The good news: Summers is gone Jan 1 (no word yet on Geithner).

The bad news? I am not sure what (if any) impact this will have on the administration’s economic policies.

To review:  Summers is the former Clinton Treasury Secretary, mentored by Robert Rubin. As such, he was one of (many) architects of the financial crisis. In addition to believing all of the usual foolishness about efficient markets, he bought into the radical deregulation arguments pushed by the free market absolutists.

Summers was the Treasury Secretary when Glass Steagall was repealed. Instead of speaking out against the irresponsible Gramm–Leach–Bliley Act (Financial Services Modernization Act of 1999) that allowed the Financialization of America to progress, he actively supported it. Instead of explaining to the public how Glass Steagall had prevented every Wall Street crisis since the Great Depression from spilling over onto Main Street, he rolled over for Citibank.

Understand that the repeal of Glass Steagall was not a cause of the crisis. But, it allowed the net damage to be far greater and extend far wider than it would have otherwise been. From a libertarian perspective, it was emblematic of the corporate takeover of the legislative process. For a hefty fee (aka campaign donation) you could pretty much write the regulations that covered your own industry. How could that ever go wrong?

Summers oversaw the passage of the even more ruinous Commodities Futures Modernization Act of 2000. The CFMA exempted all financial derivatives from any and all regulatory oversight. The CFMA not made the AIG collapse possible, it made it highly likely. It helped to set up both the Lehman and Bear Stearns’ collapses. The CFMA allowed AIG FP to write over $3 trillion in derivatives, reserving precisely zero dollars in case these insurance policy-like obligations had to be paid out.

Failing upwards: When Obama appointment the Rubin duo of Summers and Geithner, it a perverse reward for a job done poorly. The two were creatures of the banking system, and were unlikely to do anything that threatened the existing order. Even worse, it created a dynamic where the new administration was committed to defending the policies that helped to contribute to the crisis in the first place. Instead of To Hell with the Banks, Save the Banking System, we got the exact reverse. This was Rubin’s lasting gift to the Obama White House:  A third term for George W. Bush’s economic policies. When Obama becomes a one-termer, it will be his own fault for following this horrific economic advice.

Summers was incapable of saying, let’s repeal the Glass Steagall Repeal; lets overturn CFMA. Rather than fix what was broken, he stayed committed to the same bad ideas that led to crisis and collapse. Most humans have a hard time saying: “My bad, let’s just reverse the error and start over.” By putting into senior positions the people who helped create the mess, we ended up with a defense of the decision making that proceeded, instead of a fresh approach. Summers was a defender of the status quo. This was not change we could believe in — it was simply more of the same.

The Bush administration gave us the bailouts of Bear Stearns, Fannie & Frediie, AIG, Citigroup, Bank of America, Merrill Lynch, Morgan Stanley, Goldmasn Sachs, et. al.  The hope that a new White House would change the course was quickly dashed by the new old Economic team. Obama lacked the will or the understanding or the nerve to break with those Bush policies. That was his ultimate error. Instead of imprinting the failures of the prior administration on his predecessor, instead of making Bush own what he in fact did, Obama wrongly adopted them. Thus, he made the bailouts in large part his own. Huge mistake — and one that was inevitable with Summers large and in charge of White House Economic policy.

The Obama White House correctly forced the insolvent automakers into bankruptcy reorganization. They should have done the same with the insolvent banks and investment firms. That was impossible with the banker’s boys running the White House economic policy:  The Rubin/Summers/Geithner team made sure that did not happen.

As Allan Meltzer stated,  “Capitalism without failure is like religion without sin—it just doesn’t work.” The change people voted for never appeared, and the Summers led economic team gave us two more years of Bush bailout policies. For that humongous error, his departure is a welcome change.

~~~

UPDATE: September 22, 2010 10:34am

To put this into context of Wall Street:

Whenever a new portfolio manager takes over an older, under-performing fund, the first thing he does is jettison all of his predessor’s mistakes. Why own the prior manager’s problems? If you decide these names are attractive at a later date, well then, he can own them on his own terms, metrics, methods, etc.

