Tag Archives: Larry Summers

White House Moving to Wall Street

04 Tuesday Jan 2011

Posted by in economy, Goldman Sachs, Obama, Obama administration, Politics, special interests, Wall Street

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Breaking news: In order to cut down on travel time through the revolving door for President Obama’s outgoing and incoming team of  advisers, the White House is moving from 1600 Pennsylvania Avenue. Here’s the new location:


Might as well be:

“President Barack Obama is considering naming William Daley, a JPMorgan Chase & Co. executive and former U.S. Commerce secretary, to a high-level administration post, possibly White House chief of staff, people familiar with the matter said.

[…]

After serving as president of SBC Communications for more than two years, he joined New York-based JPMorgan, the second- biggest U.S. bank by assets, in 2004, serving as Midwest chairman and the bank’s head of corporate responsibility.”

Corporate responsibility. Like a 25% increase in outsourcing to India in 2009. Like using the $25 billion in bailout money that was intended to loosen up lending to become “more active on the acquisition side.” That kind of “corporate responsibility?”

Oxy (clap clap clap) moron (clap clap clap). Oxy (clap clap clap) moron (clap clap clap).

Why Daley?

“The administration is seeking to repair relations with the business community after coming under fire from industry groups, including the U.S. Chamber of Commerce. The nation’s biggest business lobbying group opposed Obama’s health-care and financial-regulatory overhauls and committed $75 million to political ads in the midterm congressional elections, mainly directed against Democrats.

…Obama is generating more optimism among corporate executives after a series of actions and overtures, including a deal to extend the Bush-era tax cuts, efforts to boost exports such as a U.S.-South Korea free-trade agreement, and a loosening of controls on some technology sales.”

Well isn’t that just wonderful. Makes me feel all warm inside.

Then there’s the search for someone to replace Larry Summers as head of the National Economic Council (NEC):

“…it seems that the shortlist to replace Larry Summers at the NEC has been whittled down to three men — Gene Sperling, Roger Altman, and Richard Levin…The…notable characteristic of the three is that they’re all multi-millionaires with close ties to Wall Street. None more than Altman, of course, who has his own bank. But Levin is on the board of American Express, which paid him $181,362 in 2009, and where he has shares and “share equivalent units” worth $539,000.”

That leaves Gene Sperling, currently one of Geithner’s underlings, and the person who is reportedly the leading candidate for the job:

“Goldman Sachs paid Sperling $887,727 for advice on its charitable giving. That made the bank his highest-paying employer. Even Geithner’s chief of staff Patterson, who was a full-time lobbyist at the firm, did not make as much as Sperling did on a part-time basis. Patterson reported earning $637,492 from Goldman Sachs [in 2008].”

Ezra Klein:

“It is very hard to believe that Goldman Sachs wasn’t attempting to buy influence with a politically savvy economist who had good relations — and would later go to work for — the incoming Democratic administration.”

More on Sperling:

“…he has played key roles crafting the administration’s economic policies, most recently in forging Obama’s compromise with Republican leaders to extend the 2001 and 2003 income tax cuts.”

Just peachy.

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Today on Let’s Make a Deal

09 Thursday Dec 2010

Posted by in budget, Congress, economy, Obama, Politics, Taxes

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The latest on “The Deal”:

President Obama at Tuesday’s press conference: [I]t’s a big, diverse country, and people have a lot of complicated positions, it means that in order to get stuff done we’re gonna compromise…This country was founded on compromise.”

Yesterday:

“Vice President Biden told House Democrats on Wednesday that the tax agreement the White House struck with Republicans was essentially final, forcing the divided caucus to decide whether to press its fight for changes in the package. “It’s up or down,” Biden told the caucus in a closed-door meeting, according to Rep. Yvette Clarke (D-N.Y.).

“So far as the administration is concerned, it’s take it or leave it,” Rep. Peter DeFazio (D-Ore.), one of the most vocal critics of the tax deal, told The Hill after the meeting. “I would say [Biden] was pretty specific about that.”

[…]

“It’s fair to say that he said, ‘We’ve negotiated with the Republicans, but we’re not going to negotiate with the Democrats,” Rep. Anthony Weiner (D-N.Y.) said in paraphrasing the vice president.

Larry Summers is saying, ‘One wrong move and the economy gets it.’

“One of President Obama’s top economic advisers warned on Wednesday that the nation could slip back into recession if Congress did not pass the administration’s tax cut deal with Republicans, as the White House sought to press Democrats into backing the plan.

“Failure to pass this bill in the next couple weeks would materially increase the risk that the economy would stall out and we would have a double-dip” recession, Mr. Summers told reporters at a briefing.”

But in September:

“Maintaining tax cuts for top wage-earners should take a back seat to other more pressing measures, White House economic advisor Larry Summers said…”With deficits looming as seriously as they are, why is now the right moment to lock in several hundred billion dollars of tax cuts for 2 percent of the population when we could be using those revenues to strengthen incentives for investment in the country’s future?”

