News & Views from 465 California Street

Obama’s Sacred Cows

Clint Reilly
Dec
16
2008

Despite our national obsession with politics, we often forget that the decisions made in Washington DC and Sacramento ultimately impact millions on an individual level.

Since mid-October, more than 675,000 Americans have lost their jobs, bringing the 2008 tally to almost two million so far.

When a head of household can no longer support his or her family, the devastation is heartbreaking.

What begins with a lost job soon cascades into lost health care benefits and gut-wrenching choices: mortgage or school clothes? Food or electricity? Unemployment benefits often aren’t enough to make ends meet.

The situation grows darker when debt – the same poison that killed Wall Street – tightens its grip. Missed mortgage and credit card payments turn into the loss of a home, harassment by bill collectors, marital strain and emotional distress. Children and seniors suffer.

Americans are about to feel the pain of economic crisis in untold ways over the next several years.

Taxpayers shouldn’t expect a bailout, but they should expect their government to guide them through the jungle ahead.

Frank Rich can hardly be described as a pessimist or a Barack Obama critic. The New York Times columnist has been a stalwart Obama cheerleader. But two Sunday’s ago, Rich wondered out loud about the superlatives heaped on Obama’s choices to shape our economic policy in a time of unprecedented financial crisis.

Rich challenged George Stephanopoulos’ use of the phrase “Best and Brightest” to describe them, reminding readers that David Halberstam named his book “The Best and the Brightest” to deride the Kennedy cabinet members in the 1960’s who mired our country in a costly and divisive war in Vietnam.

Obama’s economic team of Timothy Geithner (Treasury Secretary) and Lawrence Summers (Director, National Economic Council) has been greeted with high praise by the Beltway cognoscenti, even though both men carry troublesome ties to former Treasury Secretary Robert Rubin.

Since leaving his post at the Treasury in 1999 for a senior position at Citigroup, Rubin has raked in $115 million (not including stock options) while Citi hemorrhaged hundreds of billions. In recent weeks, Rubin has been directly involved in bailout negotiations with the Treasury Department.

To say that the negotiations were fruitful would be an understatement. On October 14, the federal government injected $25 billion into Citigroup. On November 24, the feds coughed up $20 billion more and guaranteed an additional $306 billion of Citi’s toxic assets. Only 17 days earlier, Rubin participated in a private meeting with Obama’s Transition Economic Advisory Board. He even stuck around for the photo-op afterward.

So, former Countrywide Chairman Angelo Mozilo – whose bank blew up and was swallowed by Bank of America – is a crook but Bob Rubin is a Wall Street statesman?

Summers, of course, was Rubin’s protégé and deputy at the Treasury during the Clinton years. Together, they led the vanguard for Wall Street deregulation. But the unchecked lending and arcane financial engineering that resulted brought the world financial system to the brink of collapse. A de-regulator re-regulating Wall Street?

Geithner – as Rich pointed out in his column – was Chairman of the New York Federal Reserve Bank when Wall Street exploded. Why didn’t he smell the fuse burning on the dynamite? Geithner then worked hand-in-glove with current Treasury Secretary Hank Paulson in creating and implementing the much criticized $700 billion bailout program.

Given his track record, how does Geithner represent a new direction?

A healthy dose of skepticism is required to defend the public interest against a herd of sacred cows grazing on the White House lawn.

The heart of Obama’s popularity and the core promise of his campaign was to act differently. By stocking his economic team with Washington retreads – however gilded with Ivy League degrees and Wall Street credentials – Obama risks not only his own reputation, but the futures of millions who depend on him to protect their jobs, incomes and financial security.

Comments (13)

  • Clint, I enjoy reading your column, especially this morning. Good to see that you have taken off the rose-colored glasses regards Obama. In the days ahead, I have no doubt, that many will be following your example. Obama never had the ability or experience to be president of this country and even he recognizes that fact by having surrounding himself with experienced people, though not necessarily qualified. He was elected because he was not Bush and his opponent was a dismal candidate. Being a good speaker himself was a great help to him also. Our economy is now spinning out of control with no one in sight who have solutions to our countless problems brought on by greed and corruption both in and out of government. We are indeed reaping what we have sown. Interesting days ahead.