But if you were to put the original manager back in charge, he will not be able to disown those prior errors. His cognitive biases are likely to prevent him from acknowledging the same problems he created. This is why project leaders are removed, military commanders get relieved, CEOs get fired. A clean sweep is all but impossible with the prior management. This is human nature.

Category: Bailouts, Politics, Psychology, Really, really bad calls, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

51 Responses to “Summers: Good Riddance”

  1. Chief Tomahawk says:

    Worthy of a Harvard seminar BR! Hope they give you a ring to book a speaking engagement regarding their soon-to-return DC insider/boomerang. I wonder whether Summers will hook Harvard up with another $1.8 trillion dollars worth of risky investments for it’s endowment fund (afterall, the place is still standing)??? http://www.boston.com/news/local/massachusetts/articles/2009/11/29/harvard_ignored_warnings_about_investments/?page=1

  2. call me ahab says:

    excellent post-

    Obama could have (and should have) made some bold moves regarding the banks- but delegated (Reagan anyone?) the decisions on that to those who were supposedly the experts-

    colossal blunder- (much like starting a land war in Asia)

  3. JustinTheSkeptic says:

    BR, have you ever thought about entering the political arena? I truly believe that you would be a great choice to take someone like Summers place. Yea, your probably too outside Washington politics to even be considered.

  4. scottsabol says:

    Its a shame that the majority of the public is ignorant on the basics of economics to understand what the repeal of Glass-Steagall and the passage of the Commodities Futures Modernization Act setting the stage for what has happened since then.

    Most still attempt to whittle it down to the same “higher taxes, big government” or “lower taxes, less government” rhetoric.

    Maybe a change will do some good in the long run. Only time will tell. I bet Geithner is gone by the end of the year.

  5. BennyProfane says:

    I was driving home last night and heard something on NPR that almost made me veer off the road – maybe somebody could help me with this. Something about him going back to Harvard to teach, and one of the subjects would be, I swear I heard this, really, ……….. How government spending can create jobs.

    Was I hallucinating?

  6. chartist says:

    This is my main problem with the Ivy league: they perpetuate crony capitalism.

  7. globaleyes says:

    Kudos to BR for a flamethrower-style post that left its target smoldering and crisper than any autumn leaf.

    Fans of The White House would say that President Obama is turning a corner and making economic policy his own. All Presidents rely on help upon arrival but the good ones know gow to change course midstream.

    BR is right and so is The President.

  8. super_trooper says:

    @BennyProfane, time to stop listening to NPR and move over to news you can believe in Fox news radio. Try staying on the road while listening to Glenn Beck or Sean Hannity.

  9. The Topic is a Total Waste of, formerly, good Pixels..
    ~~
    even, this aspect: “The Obama White House correctly forced the insolvent automakers into bankruptcy reorganization.” bastardizes the Term: “bankruptcy reorganization” ..
    ~~
    “The change people voted for never appeared..” Dude, even Gomer Pyle USMC wouldn’t have been ‘Surprised’..

  10. call me ahab says:

    here’s an image everyone can relate to including Harvard Alumni and students (who lost billions in their endowment fund)-

    http://www.truthdig.com/images/reportuploads/solongsummers_399.jpg

    and following on MEH’s theme- Surprise, Surprise,Surprise- your money’s gone!!! (and why was he picked by Obama again . . .call me dense)

  11. wally says:

    “For a fee (campaign donation) you could write your own regulations.”

    Exactly! Laws for sale. That’s where we are today.

  12. BennyProfane says:

    Super Trooper

    I’d rather be forced to listen to my ex wife’s Celine Dion CD over and over again.

    ~~~

    BR: Hey! I’m on NPR all the time. They have great stuff.

  13. Greg0658 says:

    I would like to see a person in the position that would make the Secret Service have to double-up and work twice as hard for the POTUS .. would that be you Barry ? or would you be Goldilocks porridge chair bed “just right” ? or would you knowing its just a temp job play for the future yacht ?

    I think I’m drafting you BR .. what the hey .. you in ? its just temp ? it definitely good PR for BR

    ~~~

    BR: heh heh way too many skeletons in my closet to get thru the White House vetting process (but at least I pay my taxes!)

