Great item in Bloomberg News this AM.  Where have we heard of the coming Volcker-Summers showdown?  Ah, it was in The Big Picture.

Excerpt:

Paul Volcker has grown increasingly frustrated over delays in setting up the economic advisory group President Barack Obama picked the former Federal Reserve chairman to lead, people familiar with the matter said.

Volcker, 81, blames Obama’s National Economic Council Director Lawrence Summers for slowing down the effort to organize the panel of outside advisers, the people said. Summers isn’t regularly inviting Volcker to White House meetings and hasn’t shown interest in collaborating on policy or sharing potential solutions to the economic crisis, they said.

While Summers, a former Treasury secretary, oversees the official White House economic policy apparatus, Obama tapped Volcker for a new Economic Recovery Advisory Board charged with injecting fresh, outside ideas into policy debates.

“When you have two strong, highly accomplished, driven people, it’s not unusual that there is going to be a battle over turf,” said James Cox, a professor at Duke University Law School in Durham, North Carolina. “I would hope that Obama doesn’t lose Volcker’s counsel. They need someone to help them think outside the box.”

The contretemps shows the difficulties Volcker, perhaps the world’s most respected economist, may encounter as an outside adviser charged with providing policy alternatives to the president, said William Silber, a finance professor at New York University’s business school…

The 6-foot, 7-inch Volcker, who ran the Fed from 1979 to 1987, was vilified for raising interest rates to fight inflation at the risk of pushing the U.S. into a recession.

Since then, Volcker’s assault on runaway prices has been credited with sparking years of economic growth. Meanwhile, the standing of his successor, Alan Greenspan, has been undermined by questions about whether his policies set the stage for the current credit crunch and economic slowdown.

Great stuff — read the full article

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Source:
Volcker Chafes at Obama Panel Delay, Strains With Summers Rise
Robert Schmidt and Julianna Goldman
Bloomberg Feb. 5 2009

http://www.bloomberg.com/apps/news?pid=20601087&sid=aaLzJZKNcc6Y&

Category: BP Cafe, Credit, Markets

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12 Responses to “Volcker Chafes at Obama Panel Delay, Strains With Summers Rise”

  1. VangelV says:

    I am sorry to point this out but both Summers and Volker suffer from the fatal conceit that Hayek warned us of. Neither individual is capable of effective economic planning or forecasting the consequences of the actions taken by their respective committees. If the US wants to correct the problems that it faces as quickly as possible it needs to get out of the way and let the markets force corrections. The bad banks should fail and people who paid more for their homes than they are worth should lose them. Green companies are free to continue to pursue their goals but they must compete and cannot demand that consumers pay more for their products. It is time that the US government stopped its slide towards the socialist abyss and start limiting its activities to protecting individuals from the use of force and fraud.

  2. investorinpa says:

    Since nobody else will say it, I will. Obama is losing control of the ship fast. There is too much dissension among his staff, advisers, Congress, and pretty soon, the people. Wow, in just a span of a few weeks it looks like he’s way in over his head and underestimated his ability and the depth of the problems facing his tenure as President.

  3. jclabelle says:

    Hard to deny that Obama is losing control. He’s surrounded himself with unmanageable, gigantic Egos and he’s going to pay the price.

  4. Chris Whalen says:

    This is what I told our advisory clients this week:

    “1. The failure of the Daschle nomination begins to reveal further the underlying disarray and lack of focus within the Obama Administration. More than an FDR type figure, Obama resembles an intelligent, hopeful young monarch surrounded by powerful family and tribal elders, many of whom lack competence and have various personal conflicts. Unlike FDR, whose intellect and political skills were widely underestimated, even ridiculed, Obama starts with seeming competence, thus has nowhere to go but down. It is interesting, for example, that the media is already questioning the choice of Hillary Clinton at State. At some point, Obama is going to need to make some choices in terms of the ownership of various policy portfolios. If the US/global economy continues to track lower in terms of employment and GDP, look for a UK-style cabinet reshuffle before year-end.”