    Regards,

    Gene M.,
    Brentwood

    Posted by: Gene | December 16th, 2008 at 9:32 am

  • Thank you for questioning Obama’s choices of Timothy Geithner and Lawrence Summers. I am an avid newspaper reader and always look forward to your articles in the Alameda Times Star Will you be speaking anywhere in the East Bay? By the way, I am going back for the inauguration. I have been active in the Alameda Democratic Club and have walked precincts, phonebanked, and raised funds for many years. Again, thank you for giving us the facts. Sincerely, Johanne

    Posted by: Johanne D. | December 16th, 2008 at 9:39 am

  • Clint,
    You’re a political scholar: Who was it who said that he would rather be governed by the first 100 persons in the telephone book than the Harvard faculty?
    Hank R

    Posted by: Hank | December 16th, 2008 at 9:40 am

  • I loved “Sacred Cows”. I was and am still an Obama supporter, but I agree with your criticism of his economic choices. I was a little iffy about Hillary at state, but as I am just an armchair political pundit, I deferred to Obama’s judgment. With these guys though, I can’t help but wonder… How are they going to break with their track records? Summers has a big ego, so I can’t see him subordinating himself to Obama when tough decisions have to be made. Can Obama lay down the law? Maybe, but I’d rather have smart people who were willing to buy into his vision and leadership than people he’s going to have to rein in all the time.

    Which brings me to another point – where would he find these people? It’s like if you want to get top-level experience, you have to subscribe to the theories and practices of those already at the top, which makes you complicit and narrows your thinking. So where would obama go to find someone with the requisite experience but an iconoclastic perspective?

    Posted by: Big G. | December 16th, 2008 at 9:52 am

  • Dear Clint,

    You have assessed Obama’s choices for his economic team right on the
    money.

    In fact one might say they are definitely ‘The Change We Can’t Believe
    In’. Summers and Rubin were editorializing a few months before the
    mess broke out as being against placing new regulations on the Wall
    Street shops. In fact I remember Rubin saying we have to be careful
    and not reverse the ‘innovative’ schemes that have been placed in the
    markets. I could not believe this when I heard it. I voted for
    Barack but have been very concerned at the way he has selected many
    top jobs so fast.

    Thank you for your thoughtful editorials.

    M. Khoobyarian
    San Jose, CA

    Posted by: M | December 16th, 2008 at 11:21 am

  • Even in the most extreme conditions of hunger and poverty when famine ravaged the land, India’s sacred cows were left untouched–so goes Obama’s economic team.

    Posted by: Tony Gantner | December 16th, 2008 at 11:51 am

  • Mr. Reilly,

    You expressed my personal thoughts about the ”financial” team so well. Mr. Rubin, according to the N Y Times recent article was not a passive player at Citibank, but encouraged the move to derivatives and the other exotic instruments. He should not be part of the recovery team. The other two were in with Paulson’s bail out of Wall Street (without any regulatory review or mandatory conditions for funding the really needy general public).

    The mess is one of lack of confidence in the key players.

    And now this 50B ponzi scheme. Nobody was watching and the foxes were in the hen house!

    Generally agree with your columns.

    Posted by: Stephen | December 16th, 2008 at 2:57 pm

  • I agree with your reservations, but am wondering how you felt during the go-go 90′s when the dot-coms were soring and the whole internet thing meant that we were in a “paradigm shift”, that the old rules no longer applied. The end for all time of business cycles. An ever expanding universe of marketing possibilities. I must admit that I kind of bought into that view – even dumped some real coin into the hope/hype. This was, of course, happening on the watch of Mr Rubin, who, at the time, was hailed as a hero for understanding that this new thing needed to grow unimpeded by what I think are called ” government regulations”. So, I’m just wondering what was your view back then? There were those who thought they smelled a “bubble” – Warren Buffet, first and foremost, as well as a guy I used to read at the old Chron – Herb Greenberg. I guess I am wondering who you think should be taking the reigns here. Like, these guys don’t seem to be supply-side idiots, thank god, and maybe they have learned something from the buying into unwarrented exuberance thing. Got anybody else in mind?

    Posted by: John Derrig | December 16th, 2008 at 10:08 pm

  • Mr. Reilly,

    I was somewhat aware of who you were some years ago. I really had nothing but a general idea that you were a very accomplished political campaign manager. Now after reading your commentaries in the San Jose Mercury for some time I want to say how impressed I am with your intelligence, reasoning and objective views of various subjects.

    I should have known that you could not be as successful as you are without being very intelligent and very pragmatic. I have come to appreciate your views as expressed in your published comments. I believe that all of your published comments that I have read so far have been well thought out and represent original thinking. You have been able to make we readers think, to look at things from a different perspective and although I don’t always agree with you, or sometimes hope that you are wrong, your commentaries have stretched my opinions.