What a difference 3 months makes.

President Obama’s Republican “friends” are making clear their intentions on the so-called “temporary” reduction in Social Security payroll taxes:

“Republicans acknowledged that the expiration of the tax holiday will be treated as a tax increase. “Once something like this goes into place, a year from now, when it expires, it’ll be portrayed as a tax increase,” said Sen. Bob Corker (R-Tenn.). So in a body like Congress, precedents matter and this is setting a precedent. I think that certainly is going to create some problems down the road if it passes.”

“Once you bring a rate down, if it goes back up, people will feel that. They’ll feel their paycheck being less and that argument” — that letting it expire amounts to a tax hike — “eventually is bound to be made,” said Sen. Mike Johanns (R-Neb.).

[…]

Lamar Alexander, the Senate’s number-three Republican, also said that reform of Social Security should be tied to moving that tax rate back up. “My personal hope is that it doesn’t become permanent unless we deal with a way to make Social Security solvent over the long term,” he told HuffPost. “You have to remember, the payroll tax funds Social Security and I like the idea of a lower payroll tax contribution, but we’ve got to make sure Social Security is solvent, which we should be doing this next year as the first order of business.” The way to make the program “solvent” and keep taxes low, of course, is to reduce benefits.

On a related note, this is what happens when you go down the road of giving in to the demands of “hostage takers.” The line starts to form:

“Here’s what Sen. Susan Collins (R-ME) told Senate Majority Leader Harry Reid that she needs to support a full Senate debate on the defense authorization bill (the vehicle for Don’t Ask, Don’t Tell repeal): 15 guaranteed votes on amendments (10 for Republicans, and 5 for Democrats), and somewhere around four days to debate the bill.

Senate Majority Leader Harry Reid already promised her the 15 amendments, but his initial offer was for a day or two of debate. Here’s her response to reporters tonight, after a Senate vote.

“The majority leader’s allotment of time for to debate those amendments was extremely short, so I have suggested doubling the amount of time, assuring that there would be votes, and making sure that the Republicans get to pick our own amendments as opposed to the Majority Leader.”

“If he does that I will do all that I can to help him proceed to the bill. But if he does not do that, then I will not,” she added.”

Look in the Mirror, Democrats

02 Tuesday Nov 2010

Posted by in Democrats, Obama, Politics, Republicans

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If the election results go as expected tonight and Republicans take control of at least the House, the hand-wringing and ‘what happened?’ from the Democratic side of the aisle will commence shortly thereafter. In the search for someone or something to blame I suggest Democrats, including President Obama, need look no further than the nearest mirror. This blurb from Politico pretty much sums up the problem:

“…even White House advisers quietly admit a far more jobs-focused, targeted stimulus would have been more effective as a policy and political tool.”

Ya think? Do ya freakin’ think so? That epiphany comes about 18 months too late, but I guess better late than never. Maybe if the president had listened to someone outside of his inner circle jerk of “advisers” who were saying that from the get-go he wouldn’t be preparing to deal with a Republican Congress in January.

But that wasn’t the only serious misstep that put Obama and the Democrats in the situation in which they find themselves. It goes back to before Inauguration Day of 2009. Beginning when the candidate who said he wanted to change the way business was done in Washington named a poster child of the way business is done in Washington to be his chief of staff.

Then, faced with an economic crisis not seen in this country since the 1930′ s, he named as his chief economic adviser one of the main culprits in creating the conditions that led to the financial meltdown, Larry Summers. He then nominated as his Treasury Secretary Tim Geithner, a protégé of another architect of the collapse, Robert Rubin. Enjoy your stay at the henhouse, Mr. Fox.

This was the change we could believe in?

When it came to the stimulus package there were a number of economists (outside of that sacred inner circle) who were saying that it needed to be bigger and focused almost entirely on spending to create jobs. They were summarily ignored. An arbitrary figure was arrived at–$1 trillion–which for political purposes the stimulus could not exceed. And in the spirit of bi-partisanship, a good chunk of the package was made to include tax cuts. This was done to supposedly draw Republican support for the stimulus. How did that work out?

Just as an aside here, President Obama later said that he underestimated the size and intensity of the opposition from Republicans in Congress. Was he asleep during the 90’s when Republicans impeached a Democratic president for…well, you know what for. His estimation of the GOP opposition should have been Clinton X 10.

On health care reform, the candidate who ran on a public option and no individual mandate did a sudden 180 and became the president of no public option and an individual mandate. The candidate who promised lower prescription drug prices by way of drug importation from Canada and elsewhere cut a backroom deal with Pharma to insure their monopoly.

Also on health care reform, if the president and Democrats would ask those who supported them in ‘08 (instead of calling them whiners and telling them to buck up) they might find out that just as many, if not more, will tell them too little was done in the way of “reform,” not too much.

