Team of Zombies Wins Fight to Protect Bank Executives

by: David Sirota

Tue Feb 10, 2009 at 01:11


The New York Times reports that Obama's economic team of zombies won out against those who wanted tougher restrictions on Wall Street:

WASHINGTON- The Obama administration's new plan to bail out the nation's banks was fashioned after a spirited internal debate that pitted the Treasury secretary, Timothy F. Geithner, against some of the president's top political hands.

In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials...

He resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid.

Interestingly, the divide inside the administration seems to hearken back to a divide discussed very early on in the formation of the administration - the one whereby progressives were put in strictly political positions, and zombie conservatives were put in the policymaking positions. In this case, more progressive politicos like Axelrod was overruled by corporate cronies like Geithner.

The good news is that at least there seems to be something of a debate inside the administration, however tepid. The bad news is what I and others predicted: namely, that progressives seem to have been ghettoized into the political/salesmanship jobs, the conservative zombies shaping policy aren't interested in having any debate with them. Worse, we're now learning that those zombies are as rigidly ideological as their initial policies seemed to suggest.  

David Sirota :: Team of Zombies Wins Fight to Protect Bank Executives

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It reflects poorly on Obama (4.00 / 3)
that he would give so much credence to people like Geithner and Summers, who have been so wrong about so much. I predict that appointing them will turn out to be among his worst decisions as president.

Join the Iowa progressive community at Bleeding Heartland.

Both (4.00 / 2)
While I don't have a problem with either one in the administration individually, I think the two combined poses a real problem.  Geithner at Treasury and Roubini as the main adviser, for instance, would be a true "team of rivals" that could probably get to the correct solutions.  But the one-two punch is too much.

[ Parent ]
I'm not as yet convinced (0.00 / 0)
that this reflects poor judgement on Obama's part, as opposed to a reflection of his own ideology. Which would still be poor judgement IMO, but on an economic as opposed to policy and political level. I.e. did he choose them because he substantially agrees with their economic ideology, as well as believes that they're ideally suited to implement it, or did he choose them because he values their expertise more than he cares about their actual ideology? I.e. does he value ideology or process more--or both?

And consider this my latest attempt to offer you an opportunity to disagree with me, or else be frustrated by your inability to do so.

;-)

"Those who stand for nothing fall for anything...Mankind are forever destined to be the dupes of bold & cunning imposture" -- Alexander Hamilton


[ Parent ]
It's poor judgement (4.00 / 1)
to get all your advice during a record-setting crisis from one limited school of people (neoliberal economists) who not only missed the crisis, but actually helped cause it, and in Geithner's case were deeply involved in massive plundering of the US Treasury. Unless Obama is some kind of Wall Street Manchurian candidate he should have known better.

[ Parent ]
I agree (4.00 / 1)
I'm just wondering whether he actually buys into neoliberalism, or just happens to trust the neolibs that he knows to do the best job, but that their ideology is secondary. I suspect that it's the latter, which is bad, but in a different way. I personally don't think that he has an ideology, about anything really, and it's all one huge ongoing and never resolved intellectual puzzle to him in which everyone's opinion is worth considering, and it's more of a process than a goal. Which is fine in academia, but not so much in a president. And I further suspect that it's the result of a personality that appears to not want to make up its mind about anything until the last possible minute, so as to not be tied down in any given direction. Which is fine to the extent that flexibility is good, but not so fine in that he doesn't seem to stand on anything more solid than his intellect, and will go wherever the strongest current leads him.

I'd almost rather have an open-minded and flexible ideologue than someone who just goes with whatever's most interesting and persuasive to him at the moment. Flexibility has its virtues, but not when it's infinite and hollow at the core. Who IS he, and what DOES he believe in? I'm not sure that even he knows, or cares.

"Those who stand for nothing fall for anything...Mankind are forever destined to be the dupes of bold & cunning imposture" -- Alexander Hamilton


[ Parent ]
Zombies eh? (4.00 / 1)
I think it's worthwhile to give the whole article a once over. There are still executive pay caps and oversight. Banks need help and obviously need guidelines and regulations, but they don't need to be taken over by the government.