  14. davefromcarolina says:

    The question, of course, is whether Summers will be replaced by someone not tied to Rubin. Do you suppose that’s within the realm of the possible?

  15. crazicanuck says:

    I don’t think it was ‘a lack of nerve’, I think it was a lack of votes. Were/are the US politicians amenable to the policies you suggest? The Obama admin wanted to go beyond partisanship. Geintner and Gates are examples of an effort to go beyond partisanship. Any effort at compromise means that any policy will be compromised. You are saying that Obama was wrong to try at non partisanship? He should of said “Bush was an idiot and I will not have any Republicans or officials from the Bush era in my admin”? Obama compromises have failed.

    Americans blame Obama for the mess they are in now and want to return to the ‘good times’ under Bush. If that is true then Obama can, effectively, do nothing.

  16. number2son says:

    Excellent post, BR, typos and all. And a welcome antidote to the hagiography now sitting atop the fold on Bloomberg (dreck, even when copy edited by a pro, is still dreck).

    And I would ask that you save this for Nov. 2012, when it will serve as an apt eulogy for the Obama Presidency.

    And btw, do you also feel like a piñata, too, BR?

    Didn’t think so. In any case, that little moment was particularly nauseating given what Summers and Geithner have wrought.

    ~~~

    BR: No, I have been calling for larger sticks and more whacking . . .

  17. TakBak04 says:

    Good Post, BR, reminding us of why we should celebrate Summer’s exit.

    Problem is…who will replace him? I saw Erin Burnett (CNBC) this a.m. pushing three CEO’s who she said were her suggestions. Erin is a member of Council on Foreign Relations, so assume either they or some other interest gave her those names. I don’t know why I have hard time believing she did her own research to come up with the names she did, and sorry I didn’t write them down…believe it was former CEOs of Deer, Continental Airlines, and someone who had something to do with a GE division.

    Would it be a good idea to have al former CEO to replace Summers? Some would say better a person with business experience than another Ivy League Economist… I’m not so sure.

  18. number2son says:

    crazicanuck,

    The answer is no. Obama should have been a leader. A man who does not seek consensus for consensus-sake, but provides a clear and decisive way forward that inspires others to follow. Someone who truly had the best interests of the entire country as his guiding principle. Instead we have a meek corporate middle-manager and can now look forward to even more horrible leadership from whoever the right-wing noise machine throws up on the ballot in 2012.

  19. dead hobo says:

    BR pondered:

    The bad news? I am not sure what (if any) impact this will have on the administration’s economic policies.

    reply:
    —————-
    Probably none. As another poster above stated, Obama lacks leadership. If he had any leadership abilities, it would not matter who held the job or whether Summers was there or not. The rest of the Democrats ooze failure at their most core level. No meaningful change will be proposed, discussed, initiated, or implemented. Summers replacement will be an empty suit and leave no footprints other than to support whatever new spending initiatives bubble to the top. Republicans would be no different in results, only in tactics.

    The Fed will support economic bloat by printing money and causing commodities to be priced out of the range of affordability. The only measured inflation will come from 2md round effects from asset inflation due to commodity price increases since commodity prices aren’t counted as inflation by the Fed. The rest of the economy will be in deflation due to the high cost of commodities and lack of demand due to lack of jobs and lack of disposable income, all because commodities are so expensive.

  20. carleric says:

    It is a sad but true fact that Larry Summer’s reputation is dwarfed by his abysmal record of continued failures…..he is in the same camp with Bernanke, Geithner, et al…educated far beyond his ability to comprehend….or just another bewildered neo-Keynesian…

  21. Lugnut says:

    “When Obama appointment Summers (and Geithner), it he was perversely represented a reward for a job done poorly.”