    Your latest commentary about Obama and the need for a healthy skepticism worries me because you are probably correct. I was hoping that he has the answers but as you point out there are substantial questions about the abilities of his “best and brightest” to accomplish what we all desire, or even some of what we need. It is the thought provoking nature of your commentaries that cause many of we readers to reexamine our hopes and make us to think more critically.

    I, along with many other readers, think your settlement of the antitrust suit that resulted in your platform is one of the best things that have happened in journalism in a long time. Please keep up your thought provoking commentaries because you have many readers that you reach.

    Michael

    Posted by: Michael | December 17th, 2008 at 12:48 pm

  • Dear Mr. Reilly,

    I applaud your article in the December 16th edition of the San Mateo County Times.

    The activities of former Treasury Secretary Robert Rubin amount to a conflict of interest when he participates in the Transition Economic Advisory Board and thereafter negotiates billions of cash infusion into his employer. If he is so public spirited, he should resign the Citigroup Board and openly join the new administration in a public capacity – he cannot serve two masters. The blurring of roles and conflicts inherent in campaign contributions in recent years has brought us to the current financial distress.

    The chaos created by the subprime lending debacle (that was supposedly overseen by Barney Frank and Chris Dodd, with their repeated justification of Fanny and Freddie’s’ prior underwriting of junk mortgages) has brought our economy to a near stand-still. If the President Elect hopes to implement his social programs, he will need a sound economy and tax base upon which to proceed.

    The Scared Cows cannot graze on the White House lawn without leaving effluent behind them. Unfortunately for the President Elect, the Democrat bench of high profile, Wall Street experienced, financial hands is only so deep.

    Thank you for providing a voice of reason amid the din of political double-speak and spin that is so pervasive in mainstream media sound bites and Op-Ed pieces from the NY Times and Washington Post. It is indeed refreshing to see the truth plainly spoken.

    Yours truly,

    Baker
    Hillsborough, CA

    Posted by: Baker | December 17th, 2008 at 3:49 pm

  • You bring up some very important points about getting the
    same old Wall Street hacks involved in Obama’s economic team.
    I’m currently unemployed and I am terrified of what havoc Obama’s
    economic policies are going to do to this country that I love so
    much. I’m afraid that things will be so bad I won’t even be able to
    get a job at McDonald’s!

    Posted by: Gwendolyn | December 18th, 2008 at 9:24 am

  • Brilliant and insightful assessment of the hoped for and touted, “Change We Can Believe In” that was promised by President-Elect Obama. But since we all have a vested interest in the future well-being of our economy, nation, and world, let’s give our President-Elect a chance and some time to prove his worth as our next Chief in Command. He’s not even Inaugurated yet but appears ready, willing, and hopefully able to work in the best interests for all of us, with just about anyone. After all, some have been waiting 8 years to exhale and in the final analysis, “What matters is the Result”(s). President Obama will no doubt need all the support he can get.

    Treas. Sec. Rubin opened the doors to unfettered “capitalism without values” at the tail end of President Clinton’s second term. That has led to an economic “Frankenstein” that has caused great distress on the most dynamic economic system (and Democracy) the world has ever known. We all know the working and middle class make this and any other country great. But so too do the leaders of any free market and free society. No one can argue that we need to get back to the basics, but first need to deal with the phenomenon that is holding us all back…(i.e. the credit crisis, banks not lending, the disconnect etc.)… = Derivatives. The great test is how will we all get our country (and the world) moving again given the carnage that remains from the messes created by the sleeping watchdog and arguably the worst President in US History and his “laissez-faire” (turning a blind eye) approach of, by, and for his ilk, his cronies. In the land of the blind, is the one-eyed regulator going to be king?

    Perhaps Barack realizes this but is equally pragmatic enough and believes that the only people who can undo “economic Frankenstein” is/are “Econ Frank’s” creator(s). The Prez-Elect Chief ultimately has the right and responsibility of oversight (“Chief Watchdog”) by setting the tone and policy, and so he may even appoint an overseer of the “re-regulating, de-regulator” if he has in him the wisdom. That would make a great check and balance for this vastly unchecked area of the US economy which we have witnessed, affects American industry and world economies. This is what we by default might end up needing…conflict of interest-free oversight and wisdom.

    Posted by: Don Nguyen | December 18th, 2008 at 2:12 pm

  • Clint,I have multiple pre-existing konditions, so I say leave this kountry’s health kare bit alone. Bill Klinton, Jimmy Karter, LBJ, JFK, Truman, FDR never said to a sick person;” Maybe you take this pain pill & not have surgery”.

    Posted by: Richard Romanek | August 30th, 2009 at 3:00 pm

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