Cabinet picks don't represent change
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Pavan Vangipuram
It seems like an eon ago that President-elect Barack Obama, that mighty vanquisher of the “same old Washington,” was merely an upstart junior senator, taking on the Clinton political juggernaut. The choice back then was clear — a vote for Obama was a vote for the future, whereas support for Sen. Hillary Clinton, D-N.Y., was a vote for the past.
Throughout his campaign, Obama cast himself as the modern candidate: Young and unencumbered by decades of political baggage. His whole campaign pivoted around that one word: Change. An Obama presidency was seen as tantamount to revolution, a thorough shake-up of the Washington elite: A “whole new politics.”
Then came the financial crisis. Whether by force of circumstance or by design, the few concrete proposals outlined in Obama’s primary campaign are now being reconsidered or jettisoned. It turns out there will be no repeal of Bush-era tax breaks, at least not in Obama’s first term, and his Cabinet lineup is a slightly updated roster from 10 years ago. Clinton’s appointment to the State Department was merely a concise symbol for the shape Obama’s Cabinet is taking. In fact, nearly all of the names which are floating almost — Rahm Emanuel, Lawrence Summers and Timothy Geithner — are veterans of the Clinton administration. They, in large part, were the architects of the financial deregulation which in hindsight caused our present situation.
Geithner served as a treasury undersecretary in the final years of the Clinton administration and as president of the New York Federal Reserve since 2003. He has been named treasury secretary under the new Obama administration. As the president of the New York Fed, he oversaw and encouraged the inflation of real estate and derivatives that predicated our banks’ insolvency. In all those years he offered only a few half-hearted warnings about the dangers inherent in our financial system and those were isolated cries in the ensuing storm of deregulation. When Geithner had the power to cool our markets before they overheated, he instead chose to pour on the gasoline.
Much later, he organized the fire sale of Bear Stearns and multistage bailout of AIG, which continues to this day. Geithner also has been a key participant in the massive gift recently bestowed to Citicorp, the gargantuan conglomerate, which he ironically had a dominant hand in creating.
Summers, the head of Obama’s National Economic Council, is another Clintonite (serving as his last Treasury secretary) and another architect of the legal framework that allowed our banks to gamble so recklessly. The Financial Services Modernization Act, passed at his behest, eliminated prior restrictions on mergers and, incredibly, forbade government oversight into any of the new financial instruments (credit default swaps and so forth). More than anything else it was a lack of transparency that allowed the current fraud to continue for as long as it had — transparency that Summers worked actively for decades against.
The salient factor for all of these appointees is not that their experience is dealing with financial crises, but instead their experience in causing them. Having entrenched themselves in the Washington-Wall Street power structure during two administrations they are inextricably connected with our current banking structure. After loosening market regulations, many of them went on to leadership positions in banks and hedge funds. By allowing these insiders lofty positions in his administration, Obama has given the financial sector a visible indication that their interests shall not be ignored.
But what of the public interest? Despite lofty rhetoric in his radio address to create 2.5 million jobs, the specific policies put forth (for example, the total absorption of Citigroup’s debt) have been geared almost exclusively toward the financial sector. In essence, they are a continuation of Bush and Paulson’s bailout efforts.
There is wisdom, of course, in assembling a team with experience, even if it is of a very dubious sort. Geithner, Summers and company know our markets intimately, having dictated policy for the better part of two decades. But it is disconcerting to see Obama’s economic Cabinet populated entirely by Wall Street insiders with deep connections to past administrations. One would have been heartened by even one nomination of a private academic, unconnected with the current establishment. As it is, we shall have to watch passively as “change we can believe in” quickly transforms into “more of the same.”
Pavan Vangipuram is a State News columnist and a chemical engineering senior. Reach him at vangipu1@msu.edu.
Commentary
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America Loves You
(11/30/08 7:52pm)Report
I see no problem with a repeat of the ’90s. It was a good time for the middle class.
GOB-BRAIN @ MSU
(11/30/08 7:58pm)Report
I see no problem with a repeat of the ’90s. It was a good time for the middle class.
—-
Yeah. All that is needed is for the USSR to collapse — again. And another Reagan, fixing Jimmy Carter’s mess.
Or will it be a “changed” USA, this time?
Papa Smurf
(11/30/08 7:58pm)Report
Sanjaya Smurf need haircut like John Bice Smurf.
