Widespread praise for Obama's new economic team

Is the intensely positive reaction to the new Treasury Secretary and other key economic aides rational and healthy?

By Glenn Greenwald
Published November 25, 2008 8:07PM (UTC)
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(updated below)

From most precincts, there is lavish praise being heaped on Obama's new economic team, particularly soon-to-be Treasury Secretary Timothy Geithner and National Economic Counsel chief Larry Summers, who are being hailed as exactly the type of serious, deeply intelligent, pragmatic experts needed in this financial crisis.  Oddly, that praise is pouring forth despite what many economic experts say is the role -- perhaps critical roles -- that each of them played in enabling this crisis in the first place.


Writing in The Guardian today, economist Dean Baker argues that "the roots of the current crisis can be attributed to the course that Geithner and his colleagues followed in designing that bail-out"; that particularly with regard to "the suspension of regulatory oversight of the financial industry" -- which Baker identifies as a key cause of the crisis -- "Geithner was in the middle of all this, even if not a lead actor"; and that when Geithner testified in the Senate about the Bear Stearns collapse earlier this year, he "gave the classic 'who could have known' answer."  Concluded Baker:  "we really do need a Treasury secretary who can give answers, not just excuses."

The New York Times Editorial Page today says that both Geithner and Summers "have played central roles in policies that helped provoke today’s financial crisis" and that Geithner "also has helped shape the Bush administration’s erratic and often inscrutable responses to the current financial meltdown, up to and including this past weekend’s multibillion-dollar bailout of Citigroup."  And The Washington Post's Steven Pearlstein today details the central role played by Robert Rubin both in the deregulation decisions that enabled this crisis and the downfall of Citigroup, and observes that "the ultimate irony is that just as Rubin & Co. were being bailed out at Citi by the Bush administration, President-elect Obama was announcing a new economic team drawn almost entirely from Rubin's acolytes."

I don't have the knowledge or expertise necessary to resolve these conflicting pictures or to form a meaningful opinion about these selections (even Baker, in the midst of his sharp criticisms, allows that the choices Obama made might be the best alternatives, as flawed as Baker believes them to be, and Nouriel Roubini praises the choices as "excellent").  But it is nonetheless noteworthy -- in general -- how much accountability-free praise, and how little critical scrutiny, is heaped on establishment figures as they ascend to power.


Consider this truly reverent -- and deeply misleading -- profile of Dick Cheney that appeared on the front page of The New York Times in July, 2000, once George Bush selected Cheney as his running mate.  This homage, written by Eric Schmitt, was cited yesterday by sysprog to illustrate how often we are told that past actions and ideology of new political leaders don't matter, that what matters is that they are serious, pragmatic establishment experts who can be trusted to do the right thing. I'm including a lengthy excerpt to convey its rancid flavor:

THE 2000 CAMPAIGN: THE RUNNING MATE; The Armchair General: Richard Bruce Cheney

The night allied warplanes began bombing Iraq in 1991, Defense Secretary Dick Cheney quietly flipped on CNN in his third-floor Pentagon office, ordered Chinese take-out and sat back to watch the Persian Gulf war unfold.

''Everyone was concerned about possible losses, but he was tremendously calm,'' a former top Cheney aide said. ''I asked him why he wasn't more nervous, and he basically said that he was confident that everything was done that needed to be done. Once the airplanes were in the air, we just had to wait.''

In choosing Mr. Cheney as his running mate, Gov. George W. Bush has turned to an unflappable Washington insider whose easygoing exterior masks a steely confidence, a man who, once he makes a tough decision, never looks back.

''He sort of chews on issues, and chews on them until he makes his mind up,'' said former Secretary of State George P. Shultz, ''then he goes on and he doesn't second-guess himself. He has very good judgment.''

Mr. Cheney, 59, who served 10 years in the House of Representatives and four as President George Bush's defense secretary, brings stature, decisiveness and decades of government experience to a campaign sometimes short on all three.

But the real secret to his success may be an ability to wrap a staunchly conservative ideology in a mantle of moderation and civility to get people to trust him and get things done.

It is not just Republicans who feel at ease with Mr. Cheney, who while in the House opposed abortion and gun control and supported aid to anti-Marxist rebels in Nicaragua and President Ronald Reagan's ''Star Wars'' anti-missile shield. Mr. Cheney has a knack for working with political rivals, colleagues say.

Leon E. Panetta, a former Democratic congressman and White House chief of staff, recalled that Mr. Cheney was one Republican with whom he could confide during sensitive Capitol Hill budget negotiations.

''There was never any question he had conservative views, but he was always someone you could deal with and talk to, and never one to demagogue the issues,'' Mr. Panetta said. ''I trusted that what I said would not be used against me in negotiations" . . . . 

