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Tuesday, May 12, 2009

Why Obama Is Low-Balling the Banking Crisis


By Robert Kuttner, Huffington Post. Posted May 11, 2009.


It's been suggested that Obama is focusing on Republican self-destruction and that he'll get around to reforming Wall Street next year.


Why did the Obama Administration make this perverse alliance with Wall Street, and decide to prop up large zombie banks rather than taking them into receivership and getting on with it? You could blame it on campaign finance, or you could blame it on the quirk of history that Obama, once he became the nominee, decided to hire the Wall Street-oriented Clinton economic team.

The most hopeful and elegant theory I've heard is that for now, Obama's main political project is to let the Republicans self-destruct; co-opting Wall Street (for now) is part of that game plan. He'll get around to reforming Wall Street next year. Even Roosevelt had to take things one step at a time, as public opinion moved. The Second New Deal was more radical than the first. I've often said that Obama is smarter than I am, and if he is politically shrewd enough to have come up with that strategy, hats off to him. I'm also a Red Sox fan, and anything is possible. But for the moment, it looks more like a case of political expediency and even political capture.

I could excuse all that if the Geithner-Summers-Bernanke strategy of low-balling the scale of the banks' problems and inviting speculators to bail them out actually worked. But the greater likelihood is that the economy will tread water at best for the remainder of this year, losing both precious time and political credibility in America's heartland.

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