Posted by DrJohn on 15 September, 2010 at 12:48 pm. 39 comments already!



WASHINGTON (AP) – Confronting misgivings, even in his own party, President Barack Obama mounted a stout defense of his blueprint to overhaul the economy Thursday, declaring the national crisis is “not as bad as we think” and his plans will speed recovery.

Barack Obama recently named Austan Goolsbee, the wanna-be comedian, to lead the Council of Economic Advisers. Goolsbee tells America that unemployment will remain high for, well, likely as long as Obama remains President:

“I don’t think the unemployment rate will be coming down significantly at any time in the near future,” according to POLITICO’s Mike Allen.

Obama has described Goolsbee as

“…someone who has a deep appreciation of how the economy affects everyday people,”

Sounds great, if only you could believe it. Goolsbee is just another policy wonk who has zero experience in the real business world. He is the perfect fit for the Obama administration.

But Goolsbee doesn’t hold a candle to Larry Summers or Tim Geithner. Summers, a key player in the first stimulus package, is often described as a genius, but his genius seems to lie in his crystal clear hindsight.

He was all for a stimulus package in late 2008, but in 2001 argued against stimulus spending:

“The idea that a huge spending program is the way to stimulate the economy, or the idea that the way to get better at high tech is for the government to take over the technology industries, these kinds of ideas basically have become passe because they’ve been disproven,”

He is described as foreseeing the mortgage crisis;

“Three months ago it was reasonable to expect that the subprime credit crisis would be a financially significant event but not one that would threaten the overall pattern of economic growth. This is still a possible outcome but no longer the preponderant probability,”

Yet Summers was an architect of that crisis.

In 1998 Brooksley Born, chair of the Commodity Futures Trading Commission, decided that derivatives ought to be regulated but encountered a buzzsaw of opposition:

She ran into a firewall called the Working Group: Alan Greenspan, chairman of the Federal Reserve, Treasury Secretary Robert Rubin, Assistant Treasury Secretary Larry Summers and SEC chairman Arthur Levitt. Rubin, Levitt, Summers and Greenspan lobbied Congress to pass a law to stop Born and strip her agency of its regulatory power, which they did after working her over in committee hearings. She ended up resigning, feeling that she could not do what she believed was her job to, because that power had been stripped away in what seemed like the seediest of manners.

The guy who argued that new bank reforms would end “too big to fail” is the same guy who made “too big to fail” possible:

As a 1999 New York Times article entitled “Congress Passes Wide-Ranging Bill Easing Bank Laws” quotes Summers as saying:

”Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century,” Treasury Secretary Lawrence H. Summers said. ”This historic legislation will better enable American companies to compete in the new economy.”

In an eerily prescient article, Mark Ames predicted the mess that Summers would create

We all know in the backs of our minds that Barack Obama’s incredible victory will eventually be followed by disappointment. But does it have to come so soon, and hit so hard? The answer will be yes, if Lawrence Summers is named treasury secretary in the president-elect’s cabinet, as many observers believe will be the case. Summers was one of the key architects of our financial crisis — hiring him to fix the economy makes as much sense as appointing Paul Wolfowitz to oversee the Iraq withdrawal. And when you look at the trail of economic destruction Summers left behind in other crisis-stricken countries who sought his advice in the past, then “terror” might be a more appropriate word than “disappointment.”

And two weeks later:

Obama picks Summers as top economic adviser

Summers, who uses Google searches as a means of measuring economic progress

The number of people searching for the term “economic depression” on Google is down to normal levels, Summers said.

made his own predictions about the effect of the stimulus:

“Given lags in spending and hiring, the peak impact of the stimulus on jobs was expected not to be achieved until the end of 2010,” Summers said in a speech at the Peterson Institute for International Economics in Washington.

Unemployment is at 9.6% and Goolsbee says there’s basically no hope in sight.

Obama’s chief economic adviser is largely responsible for putting the US into its current financial crisis.

But more importantly, Summers is the guy responsible for:

•Allowing the banks to carry extraordinary levels of debt, thirty-to-one fractional reserve banking margins

•Ensuring that derivatives were not regulated, and that AIG could operate as a giant hedge fund
•Repealing New Deal era legislation which separated investment banks from commercial banks, insurers and stock brokers, and which kept companies from becoming “too big to fail”

And Obama’s Treasury Secretary- the guy who can’t figure out Turbo Tax?? His job was to keep an eye on CitiGroup:

As president of the New York Federal Reserve Bank, Timothy Geithner often preached that gargantuan financial firms like Citigroup should be held to the highest regulatory standards to make sure they couldn’t take on too much risk.

But when it came to supervising Citigroup in recent years, the record shows that the New York Fed eased the reins as the company blew billions on subprime mortgages and other risky deals that ultimately forced the biggest bank rescue in U.S. history.

Two of the biggest failures in financial history are in charge of our financial future.

The stimulus has failed.

This discussion would be remiss in not including a fun snippet from J. Bradford Delong, a virulently anti-Republican economist:

On the phone just now, Larry Summers just moved me appreciably toward enthusiastic support of the stimulus package by arguing, roughly:

•The big arguments against the stimulus package are two:
◦It will become a destructive lobbyist Christmas tree
◦It will increase the deficit and yet fail to stimulate the economy

And that second argument?

The second argument is incoherent

The much-heralded financial reform law left two huge loopholes for derivatives and Fannie and Freddie are still “too big to fail.”

To paraphrase Einstein, insanity is enlisting the aid of the same people who caused this mess in the hopes of a different outcome.

Goolsbee can always go back to stand-up.

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