The Miseducation of the President
Continued from previous page
When Suskind asks Obama if he was "agitated" by Geithner's failure to develop a plan for Citi, his answer is classic no-drama Obama, Zen Man:
"Agitated may be too strong a word. During this period what we are increasingly recognizing is that there are no good options."
He goes on:
"What's true is that I was often pushing hard, and the speed with which the bureaucracy could exercise my decision was slower than I wanted. But I don't think, it's not clear to me -- and I'll have to reflect on this at some point -- it's not clear to me that that was necessarily because of a management problem, as it was that this is really hard stuff."
Frankly, given Obama's answer, I'll give that one to Geithner. There's no hard evidence he ignored a firm directive from his boss -- and if he did, it obviously wasn't a big deal, because Geithner is one of the few people from the president's original economic team still employed at the White House. If the president wanted a tougher approach with Citibank, or with any other malefactor of great wealth, he'd have forced his subordinates to develop one, and fired them if they didn't.
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Whatever happened with Citibank, it's clear that at every turn, Obama made choices that protected the Wall Street status quo, and Geithner was behind every single decision. Although during the campaign Obama seemed to be closer to a group of economists Suskind labels Team A -- voices for strong action like Volcker, former Clinton Labor Secretary Robert Reich, and Clinton advisor Laura Tyson -- when it came time to staff his economic shop, he chose from Team B, most of whom had clustered around the infamous Robert Rubin, who moved from the Clinton White House to Citibank. He picked Geithner and Larry Summers precisely for their caution when it came to dramatic action regarding the banks. Obama seemed reassured by Geithner's tiresome reliance on the Hippocratic Oath, "First, do no harm."
On the Volcker team, "harming" the debt machine that destroyed the economy was precisely the point. Suskind does a magnificent job explaining the way an economy centered on debt has decimated the middle class and made the top 1 percent of Americans impossibly wealthy. The entire machinery of government, under Democrats and Republicans, has been rigged to privilege the financial sector over any other business sector for the last 30 years. Household debt, which had run between 30 and 50 percent of GDP for decades, doubled in the 2000s, to almost 100 percent of GDP. Family savings rates became "negative," meaning people used credit to spend more than they earned. Essentially, the economy now runs on the financial sector's genius in finding ways to profit by lending Americans the money they haven't received from their employers in wage increases since the 1970s.
A Wall Street lobbyist says as much to Suskind during the debate over financial regulatory reform: "Maybe we did this to ourselves, sure, but we're just responding to the way things are. We've gone 'long' on developing markets around the world, and gone 'short' on America, where the whole game is using debt to give people what they haven't been able to earn, and may never earn."
Geithner worked hard to protect the debt machine and its masters. He opposed limits on executive compensation at firms receiving TARP funds, insisted on paying AIG's debts at 100 percent (instead of a smaller sum like creditors would have had to accept in a bankruptcy proceeding), squashed a tax based on bank size (to discourage "too big to fail" titans). One prominent banker tells Suskind his colleagues expected much harsher treatment from the Obama administration in the administration of TARP and other decisions. "For Washington to not demand anything when it saved us, even stuff that we know is for our long-term good, was one of the stupidest moves in modern times ... I feel like I should go over and hug Tim. It's a shame we can't pay him, 'cause that's a guy who really earned a big-time bonus."