For his part, Mr. Geithner will blame corporate executives for much of the economic crisis, according to officials. He will announce rules that require all banks receiving capital from the government to submit plans that describe how they intend to strengthen their lending programs and generally restrict them from using the money to acquire other banks until the government money is repaid.

But officials said Mr. Geithner worried that the plan would not work - and could become more expensive for taxpayers - if there were too much government involvement in the affairs of the companies.

Mr. Geithner also expressed concern that too many government controls would discourage private investors from participating.

It will also renew a legislative proposal giving bankruptcy judges greater authority to modify mortgages on more favorable terms to lenders and over the objections of banks.

Officials say that new rules encouraging transparency and limiting lobbying are intended to begin to restore political confidence in a program that has faced withering criticism in Congress, an effort that they view as essential because they expect to return to Congress for more money later this year.

The $500,000 pay cap for executives at companies receiving assistance, for instance, applies only to very senior executives. Some officials argued for caps that applied to every employee at institutions that received taxpayer money.

Abandoning any pretense about limiting the moral hazards at companies that made foolhardy investments, the plan also will not require shareholders of companies receiving significant assistance to lose most or all of their investment. Some officials had suggested that the next bailout phase not protect existing shareholders. (Shareholders at most banks that fail will continue to lose their investment.)

Nor will the government announce any plans to replace the management of virtually any of the troubled institutions, despite arguments by some to oust current management at the most troubled banks.

Finally, while the administration will urge banks to increase their lending, and possibly provide some incentives, it will not dictate to the banks how they should spend the billions of dollars in new government money.



The banks DO need to be taken over, in fact... (4.00 / 4)
...banks need to be allowed to fail. They made their bed, now lie in it.

Not ALL banks bellied up to graft, theft and corruption. There ARE still banks who held to good lending practices and are vialble. Why are THEY not being favored by Geithner? Why should those institutions that gorged on corruption STILL be helped by the government?

Until Geithner can begin to answer that question, I continue to maintain that not only should he lose his job, but that he should be one of the ones perp-walked to prison for his part in the near-collapse of the US dollar (along with Paulson, Bernake and a host of others).

Bad bank idea? Horrible, from the outset.

Bank shareholders have no claim to being better or in need of more protection than other investors.

This entire thing is beyond infuriating. For one thing, the stakes are so high that unless Obama deals w/ the corruption, nothing will get better. People don't trust banks...they don't trust the system. Intertwine the government with that distrust of banks and very bad things are going to result.


[ Parent ]
Ignorance Abounds (4.00 / 1)
How can anyone possibly follow all of the information about exactly what is being done with taxpayer dollars and not think there's a huge problem with leaving the bank executives in charge?  That's okay.  At this point I have come to assume the average centrist democrat won't understand the consequences of allowing the banks to exist autonomously of federal control until our whole society comes crashing down.  

Optimism is fine, unless you're one of the millions and millions of people who have lost jobs, homes and hope.  Read whatever article you like.  It won't change the disaster that is taking place.  

Timothy Geithner is in a position to make the worst mistakes in the history of our nation.  But I'm sure it will be okay.  Rush Limbaugh thinks it would be great for Obama to fail.  You don't even have to read to know what he thinks.


surprise, surprise (0.00 / 0)
guess who won the argument?  my head will explode with shock when a friedman zombie doesnt when the debate in this admin.

guhhhhhhhhh invisble hand...ggggggggggaaaarrrggh free markets equal free peoples....gssssssssssssssshhhuuuuuuuu hayek TAX CUT BRAINS BRAINS


This is political suicide. (4.00 / 1)
If this becomes a straight party-line vote like the stimulus package, with Dems lining up behind Geithner to give away hundreds of billions to shareholders and executives, and Republicans taking a populist "let them fail" line, then this vote alone could guarantee a Republican House and Senate in 2011, and a GOP White House in 2013.  This proposal is the worst of all worlds--socialist plutocracy.  Giving hundreds of billions to the very richest, most powerful, and most incompetent.  I can't believe Democrats are seriously going along with this.  I can't believe they'll expect any progressive to lift a damn finger for any Democrat in any election ever again if this goes through.  

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