Larry Summers: Geithner Doing All He Can on AIG Bonuses

Larry Summers appeared on ABC’s This Week with George Stephanopolous.  Select quotes:

“There are a lot of terrible things that have happened in the last 18 months, but what’s happened at AIG is the most outrageous,” said Summers, chairman of the White House National Economic Council, during an appearance on “This Week” Sunday.

“What that company did, the way it was not regulated, the way no one was watching, what’s proved necessary, it is outrageous,” Summers said.

“We are a country of law. There are contracts. The government cannot just abrogate contracts. Every legal step possible to limit those bonuses is being taken by Secretary Geithner and by the Federal Reserve system,” Summers said.

“What the Obama administration has done, based on the advice of attorneys, is done everything that it can to, within the law and within the tradition of upholding law that we have in this country, to limit these bonuses. And they have as a result of Secretary Geithner’s efforts been scaled back,” he said.

My take:  The game changed when the company began taking our money.

Full Text: Larry Summers Speech, Brookings Institution, The Obama Program and the Current Economic Crisis

(Source: White House Press Office)

I am glad to be here. This morning I want to describe our understanding of the root of our current economic crisis, talk about the rationale for the Administration’s recovery strategy, and connect our longer-term economic strategy to the central objective of sustained and healthy expansion.

Read more

BusinessWeek: You Won’t Fix the U.S. Auto Industry on the Back of the UAW

2. Some southern Republicans think this is all the UAW’s fault. Not so. Wages are pretty competitive. The JOBS bank (that paid layoff clause that everyone hates) is on its way out. The union does need to give on its rigid work rules and its gold-plated healthcare deal. But you don’t save Detroit solely on the UAW’s back.

That quote is number two on a six-item list of things for our two new Car Czars, Timothy Geithner and Larry Summers, to consider as they set up a task force to help the U.S. auto industry help itself.  The article is online at BusinessWeek.

Does anyone else feel that Messrs. Geithner’s and Summers’ plates are already too full?  The Big Three Automakers are the industrial driver in most aspects of the once mighty, now pathetic U.S. manufacturing market.  In terms of GDP, what do you think has supplanted industry – which creates real, three dimensional value?  My armchair economist’s view is that is has been financial services, health care and government.

Now ask yourself, what is the root cause of or at the very least, one of the two or three root causes of our current economic predicament? Financial Services …  Who in the Administration are the two most in the tank and a part of that financial services, unregulated slop bucket for the investment class?  Messrs. Geithner and Summers.

The auto industry – and American workers all the way down the supply chain – are either going to be royally screwed by these two, or, perhaps we’ll finally see some of the economic and public policy brilliance we’ve heard so much about but hasn’t been on display yet for President Barack Obama.

Bank Bailout: Hurts Worse When the Politicians Failing Us Inspired Hope and Promised Change

There are so many things to dislike about the big banks, brokerages and insurance companies that brought the financial crisis upon us that one doesn’t know where to begin.  So instead, let’s begin with the politicians who we elect and pay to keep us out of these messes.

They failed us last fall with the first enactment of the TARP – the $700 billion bailout – and they’re failing us again.  Only now it hurts worse because the folks failing us are the ones who inspired hope and promised change.

I had a fantasy that change would mean a different approach in handling the greed and inequity which hide behind the  corporate ramparts.  I thought change would mean a president taking advice from the likes of Krugman and Galbraith and instead we’ve got Summers and Geithner.  Where the problem with Krugman and Galbraith may be that they’re too “liberal” for a president trying to be non partisan and centrist, the answers to our problems do not lie with “the establishment,” represented by Summers and Geithner.

I’m angry, there are lots of people angry, and we don’t want to be told any reckless business is “too big to fail.”

On Tuesday, Geithner was still singing, Too Big to Fail.  He didn’t tell us much, but he did tell us Washington is still willing to pull out the stops for the investment class.  Congress is no better.  When it comes to the financial services sector, Congress is operating in the irrelevant sector.

What we do still have a chance at here is change.  Some players need to be thrown out of the game, and their survival shouldn’t have anything to do with how far their tentacles reach into the larger economy or the campaign accounts of our elected officials.

So, here’s another fantasy … Perhaps Treasury Secretary Timothy Geithner’s announcement Tuesday was only a trial baloon.  Maybe he and Larry Summers were on the phone with Robert Rubin and Alan Greenspan and thought they might be able to rig the game one more time for Wall Street.  Geithner may have said, “Boys, I just don’t know, I think we’ve run our string, but I’ll try for one more – but I’m telling you, if there’s blowback, this president is different than the last two …”

That’s my fantasy anyway.

Transcript: Obama Announces Economic Team | Includes Press Q&A | November 24, 2008

(Source: CNN)
(JOINED IN PROGRESS)

BARACK OBAMA, PRESIDENT-ELECT: The news this past week, including this morning’s news about Citigroup, has made it even more clear that we are facing an economic crisis of historic proportions.

Our financial markets are under stress. New home purchases in October were the lowest in half-a-century. Recently, more than 500,000 jobless claims were filed, the highest in 18 years. Read more

Video: Obama Announces Economic Team | November 24, 2008

Obama Transition: Meet the New Team, Same as the Old Team

Progressives and others who backed Barack Obama for president are pulling their hair out a bit as the Obama presidency begins to take shape as … the Clinton presidency.

Here’s what we know and what we think we know:

• White House CoS – Rahm Emanuel – Clinton Alumni
• Secretary of State – Hillary Clinton – Former First Lady
• Secretary of HHS – Tom Daschle – Former Senate Leader from Clinton Era
• Secretary of Homeland Security – Janet Napolitano – Actual Newcomer
• Secretary of the Treasury – Larry Summers – Clinton Alumni
• Attorney General – Eric Holder – Clinton Alumni

Now some are looking at this list and wondering where the change is coming for the top cabinet spots.  Here’s where the benefit of the doubt has to come in.

If you voted for Barack Obama and believe that he means what he says and that he’ll work toward a different Washington, one more responsive to the needs of regular folks and less so to the special interests – remember that he’s not even in office yet. 

When these prospective Cabinet members worked for or in the Clinton administration it was in the heady days when the Democratic Party first fell in love with Wall Street and its money.  They were smitten.  These smart people were tired of ceding the “business” argument to the Republican Party.  Except for perhaps Robert Reich and James Carville every Democrat in Washington during the nineties bent over backwards to deregulate and tear down firewalls because Goldman Sachs and their favorite Republican, Alan Greenspan, said it was good for business.

Here’s what’s different: Obama.  Despite all the crap that John McCain and the Republican Party threw at Barack Obama during the campaign, he stayed on message.  That’s integrity.  That’s steadiness and steel.  I believe the guy when he says things are going to change.

As for the retreads – other things have changed.  The Democratic Party is still heavily funded by the investment class and its economic brainpower is still a little too tied to Wall Street for my comfort, but these people aren’t stupid.  They got caught up in the same high flying economy so many did during the nineties.  The difference was they were in power and we can trace some of today’s financial crisis to the policies they pursued back then.  We can only hope they’ve learned their lesson and the great talent of people like Rahm Emanuel and Tom Daschle will be fully aligned with Barack Obama’s world view and public policy.

One thing I do wish they’d try again from the nineties.  Remember when they deregulated cable TV?  I’m still waiting for the “competition” to lower my cable bills.