    BR, add this to your list of things to edit. Otherwise excellent post

  22. ashpelham2 says:

    I agree with all points stated in the blog, Mr. Ritholtz. I’d also like to second the comment about how Americans should get a good understanding of what caused them to lose their jobs and lose their livelihoods, and that it wasn’t “more taxes, more government” or “less taxes, less government”. Instead, it was the NASCAR jackets that our lawmakers should be wearing right now, that show what industries and what companies specifically paid for them be there. If we all understood which side of the aisle some of these hacks we call politicians were on, voting would become a very different exercise, every 2 years. Instead of just checking the box “R” or “D”, people would have to know who the candidates are, that are going to appoint corporate puppets like Summers, and stop RE-electing pols who will say one thing, and do the exact opposite.

    Here’s to “change” we can believe in……

  23. Marcus says:

    Summer’s leadership at Harvard was the main reason the school lost over $12B. He was the main advisor for over a trillion in wasted spending in DC. I wonder what new mischief Larry is up to? I want to put the company he joins.

  24. Breezy says:

    BR
    You were too charitable. Summers has a long history of being brilliant on things that don’t matter, but an unbroken history of making very bad choices/decisions/recommendations on the big important decisions. Your list of his big failures is good, but that list is much longer.
    I question those who think his departure won’t help. Isn’t he a consummate gate-keeper who prevented all good ideas from reaching the President? Won’t his successor allow at least some sound economic ideas get to Obama?

  25. louis says:

    So who got to Obama to keep these guy’s and what did they say that kept the failing going forward?

  26. V says:

    Grassroots campaign to bring back Volker?

  27. Mike in Nola says:

    BR – Great post, but lots of typos. You should get someone else to proofread it.

    Your quote on capitalism and religion points out the problem pervading the US today in both spheres, typified by the rise of the Joel Osteen-type ministries. God loves you and wants you to be successful. Never a mention of the necessity to be good and obey the commandments or atone for wrongdoing. It’s as it if the congregation were all bankers and God was Ben Bernanke or Tim Geithner.

  28. Greg0658 says:

    “Here’s to change we can believe in…… Instead of just checking the box R or D”

    how about – instead of people – we get to vote on issues – run by people – who we can throw the bum & law out – in 45 days – after we become unhappy with the law they wrote *

    * ah but business will be running round chasing changing policies – ah then get it right the 1st time – write what you really think the people will stick with

    IT can happen in this super connected day … but but but I do worry what the Americans will choose for a few years (or decades) after and then I do believe in masses wanting it “just right”

  29. lalaland says:

    Just to be clear – after TARP, the Obama administration should have forced the banks through bankruptcy? I don’t think that would be constitutional, and maybe a Republican could get away with it with severe bruising, but as a Dem that would literally destroy the party.

    Dems reputations are already anti-business, and forcing solvent companies (they would claim they are solvent you know – Fuld STILL does, for example) through bankruptcy would have resulted in impeachment proceedings.

  30. Marcus says:

    Summer is not leaving until January, safely after the mid-term elections. The real question to ask: Who will replace Summer and what will they do?

    The leading contenders are:

    Anne Mulcahy – former chief executive at Xerox.
    Laura Tyson – Clinton era Chair of the Council of Economic Advisors.
    Diana Farrell – Summers deputy and heir apparent.
    Alan Blinder – Princeton’s version of Larry Summer.

    Just look at the history of Xerox and you have the answer for Mulcahy. Farrell is part of the Summer team and will not get the nod for all the reasons in Barry’s update (She can’t disavow mistakes of the past.). Blinder is more of the same, an Ivy League theorist. Which leaves one reasonable candidate – Laura Tyson. She would be my pick too.

  31. rickety rick says:

    since summers and rubin worked for president clinton it seems logical to me to more accurate to call this the “4th term of william j. clinton’s economic policies. ”

    plenty of blame to share for the whole mob of them.

  32. Mike in Nola says:

    lalaland: I think he could have gotten away with it. After all, Main St. who has the votes, hates Wall St. Populism will sell in this environment. Good example was FDR’s fear of Huey Long during the great depression.

  33. Greg0658 says:

    psst .. remember your days in law school .. POTUS enact Marshall Law then “Draft” you as a hostile witness

  34. Chief Tomahawk says:

    “This is why project leaders are removed, military commanders get relieved, CEOs get fired.”

    Except in the case of the Chicago Cubs!

