself to fix the larger issues. I'm not saying this is the only problem, but it certainly is a valid one.

[treestar]

12. This guy doesn't get it, there are politics involved

As Rahm E. said, and he was right. Get Franken seated and deal with Spector, Snow and Collins.

Obama is the POTUS, not a CEO of a company.

[edhopper]

22. Who's the "this guy"

your refering to?

[treestar]

45. Krugman

I mean he could be right, but then Obama can't just do things - he has Congress to contend with.

[biopowertoday]

23. I fear for the new job lost folks.

[old mark]

24. I think Geithner is trying to find where the bodies are buried

and is becinning to dig some of them up (The treasury Dept. inspector.)
but I believe there are a lot of bad actors in both the government and the banking system who will be uncovered over the next few months. It's not 1 problem of 1 bad person, it's a long term method of doing business like a fucking banana republic that has to be found out and changed.
The bankers, many in government positions and many rich RWers will hate and fight this all the way.

Give it time.
Obama is moving to HealthCare because he can get it passed now and it needs to be done now - it really will help the economy.


mark

[edhopper]

28. Yes it will

but realistically, even if a good plan comes out (I am becoming dubious, since single payer is off the table like nationalizing the banks is) it will not start for several years. A bill passed this year will likely take a few years to set up.
Meanwhile the economy is in crisis and they are not acting in a way that will help.

[leftchick]

32. Obama Needs an Economic summit

With real economists NOT Bankers! Every Single day I read very respected economists' articles like Krugnan's Scream for nationalizing and REGULATING!!! WTF is he waiting for???

:grr:

[blues90]

62. I think most politicians including Obama

Are joined at the hip with the banks and the major corporations and are not really in control of what they lead the people to believe.

Look how long this political game has been going on and how long it has been on this course. Why would Obama be any different. The only reason people feel he is is because he is not a dumb fuck like GW when it comes to speaking.

Here in the US people have to attach a star quality to a president.

[leftchick]

65. in other words

all talk and no action. :(

[NJmaverick]

36. Yes I read the hit piece

the guy is selling out his credibility in his attacks on Obama. Sorry but there is no such thing as "informed commentators" in the MSM. Yet Krugman has fantasies that such creatures exist. I don't know if he felt slighted by the Obama administration, because he was passed over, or what. Clearly Krugman is not a source of thoughtful, balanced and intelligent commentary, at this point.

[galloglas]

43. Oh, please !!

I don't think Krugman would consent to be the Treasury Secretary if they drug him kicking and screaming into the office and chained him to a desk!!

Also, can you imagine the confirmation hearings?

PS. This line of thought is NOT Obama bashing. Edhopper and others probably want Obama (as I do) to take responsibility for the actions needed and do what needs to be done. I hope Obama is simply playing rope-a-dope with these people and that he really knows what needs to be done.

[NJmaverick]

44. He isn't part of Obama's economic council either

and that apparently is pissing him off. How else can you explain such ridiculous commentary such as the Obama administration floating ideas for the approval of the MSM commentators?

[dpbrown]

39. Take over the banks now!

Stop dilly-dallying!!!

[Politicalboi]

41. I think Krugman's pissed

Because Obama didn't pick him for Treasury Secretary.

[tridim]

42. Damned if he does, damned if he doesn't

Damned no matter what he does.

I like Krugman, but IMO his Nobel prize doesn't make his ideas any more correct than the administration's ideas. This is all uncharted waters.

[pa28]

46. It's time to show authority. Re-administer, fix and sell.

Hopefully Obama is listening to people like Krugman and getting all his options. Personally I'm hoping he steps in soon with a big FDR stick and kicks some a$$. It's time.

Yes, re-administering the institutions goes up against many social taboos and maybe President Obama wants to try the more conventional approaches first. It would be expensive and the cnbc financo-cons would be howling in disbelief but at least it would be taking control of the situation and not trying to halt the death spiral of losses by just adding money.

[high density]

48. I think we should follow the Jon Stewart model

Get a list of customers from the bank. Pay up everybody's loans for the next couple of years. The banks are suddenly back to being well capitalized, the burden on the borrowers has been decreased, plus the burden on the insurance companies like AIG has been greatly lessened. Give the bank specific guidelines about who it should be extending credit to as a participant in this bailout. It's a win/win/win situation versus a lose/maybe win/lose situation.

[nolabels]

51. It's just pitiful when the comedians make more sense than the so called 'rational people'

:argh:

[Odin2005]

52. I think he's trying to pull off a nationalization without making it look like a nationalization.

On NPR yesterday morning some economics professor was saying that the problem is that there are lots of Dems in Congress that are suck-ups for the big banks and wouldn't allow a blatant, direct nationalization so Obama is trying to nationalize the banks through the back door so the corrupted Dems don't notice.

[leftofthedial]

54. Gee, when I said Geithner was a bad choice on the day he was named,

I was ripped a new one for having the gall and the poor taste to piss in Obama's wheaties before he was even President yet. I was called names, including freeper, told to leave DU, that there was no place for my kind here, and widely crapped on. I had threads locked because I was criticizing a Democrat.


Maybe Americans really are stupid.

[BuyingThyme]

57. Truth is controversial.

[leftofthedial]

58. then it becomes passe.

timing is everything.

[BuyingThyme]

59. And they stop locking the threads.

[leftofthedial]

67. funny, eh?

welcome to the "democratic" site.

[BuyingThyme]

55. We're shootin' craps. Bet the come line.

[closeupready]

60. Scary.

n/t

[edhopper]

61. And Roubini says the same thing.

http://www.bloomberg.com/apps/news?pid=20601091&sid=ayVsI_55G8.0&refer=india

"The global recession may continue until the end of 2010 as the response by governments to rectify it is “too little, too late,” said Nouriel Roubini, the New York University professor who predicted the financial crisis.

“Governments are falling behind the curve,” Roubini said at the India Today Conclave in New Delhi today. “This recession can end up becoming even worse.”

The situation can be improved by appropriate policies, including governments taking over insolvent banks, cleaning them up and re-selling them to private investors, he said. The Group of Seven and the Group of Twenty economies “must act together to get out of this mess,” Roubini said. "

Maybe Obama should listen to the people who have been right the last eight years instead of some one who helped let it all happen (that would be Geithner at the Fed)

[Rosa Luxemburg]

63. well we are not putting Krugman in charge are we?

[GeorgeGist]

64. Krugman is still dancing around the sacred ...

profit cow. Which makes him a fool not an economist.

[PM Martin]

66. I agree.

The banks cannot be trusted to clean up the mess that they made.