And he abhors the scorched-earth politics that came to characterize House Republicans under Speaker Newt Gingrich.

''Dick does not bring political sex appeal to the ticket,'' said Bill Frenzel, a longtime friend and a former Republican congressman from Minnesota. ''What he brings is the competence and confidence that if anything happens to the president, the country will have a competent vice president to step in.''

It goes on and on like that, one paragraph after the next filled to the brim with respectful praise -- even hailing his "wry sense of humor" and "popular touch" -- with not a word of criticism or skepticism. 

No mention was made -- in this or virtually any other pre-election profile of Cheney -- of what The Boston Globe's Charlie Savage in 2006 described as Cheney's "revolutionary claims" about unlimited executive power, expressed in 1987 when Cheney refused to sign onto a bipartisan Congressional report condemning the Reagan administration for its "disdain for the law" as part of the Iran-contra scandal.  Foretelling what happened over the last eight years, Cheney back then argued that President Reagan had the power to ignore Congressional laws proscribing aid to Nicaraguan rebels.  Nor was it mentioned in the lengthy NYT profile that, as Savage put it, "Cheney bypassed acts of Congress as defense secretary in the first Bush administration." 


Indeed, it would be very difficult to find any mention of Cheney's ideological radicalism in the parade of establishment praise that poured forth before the election.  None of that mattered; he was a serious, sober establishment figure with great competence and expertise, and that was more important than ideology or past acts.

None of this, obviously, is to equate or even compare any of Obama's economic appointees with Dick Cheney.  But it does demonstrate that deep skepticism is warranted when we're told that The Serious Adults have entered the room and are in charge now.  And particular wariness is called for when we're told that the very people who have played such important roles in the broken system, who have contributed to rather than worked against the problems, are now the ones who are going to save us all from those problems.  


The establishment loves its own.  It's an accountability-free zone where members in good standing are deemed Serious and Trustworthy no matter what they do.  Media stars in particular swoon when in the presence of new power (see this amusing video discussion of that dynamic by The Young Turks' Cenk Uygur this week).   For those general reasons -- and because of the magnitude of what is at stake specifically in this financial crisis -- we need far more skepticism and scrutiny of these individuals than we need to be told how trustworthy and brilliant they are.

As but one example, here is what Robert Reich just wrote about the Citibank bailout, which Robert Rubin and his protégé Tim Geithner helped to engineer:

If you had any doubt at all about the primacy of Wall Street over Main Street; the utter lack of transparency behind the biggest government giveaway in history to financial executives, and their shareholders, directors, and creditors; and the intimate connections the lie between Administrations -- both Republican and Democratic -- and the heavyweights on Wall Street, your doubts should be laid to rest. Today it was decided the government will guarantee more than $300 billion of troubled mortgages and other assets of Citigroup under a federal plan to stabilize the lender after its stock fell 60 percent last week. . . .

The senior executives of Citi, including those who have served at the highest levels in the US government, have done their jobs exceedingly well. The American public, including the media, have not the slightest clue what just happened.

Trillions of dollars flying around.  Deals being cut in the dark, with virtually no oversight, scrutiny or even public awareness until after the fact.  All sorts of overlapping relationships and influence-peddling at the heart of these transactions.  And people like Rubin, Geithner, and Summers have all long been a part of that system, and in many cases, important components of the key precipitating events. That is some rather substantial ground for concern.


It's certainly possible that they will do a superb job in managing the crisis.  I'm definitely not suggesting otherwise, and I assign substantial credibility to the assessments of trustworthy experts like Roubini and Baker.  But between too much trust and reverence on the one hand, and too much skepticism on the other, the last eight years should have taught -- but don't seem to have -- that the former is far more dangerous than the latter.


UPDATE:  About the Newsweek interview with Nouriel Roubini linked above -- in which Roubini praises both Gaithner and Summers -- Roubini, on his personal blog today, wrote:


I told the Newsweek reporter – as full disclosure – that I had worked for Tim Geithner and Larry Summers when they were both at Treasury: I was head of a Treasury Office and the Senior Advisor to Tim Geithner in 1999-2000 who was at that time the Under Secretary for International Affairs while Larry Summers was Treasury Secretary. So some may that [sic] my positive views of the two may be biased/tinted by my working for them; on the other hand I know first hand about them and I have the greatest respect for their skills, intelligence, expertise, commitment to sound public policy and policy wisdom even if I may not always agree with all of their views.

Make of that what you will.  Personal relationships between professionals of that sort do tend to increase the likelihood of a positive assessment (though it can also have the opposite impact).  It's something that Newsweek should have included in the interview.  Still, I personally find Roubini to be one of the most credible sources on all of these economic matters, so even with that caveat, his assessment, at least for me, carries substantial (though not decisive) weight.

Glenn Greenwald

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