  5. bonghiteric says:

    Obama’s personnel choices, in my view, reflected a need to hit the ground running upon inauguration. I believe his strategy was to address the numerous policy “hotspots” with personalities that were familiar with the inner-workings of D.C. politics, could get confirmed pretty easily, and were up to speed on the various issues. I think he chose expediency at the expense of sharper minds less beholden (in the case of the pressing financial/economic issues) to Wall Street/Goldman Sachs. I originally bought into this strategy and thought perhaps these people disagreed in private with some of Fed’s and Treasury’s prior decisions. I now agree with Chris’ suggestion that Obama needs to really get his hands around the real implications of some of his staff’s early decisions.

  6. Groty says:

    Bill Clinton stumbled right out of the gate, and he ultimately recovered.

    But Obama is losing credibility at an alarming rate. He pledged change, but he has surrounded himself with the same old tired Washington elite and career politicians. He pledged “no earmarks”, but this bacon filled plan out of the House is loaded with earmarks, and I interpretted his remarks yesterday to mean he’s not prepared to scrap it and start over. He pledged no lobbyists, and he’s already made exceptions to that policy. He pledged a new era of responsibility in government, and at least 2 of his high level nominees have been forced to withdraw from consideration for failing to pay taxes. Geithner somehow managed to get confirmed for failing to pay taxes, but one wonders if he has the moral authority to be an effective Treasury Secretary. Richardson was forced to withdraw from consideration because he’s under grand jury investiagation for influence peddling.

    I was shocked to see that even Maureen Dowd took a shot at him.

  7. VangelV says:

    Obama, his advisers and most economists suffer from the fatal conceit that Hayek warned about. The bottom line is that central planners can’t predict and control where the economy is going unless they simply want to destroy it. The best way forward is to let the bad businesses fail and to ensure that people take responsibility for their own actions. We need to keep in mind that nobody is talking about the 1920-1921 depression because the government did nothing and the correction was deep but short. That is not the case for the 1930s when Hoover and FDR intervened and meddled so much that they considered a necessary contraction into the Great Depression.

  8. VangelV says:

    Chris

    Why is an FDR type desirable? FDR was never able to accomplish anything positive on the economic front because the NRA and other idiotic programs tried to prevent the necessary liquidation of malinvestments. The average American did not see a real improvement in his standard of living until after WWII. A better role model for Obama would be Harding, who knew exactly how to handle a sharply contracting economy and did what he should. By doing nothing Harding allowed the sharp contraction to liquidate malinvestments and the economy started to grow very quickly after the contraction began.

    For the life of me I can’t understand Americans and their failure to understand their own history. The ones that most people think of as the best presidents are typically the worst (Lincoln, FDR, Wilson, Reagan) and the ones that are seen as unimportant are usually the best (Harding, A. Johnson, Grant, Monroe, Van Buren).

  9. Chris Whalen says:

    I am not an FDR fan at all. Reagan and TR are my personal favorites. And I see there is a revisionist move afoot to rehab Andrew Jackson, another classic.

  10. usphoenix says:

    I continue to lose faith in Obama, but I am reminded of a very famous Lincoln quote, and I know Obama is a huge fan of Lincoln.

    When asked why Lincoln added a true enemy to his cabinet, his response was “I’d rather have him inside pissing out than outside pissing in”. So just maybe there’s more there than we’ve given him credit for.

  11. psm2000 says:

    Obama seems to be under co-ordinated assault from Republicans who want to cut him down to size. They seem to be succeeding. The incompetency of Dems is for everyone to see. The stimulus is barrel full of pork. The same old insiders are running his administration trying to create Clinton redux. Of all this, I hate the Treasury guy getting through.

    On foreign policy side, he has been scolded by Indian government for unnecessary remarks regarding Kashmir issue (disclosure: I am from India originally). N. Korea and Iran are dissing him.

    GMO’s Grantham has also predicted that Volker will resign in less than a year.

  12. Greg0658 says:

    missed this post last night – so much to intercept
    and I get your point there VangelV
    that being in essence if you can’t manage it hands off – let free markets do it for free

    we really are in a jihad here in America too aren’t we
    that being government is incompetent – let tribes prevail

    problem is all* tribes make war with each other – little people are abused by the power
    there you have it the jihad circle

    * never generalize to the max .. more like all tribes compete to some extent