Murray Rothbard
(11/30/08 8:29pm)Report
Its clear Obama is not going to usher in the “change” people enthusiastically imagined he would, so in that sense I agree with this article. However Pavan is mistaken when he says that the financial crisis was caused by “deregulation” or that Clinton or Bush were proponents of Deregulation. FannyMay and FreddieMack are government agencies not capitalist abominations. The spark for this current crises was government mandated home loans to people a free market wouldn’t otherwise have loaned to, and the fuel for the fire was the artificially increased availability of credit created by the government and its Central Bank, the FED, neither of which constitute “deregulatory” institutions. In a truly deregulated free market system the interest rate is inversely related to the amount of savings going on. The more money that is saved the more credit there is available and the lower the interest rate. If there isn’t much saving going on, the amount of credit available is less and so its “price” the interest rate is higher. Pumping in TRILLIONS of dollars from the FED sends the wrong signals lowering interest rates and encouraging lending beyond what is economically justified. I’m sorry but the FED printing money is not “deregulation,” its rather the opposite. Government was and is the problem, not the solution.
Joann
(11/30/08 8:46pm)Report
I SEE NOTHING WRONG WITH SURROUNDING YOURSELF WITH THE BEST THAT YOU CAN FIND,HE KNOWS WHAT HES DOING.ESPECIALLY AT A TIME LIKE THIS. THE CHANGE IS OBAMA, AND THE WAY THINGS WILL BE DONE FROM NOW ON. A GOVERNMENT YOU CAN TRUST, A GOVERNMENT THAT IS WORKING FOR YOU, NOT OUT OF GREED,AND SELF GRATIFICATION.
Right...
(11/30/08 9:49pm)Report
Joann, it is really debatable if these holdovers from the Clinton administration are ‘the best’. Experienced? Perhaps but not the best. I mean if experience is key to being the best then couldn’t we say some of the advisers Bush surrounded himself with? Look at Cheney for example. The man was Ford’s Chief of Staff! Yet I don’t see many singing his praises. Quit drinking the Obama kool-aid there honey!
Lance
(12/01/08 8:12am)Report
Pavan, do you even know what “deregulation” means? Can you give us an example of the evil “deregulation” word?
Pavan please have an original thought. Liberals and Obama throw out “deregulation” as the problem but never say what “deregulation” occured. Fannie and Freddie were government run problems, not in the least a capitalist manifestation. Also, democrats were in love with FNM, and FRE. They didn’t see the error in lending people money who couldn’t possibility pay it back.
Again, please have an original thought. Just throwing out the cliche word of the day makes you sound ignorant.
JOANN
(12/01/08 8:49am)Report
WITH A NAME LIKE RIGHT, YOU ARE SO WRONG. OBAMA IS LOOKING FOR THE MOST EXPERIENCED . WHATEVER YOU WANT TO CALL IT. CHENY IS THE WRONG NAME TO CALL OUT TO ME BECAUSE I DONT KNOW ANYTHING ABOUT HIM. BUSH IS ANOTHER THING, HE HAD EXPERIENCED PEOPLE, SOME OF THEM OBAMA PICKED. THE DIFFERENCE IS,OBAMA IS OPENED TO DECISIONS. BUSH DOES HIS OWN THING. HE DOESNT HAVE THE GOOD JUDGEMENT AS OBAMA. HES NOT A LEADER. MY SUGGESTION TO YOU IS TO LAY OFF THE BOOZE. I DONT DRINK KOOL AID OR BOOZE SWEETIE.
Right...
(12/01/08 8:59am)Report
Thanks for illustrating my point that you’ve haven’t a clue what you’re talking about Joann. Additionally, you see that key off to the far left about halfway up the side of your keyboard. You know the one marked “CapsLk” or “Caps Lock”? Press it. Your excessive use of capital letters is hurting my eyes.
Pavan
(12/01/08 9:07am)Report
Lance:
An prime example of deregulation, as I wrote above, is the Financial Services Modernization act, passed in 1999 under the auspices of Obama’s man Summers under Clinton. Earlier (dating from the New Deal era), private banks were barred from participating in securities investment or commercial banking, but the act removed those restrictions (or regulations if you will – hence, deregulation). This allowed Citicorp to merge into Citigroup, AIG to balloon into the sad giant it is today, and hundreds of banks to indiscriminately gorge themselves on mortgage securities with little oversight – which before they were not allowed to do. Is that not the very definition of deregulation?
Bystander.
(12/01/08 9:41am)Report
Right…
Exactly. Cheney along with Rove have been the mastermind’s behind this past administration. Although you’re definitely right that Cheney had prior experience with Ford, it was pretty evident that experience doesn’t trump rational decision making. Same goes for Rumsfeld. They’ve all begun to turn to the conservative party into a liberal conservative party…
Pavan.
