Posts Tagged ‘tim geithner’

Alan Krueger, impeccable choice

29 August 2011

. . . to be the new chair of President Obama’s Council of Economic Advisers. Krueger is a world-class economist who has produced much fascinating, groundbreaking research, and he has ample Washington policy experience. Although Krueger is typically classified as a labor economist, not a macroeconomist, his research is far-ranging and his opinions on macro issues, as expressed in his columns and Economix blog posts for the New York Times, look sensible and well supported.

On the other hand (and there has to be an “other hand” — I’m an economist, after all!), will Obama listen to him? Christina Romer and Austan Goolsbee, Krueger’s predecessors at CEA, gave Obama excellent advice about the need for a strong fiscal stimulus but he ignored it, opting for a stimulus only about half as large as they urged. Neither of them could possibly have agreed with this summer’s bizarre pivot away from jobs toward deficit reduction at a time of 9% unemployment, not to mention the way it opened up the president to Republican debt-default brinkmanship.  No wonder Goolsbee was so delighted to leave the job.

The usually excellent Ezra Klein was on “The Rachel Maddow Show” tonight, and for once I’d say he got it wrong. He said Krueger’s policy work experience with Larry Summers in the Clinton and Obama administrations and his tennis partnering with Tim Geithner make him just another insider, not a real change. I see no evidence that Krueger is as willing as Summers or Geithner to kowtow to Wall Street interests, and at this point even Summers seems to be calling for a fiscal stimulus instead of short-term deficit reduction. It looks to me like Krueger is cut from similar nuanced-Keynesian cloth as Romer and Goolsbee, but better connected. The CEA chair who plays doubles with Geithner has a better shot of making a difference.

Advertisements

Quote of the day

24 January 2010

Where only so much credit is due:

“Preventing the collapse of the financial system should probably seen as being comparable to a major league outfielder catching a long fly ball. It’s not that easy, but major league outfielders do it.”

Dean Baker, taking issue with the NYT’s contention that Tim Geithner and Larry Summers have gotten too little credit for preventing an all-out financial collapse in the USA.  Baker points out that no major country saw its financial system collapse in this crisis, so the US performance in this regard was nothing special by today’s standards.

The Regulator Guys

18 June 2009

The Obama Administration’s new Financial Regulatory Reform plan hit the streets yesterday.  At 85 pages, it’s a lot to digest.  Today’s Washington Post has pretty good coverage, including this excellent summary chartJoe Nocera of the New York Times has some pointed criticisms, the gist of which is that Obama’s reforms, unlike FDR’s, do not go far enough.

Probably the biggest step forward is that the plan calls for giving someone the authority to close and liquidate insolvent financial behemoths like AIG and Citigroup.  Right now, the FDIC can shut down failing banks, but nobody can do the same with financial supermarkets like AIG and Citigroup.  In a similar view, it also empowers the Fed to oversee huge, systemically important financial institutions and require them to hold more reserves and take fewer risks.  Both of these changes seem to go a long way toward resolving that tension between moral hazard and “too big to fail.”

Another step that looks welcome is the establishment of a Consumer Finance Protection Agency, along the lines suggested by the estimable Elizabeth Warren, the Harvard Law Professor who chairs the Congressional Oversight Panel that monitors the TARP bailouts.  In this 2004 interview with Bill Moyers she offers a critical, detailed assessment of credit-card-company abuses and sensible ideas for reform.  Her two-part interview with Jon Stewart this past April is worth watching as well.  Warren has been rumored as the person to lead this new agency.  Had an effective consumer protection agency been in place earlier this decade, we might have avoided the stampede into dubious adjustable-rate mortages and option ARMs.  Not surprisingly, the financial services industry is critical of the idea of such an agency.