  35. obsvr-1 says:

    Marcus Says:
    September 22nd, 2010 at 10:54 am

    Summer is not leaving until January, safely after the mid-term elections. The real question to ask: Who will replace Summer and what will they do?

    @Marcus Says:
    The leading contenders are:

    Anne Mulcahy – former chief executive at Xerox.
    Laura Tyson – Clinton era Chair of the Council of Economic Advisors.
    Diana Farrell – Summers deputy and heir apparent.
    Alan Blinder – Princeton’s version of Larry Summer.

    Just look at the history of Xerox and you have the answer for Mulcahy. Farrell is part of the Summer team and will not get the nod for all the reasons in Barry’s update (She can’t disavow mistakes of the past.). Blinder is more of the same, an Ivy League theorist. Which leaves one reasonable candidate – Laura Tyson. She would be my pick too.

    —- Reply

    Laura Tyson — puck — Remember she was hanging with the boys (Rubin, Summers) in the Clinton era (1995 – 1996, Chairman, National Economic Council 1993 – 1995, Chairman, President’s Council of Economic Advisors)
    See her resume below**, too much acedamia, looks alot like Summers, been there tried that.
    Another candidate is being reported, Dick Parsons, current chairman of Citi. Do we really want to consider someone who supported Rubin and presided as chairman of the board during the Citi implosion ???

    Heaven help us that a better list will emerge.

    **Laura Tyson’s Positions Held

    At Haas since 1990
    2008 – present, S. K. and Angela Chan Chair in Global Management
    2007 – 2008, Professor, Haas School of Business
    2002 – 2006, Dean, London Business School
    1998 – 2001, Dean, Haas School of Business
    1997 – 2001, Principal, Law and Economics Consulting Group
    1990 – 2001, Professor, Haas School of Business
    1977 – 2001, Professor, Department of Economics, UC Berkeley
    1995 – 1996, Chairman, National Economic Council
    1993 – 1995, Chairman, President’s Council of Economic Advisors
    1990 – 1992, Director of the Institute of International Studies, UC Berkeley
    1988 – 1992, Director of Research, Berkeley Roundtable on the International Economy, UC Berkeley
    1974 – 1977, Assistant Professor, Department of Economics, Princeton University

  36. tcdiaz says:

    The wealth of an individual can be measured by the time and work accumulated during employment. The wealth of a nation is measured by the sum of the population’s wealth as a whole…The 78 million baby boomers represent trillions invested in the market. Their accumulated wealth has eroded. GOT RETIREMENT? NOT…We have all worked and invested in the American Dream.
    We are the enablers of Commerce. The policy makers, new world order, and the Wall Street Icons have tested the financial stamina of our system to the brink of collapse.
    The illusion of 5%, 8%, 10%, 15%, return is just that. Illusion.
    C D rates are 1.4%, that’s reality
    Some one went to jail recently for something called A PONZI SCHEME?
    I think Goldman was fined $600 million for selling credit default swaps they made billions on. The congressional committee spanked them and moved on. It would be nice if the money collected be distributed to the individuals that had (lost) money invested in the housing funds. The former safe long tem investment….GREED for a lack of a better word is a BAD THING. Most of middle class are just bottom feeders. Here is my stimulus Idea for the day.
    The IRS rebate $100,000 to every taxpayer to spend.
    We are Painting a pretty picture with a decaying canvas.

  37. obsvr-1 says:

    someone to add for consideration:

    Simon H. Johnson

    Ronald A. Kurtz (1954) Professor of Entrepreneurship
    Professor of Global Economics and Management

    http://mitsloan.mit.edu/faculty/detail.php?in_spseqno=198

    He is far more realistic and critical in review of the causes, resolution and remedies for handling financial industry and economic issues.

    See the current TARP report and his input/assessment, page 114.
    http://www.sigtarp.gov/reports.shtml (download on the left)

  38. Mannwich says:

    Excellent post, BR!

  39. Elizabeth says:

    Excellent. You nailed it. Thanks for this.