Senator Hilary as Secretary of State Scares me. A Senator? Two biggest challenges for Obama, excluding our obvious economy, is to strengthen our foreign policy and having a solid relationship with Hilary. Both go hand in hand. It would be a disaster to have a Sec. of State that is not feared by other leaders because of a combative relationship. Plus, with the newest development with Russia and South America… It’s time for Obama to stand his ground as President.
MSUAlum2001
(12/01/08 9:46am)Report
Pavan, you forget who was in control of Congress when much of this stuff passed. Also, most of the stripping of regulatory powers happened AFTER Clinton left office not before. The fact is the SEC completely failed in its job to effectively oversee the market because the chairmen were too tied to Wall Street. Guess who picks the chair of the SEC? Oh that’s right the President. Additionally, you point out Geithner as a major problem but fail to mention the real culprit in this…Alan Greenspan, who last I checked was the man in charge until 2006. It was he who kept the interest rates too low too long and helped run this credit bubble. Yes the democrats wanted more people to own houses but you’re really ignorant if you assume it’s just the poor and destitute that took out loans they couldn’t afford. Much of the real estate bubble was caused in places like Silicon Valley in California and Nevada and other well to do places where people were actually making 6 figure incomes.
CBad
(12/01/08 9:52am)Report
Way to go Pavan!
I’m glad to see not all liberals are drinking the Obama kool-aid. As much as I would like it, I don’t think Obama really got to bring much change at all. Thanks for bringing up the Financial Services Modernization Act or the repealling of the Glass Stegall Act signed by none other than Mr. Bill Clinton that as you pointed out contributed significantly to the economic mess we are in now.
lol
(12/01/08 11:04am)Report
sweet smile, sweet hair, sweet article bro
Dan
(12/01/08 11:12am)Report
Ha. Ha. Ha. Hah!
Obviously! You liberals were that stupid to actually believe that Obama was really going to bring to Washington something called “hope” and “change”? Are you all serious? This, my friends, is why I’m a conservative. Liberalism is nothing more than universal mediocrity. Amateur leftists, awake!
Allison
(12/01/08 11:22am)Report
…a vote for Obama was a vote for the future, whereas support for Sen. Hillary Clinton, D-N.Y., was a vote for the past.
Contrary to popular belief, Bill Clinton and Hillary Clinton are actually two different people! Hard to understand, I know.
And MSUAlum2001 brings up a good point — the party in the majority in Congress plays a pretty big role in the ability of the government to regulate or deregulate the economy. That might be something to remember.
J. Edward Tremlett
(12/01/08 11:36am)Report
“This, my friends, is why I’m a conservative.”
That’s nice, Dan. But why are you such a dick?
I think the fact that the far left is squealing in horror at the cabinet choices that Obama is making is a sure sign of two things: 1, he’s on the right track and, 2, a number of conservatives out there need to eat some crow about our new “socialist” President.
Murray Rothbard
(12/01/08 1:45pm)Report
I don’t see how allowing the banks to merge has caused this problem. The government has messed up the market by artificially lowering interest rates far below what a free deregulated market would allow. There are also all sorts of laws forcing banks to make high risk loans to encourage home ownership, yet Pavan is saying that the banks were being reckless and need to be controlled even more than they already are. This bubble should have been allowed to burst during the .com bust, but the government stepped in with its super regulated monopoly money FED to lower interest rates even further and stop the needed bust. Far from solving the problem this only delayed and enhanced the crisis.
Papa Smurf
(12/01/08 3:27pm)Report
“ .. One would have been heartened by even one nomination of a private academic, unconnected with the current establishment ..”
Sanjaya Smurf needs to read more. “The Messiah” lived by U. of Chicago. Many of his closest economic advisers are U-C econ profs (e.g. Goolsbee).
The bigger fear: the % of Harvard grads around “The Messiah.” Greatest percentage of Harvard grads since John F. Kennedy sent 50,000 “advisers” to “South Vietnam.” And look how great that turned out.
common sense
(12/01/08 3:42pm)Report
Politicians lying! I don’t believe this crap!
Would like to blame deregulation but...
(12/02/08 7:49pm)Report
I myself tend to be rather liberal, somewhat of a socialist in fact, but that does not mean I don’t believe in the market (not quite a communist). I must concede that Murray makes an excellent point. The home loans given to people with rather subpar credit were a pretty awful idea, but liberals themselves are not to blame. The necessary legislation was passed by a conservative congress and signed by a more liberal president, so there’s enough blame to go around.