Obama’s economists, Part I

This is a topic I’m sure I’ll be returning to many times.  Among my greatest post-election disappointments was Larry Summers’s comment that it was a misconception that deregulation was somehow responsible for the financial crisis.  Hello?  And I still don’t know what to think about Tim Geithner — New York Fed experience a big plus, accomplice role in flawed Paulson bank bailout and AIG handout a red flag (though the “just following orders” defense may apply here).  Clearly Geithner and the overall economic policy of the Obama Administration will be much more of a known quantity after 11 a.m. this morning when Geithner gets his “moment in the sun” to announce the new bailout plan.

In Sunday’s New York Times, Frank Rich, not for the first time, rips Obama’s economic team as pretty much the same Summers-Robert Rubin crew that rubber-stamped every major deregulatory initiative in sight, giving rise to behemoth too-big-to-fail banking conglomerates and unregulated credit default swaps.  A lot of it is familiar, but I’d missed this news item from last week.   Reports are that the great Paul Volcker, the former Federal Reserve chair who conquered double-digit inflation in the early ’80s and has been a voice of sanity in financial policy ever since, is being frozen out of policy discussions by Summers.  (This brings to mind Willem Buiter’s line that “adding Larry to a team is like putting a whale in an aquarium.”)  Now, the Economic Recovery Advisory Board that Obama set up and tapped Volcker to head is officially supposed to be an  independent voice, separate from the cabinet and Summers’s National Economic Council, so maybe the idea is to keep them separate and avoid a groupthink mentality.   But the word is that Volcker isn’t happy with his current treatment.   We’ll see what happens now that the Economic Recovery Advisory Board is finally up and running.

It’s evident from Obama’s creation of these new economic advisory groups, and from his Team of Rivals approach in general, that this is a man with supreme confidence in his ability to listen to a variety of viewpoints and make the right decision on his own.  We’ll see if that’s borne out in the next four (or eight) years; the last Decider didn’t fare so well.  In any event, this is a staggering number of economic advisers: Geithner, Summers, Volcker, the 15 members of Volcker’s group, Peter Orszag, Christina Romer, Austin Goolsbee, Cecilia Rouse (the third member of the Council of Economic Advisers), Jared Bernstein (economic adviser to Vice President Biden), etc.  “Too many cooks in Obama’s economic kitchen,” says Buiter.

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