    Obama’s entire economic policy now seems to be predicated on the idea that the repayment of the TARP money will show how accountable his administration is. Instead, the bailout and cynical back-patting that has occurred around the “repayment,” has made Americans more angry, because we know that the following is true: the TARP bailout caused the unemployment rate to soar, while the top management of TARP-recipient institutions (and their trading partners) pocketed the money.

    Our family lived this: my small-town-banker husband was one of 42,500 people laid off by B of A in 2008-09 (he worked in a small, profitable private banking office), when $50 Billion of TARP money was flowing to that institution. A large portion of this TARP money went to top management in terms of bonuses and salaries increases. At the same time, this management began to conduct massive layoffs. They were mainly conducted in smaller markets across the country where B of A was able to get under the 100-person layoff reporting requirement–we have a list of hundreds of people in small (but profitable) offices in the Northwest who were let go in Feb. 2009. So, now every time I hear that another $1 million TARP money is repaid, I know that happened simply because dozens or perhaps hundreds of people lost their jobs a year or so earlier, causing profits and stock price to go up temporarily, which in turn was used to “repay” the TARP money.

    Just look at the numbers of layoffs of other TARP-recipient banks that are now repaying: Citi: 50,000, JP Morgan, 9,200, etc. There is a perfect correlation: TARP money flows in and is largely pocketed by upper management whose pay packages increase, layoffs begin, earnings and stock price jumps temporarily, money gets repaid. End result: unemployment up, money accrues to highest net worth individuals. This is a policy that Summers, Geithner, Rubin and Paulson engineered–and Volcker was not allowed to influence. Who Obama marginalized is even more telling than who he enabled.

    That is what the American people are angry about: at the end of the day, they know they they paid $1 trillion, but are far worse off. Obama has deservedly lost our trust: what he says doesn’t line up with with his actions or what people are experiencing, and they know they’ve been conned. (Full disclosure: I voted for him.)

  40. Cynic_FA says:

    Summers: Good Riddance – Geithner: Round up the peasants with pitchforks

    Summers role was economic advisor, Geithner’s role is economic implementer. I think that Timothy has a way bigger share of the blame for the failure to develop and implement economic policy. saw that he managed to force of Herb Allison with a claim that Herb was at fault for the bank bailotu.

    Fact is that Geithner was head of the New York Fed, so he was responsible for failure to get banks to pull back from risk, failure of banks to raise capital in 2007, failure of regulators on Lehman repo 105, illegal payment of $30 billion to JP Morgan for Bear Stearns, decision to crush Lehman, payment at 100% for AIG debt including his buddies at Goldman, and failure to include responsible lending and bonus control as part of early TARP payback.

    And, like BR says Geithner is the top tax collector who doesn’t pay his own taxes. How about a little pinata bashing with Tim Geithner in the box?

  41. Unmitigated Audacity says:

    One of your best posts ever.

  42. [...] as one of Obama’s top economic advisers is a long-time coming, FusionIQ CEO Barry Ritholtz says. “Summers was a defender of the status quo…The change people voted for never appeared, [...]

  43. ewmayer says:

    Another lucid critique, BR – I remember being agog when I heard about Obama’s appointment of Summers.

    I guess Hah-vahd is looking to get Larry back so he can once again help the school “slash billions from its bloated endowment”.

    As to a suitable replacement, we really need someone who has a deep understanding of what ails us in macro-economic terms and of the “financial innovations” that helped such an unprecedented debt and leverage bubble to form … I’m thinking of someone like Janet Tavakoli. But I’m pretty sure we’re gonna get yet another in a long line of Wall street Ponzi-Finance enablers.

    @Elizabeth: Thanks for the great post about the TARP “repayment” scam … let’s also not forget that TARP is only the most-visible of many bailout facilities the government ran and is still running for the banksters. Most are much more back-doorish in that they were never subject to public discussion or approval by congress: the Fed discount window, the Goldman Sachs “bank holding company” conversion to get access to the former, the Fed MBS purchasing orgy, the FDIC loan-guarantee program, etc. I get the sense that because TARP is the most-publicly visible and because it imposed executive pay constraints, the most-well-connected recipients quickly realized that easier money was to be had on one of these other government teats and made a big show of “repaying TARP in full, ahead of schedule”, often by using other government-provided funds to do so. (GM is an example of the latter).