(more…)

Rearranging the icebergs on the Titanic

3 April 2009

OK, the Geithner 2.0 plan officially looks wretched.  When I’m agreeing with the top Republican on the House Financial Services Committee, you know there’s a problem.  And the problem is not merely that the plan is a lousy deal for the taxpayers because it throws lavish subsidies at institutional buyers of toxic assets and grossly overpays the banks who would sell those assets; that’s all been said before.  The new problem is that it wouldn’t even remove toxic assets from the banking system! As the Financial Times reports:

‘US banks that have received government aid, including Citigroup, Goldman Sachs, Morgan Stanley and JPMorgan Chase, are considering buying toxic assets to be sold by rivals under the Treasury’s $1,000bn (£680bn) plan to revive the financial system.’

Can you say “playing with the house money”?  Unfortunately, that would be your house and my house.

It’s not completely clear that Geithner’s Treasury will allow this to go forward, as a Treasury official says that a bank’s supervisors will weigh in on whether the bank is healthy enough to buy assets.  But Geithner and Obama have implied that all of our big banks are fundamentally sound (shades of Herbert Hoover, John McCain, and Lake Wobegon), so I suspect that the ink is already wet on those supervisors’ rubber stamps.

Seems like we’ve made literally zero progress since Halloween 2008:  captured regulators attempt to prop up insolvent banks with hundreds of billions of dollar bills and won’t even consider that some of them might need to be closed.  Cue Mark Fiore’s “Zombie Bank” cartoon.

Geithner 3.0: What a difference a day makes

24 March 2009

This is the most sensible thing I’ve heard from him yet — a proposal for FDIC-type powers for the government to temporarily take over too-big-but-failing-anyway financial institutions like AIG, clean house, and sell off their remaining assets.   I once thought the FDIC already had those powers, but apparently that’s so only for regular commercial banks, not bank holding companies or other financial Goliaths.   (FDIC Chairperson Sheila Bair explains it here.)

The new proposal doesn’t necessarily conflict with anything in yesterday’s plan to subsidize the worst financial institutions by overpaying for their worst assets, but it does suggest that the Obama Administration really does have plans to regulate them and is not kidding itself (Pollyannish recent rhetoric  to the contrary) that all of them are fundamentally sound.

(more…)

Geithner 2.0

23 March 2009

The fleshed-out Financial Rescue Plan hit the streets today, and the stock market loves it (Dow, Nasdaq, and S&P all up about 7% today).  As Dean Baker points out, why wouldn’t they? The plan is a huge gift to dodgy financial institutions, as the Treasury, Fed, and FDIC will be subsidizing gross overpayments for about $1 trillion (by Treasury Secretary Tim Geithner’s estimate) in toxic assets (or “legacy assets,” the latest euphemism.  I preferred “troubled assets” — sounds like a Capitol Steps number waiting to happen).

Paul Krugman has some unpleasant arithmetic about the plan, which takes as its starting point the way the plan would subsidize the private institutions (not individuals) that would buy those toxic assets.  Reportedly the subsidy would take the form of “non-recourse loans” in which the borrower (and toxic asset buyer) would only have to put up 15% of the price paid for the asset, the asset itself would be the collateral for the loan, and if the asset went bad the lender could default and owe only the bad asset.  Just like a 15% margin loan, except some margin loans allow the lender to demand repayment of the whole thing.

(more…)

Turning Japanese?

14 February 2009

Yesterday’s NYT continues the paper’s excellent coverage of the financial crisis with Hiroko Tabuchi’s article “In Japan’s Stagnant Decade, Cautionary Tales for America.” Notable quote:

‘“I think they know how big it is, but they don’t want to say how big it is. It’s so big they can’t acknowledge it,” said John H. Makin, an economist at the American Enterprise Institute, referring to administration officials. “The lesson from Japan in the 1990s was that they should have stepped up and nationalized the banks.”’

When someone from the American Enterprise Institute says it’s time to nationalize, then it’s probably time for policymakers to show a little openness to it (e.g., “only as a last resort,” “we’re not ruling out anything”).

(more…)

Obama’s economists, Part I

10 February 2009

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.

(more…)