  44. DeDude says:

    Hope this is the first of several. I think you are right that the owners of failed policies and ideas are the worst people to deal with the consequences.

  45. ravenchris says:

    You need to have big enough balls to ask for the job.

  46. Glen says:

    Good post. I agree with you that the failure to bail out the banking system rather than the banks was Obama’s big failure. This was a Paulson/Bush policy and hated by the American public. I cannot help but think that having Summers, Geithner and to a lessor degree Bernanke involved was what caused this to be continued.

    So much for change you can believe in.

  47. [...] Ritholtz wrote that Summers “stayed committed to the same bad ideas that led to crisis and collapse. . . . [...]

  48. ITDog09 says:

    @BR: Great piece
    @Elizabeth: Great reply.

    But who would you replace Obama with in 2012? He won’t have a Democratic challenger. Seriously, can you imagine what you might be writting today durint the 2nd year of the McCain administration? Or God forbid, what if this was the 6th month of the Palin Administration. Please, take time to do the visualization. As a Red, White and Blue American I used to have the choice between the lesser of two evils, but now I don’t even get that. Do you imagine Palin or the Newt beating Obama in 2012 and that would be a good thing? If you’re thinking of Mitt, don’t even waste you time going there: red meat GOPers will never let that happen.

  49. DuchessGateau says:

    Wow. This is how I got hooked on your blog, BR. This is one of your best pieces. This piece is so good that it bears repeating, multiple times. It sums up what went wrong and how, it fingers one of the people responsible for creating the crisis, and points out THE major problem with Obama’s Presidency. It’s still the economy! And they REFUSE to fix what led to the problem!

    I hope you repeat these talking points on every TV and radio show that will have you. I know you usually move on to fresh topics, but Summers’ departure is a “teachable moment.” Has Spitzer lined you up for his show yet? Will they let you say this on NPR? (I’d LOVE to hear you say this on the “news” portion of NPR, but that will never happen; Marketplace is also a great show).

    Not that you need my opinion, but I can only conclude that the appointments of Summers and Geithner is a continuation of the same Bush plan. Not to fix the economy, of course, but to continue bailing out the big banks who put both Bush and Obama into office. Just as Tony Blair was Labor in name only, Obama fulfills the same agenda as the Republican president before him. Continuing to transfer trillions to those banks is job #1, and all the rest is a pittance in comparison, even the wars, and possibly just so much window dressing. (NOTE: This is my analysis but you may use it. Please remember you read it first from Duchess Gateau. Obama is best compared to Tony Blair. Expect more of the same.) Many Democrats are not able to accept this idea, but this is what is happening before our very eyes…

    The money (trillions) which has been spent on big banks and other failed institutions eclipses other issues, and in fact makes other initiatives impossible. Obama shows no sign of doing anything different from the Republicans regarding the economy, except for Geithner’s propensity to try to give trillions to the IMF (EUROPEAN bankers! As if Wall St didn’t take enough!) Great post, BR. You’re the best!

  50. thehouse says:

    Summers departure has nothing to do with deregulation of late 1990s, but likely to do with not forwarding Christina Romer’s more $1 trillion-plus stimulus package option to President Obama. (Romer had mentioned the option of $787 billion, as well as $1 trillion plus, to Larry Summers, but he omitted this option to the President.) This was stated many months ago by the New Yorker profile on Larry Summers.

    It is true that Larry Summers supported deregulation in late 1990s, alongside Rubin, however it is WRONG to PRESUME that Larry Summers ever subscribed to the efficient-markets-hypothesis (EMH).

    Summers, a New Keynesian, was/is critical of EMH for a long time. In fact, in 1987, in his paper, “Do We Really Know That Financial Markets Are Efficient? (NBER Working paper 0994) *, he empirically proved that markets / stocks can remain away from their fundamentals for a long time, to disprove EMH which claimed that markets always reflect all information available and are correct.

    So, Barry Ritholtz got to get this facts correct. Whether Summers departure is good or bad, is another question.

    * http://ideas.repec.org/p/nbr/nberwo/0994.html