The candidate who railed against the Bush “war on terror” constitutional and civil liberties abuses not only continued those policies but now seeks to increase them by expanding the government’s wiretap powers and targeting American citizens who are suspected of terrorist ties for assassination. Not to mention tripling down on the number of troops in Afghanistan,  and expanding the drone war and covert operations into Pakistan, Yemen, and only God and the CIA knows where else.

And they wonder why there’s an enthusiasm gap?

Democrats in Congress don’t escape blame either. In two consecutive elections, 2006 and 2008, they were given overwhelming majorities in both Houses of Congress, including a filibuster-proof number in the Senate, plus the White House. Memo to Democrats: American voters didn’t  give you those majorities because of your sparkling personalities, they wanted things done.

Just for future reference, if and when you get that kind of power again—use it. Don’t squander it bickering amongst yourselves. Take a page from the Republican playbook and enforce some party discipline. By whatever means necessary. It would help to have a Senate Majority Leader with something resembling a spine. You had the Republican Party down for the count, but you let them up and look at what is about to happen.

Why Tim Geithner Opposes Elizabeth Warren as Head of the CFPB

20 Tuesday Jul 2010

Posted by in bailout, economy, financial reform, financial regulation, Obama administration, Politics, too big to fail, Wall Street

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Elizabeth Warren should be a no-brainer as President Obama’s choice to head the newly-created Consumer Financial Protection Bureau (CFPB). She is a long-time advocate for the rights of consumers, the person most responsible for the Bureau’s inclusion in the recently-passed financial reform legislation, and its most notable and vocal supporter. She has this crazy notion that a consumer protection agency should actually…you know…protect consumers against the abusive practices of the big banks.

As chair of the TARP oversight committee Warren regularly clashed with what those banks consider to be in their best interests, as well as those in the administration who make a habit of carrying the banker’s water, namely Treasury Secretary Timothy Geithner. Which is why it wasn’t surprising when Huffington Post reported last week that Geithner opposed Warren’s nomination.

Then came this, a piece by John Talbott (also in the Huffington Post) on Sunday. The reason for the treasury secretary’s opposition:

“The [financial reform] bill has been written to put a great deal of power as to how strongly it is implemented in the hands of its regulators, some of which remain to be chosen. The bank lobby will work incredibly hard to see that Warren, the person most responsible for initiating and fighting for the idea of a consumer financial protection group, is denied the opportunity to head it.

But this is not the only reason that Geithner is opposed to Warren’s nomination. I believe Geithner sees the appointment of Elizabeth Warren as a threat to the very scheme he has utilized to date to hide bank losses, thus keeping the banks solvent and out of bankruptcy court and their existing management teams employed and well-paid.”

The “scheme” to which Talbott refers began with Geithner’s predecessor as Treasury Secretary, Hank Paulson, and is being continued by Geithner and his partner in crime in the Obama administration, Larry Summers. In short it goes like this:

The $700 billion in TARP money was originally supposed to go to get bad loans, the so-called toxic assets, of the bank’s books. Immediately after TARP was passed, Paulson did a 180 and decided to use it as a direct cash infusion into the big banks rather than buying bad loans. (Nothing to do with him being a former Goldman CEO, I’m sure).

That left the banks with trillions of dollars of toxic assets still on the books, where they remain today. Geithner’s plan is for the banks to:

“…earn their way out of their solvency problems over time so the banks are continuing to slowly write off their problem loans but at a rate that will take years, if not decades, to clean up the problem.

And this is where defeat of the nomination of Elizabeth Warren becomes critical for Geithner. For Geithner’s strategy to work, the banks have to find increasing sources of profitability in their business segments to balance out their annual loan loss recognition from their existing bad loans in an environment in which they continue to recognize new losses in prime residential mortgages, commercial real estate lending, sovereign debt investments, bridge loans to private equity groups, leverage buyout lending and credit card defaults.

The banks have made no secret as to where they will find this increase in cash flow. They intend to soak their small retail customers, their consumer and small business borrowers, their credit card holders and their small depositors with increased costs and fees and are continuing many of the bad mortgage practices that led to the crisis

[…]

It is exactly these types of unwarranted fees on small consumers and poorly designed products that Elizabeth Warren will fight against as head of the new consumer finance protection group. And it is why Geithner sees her as so threatening. Unless the banks are allowed to raise fees and charges on their smaller consumer customers, Geithner’s and Summers’ scheme for dealing with the banking crisis by hiding problem loans permanently on the banks’ balance sheets will be exposed for what it is, an attempt at preserving the jobs of current bank executives at the cost of dragging out this recovery needlessly for years in the future.”

After much thought and careful consideration (which took about 1.5 seconds) I have a suggestion for how President Obama can resolve this conflict. Warren’s in, Geithner’s out. Problem solved.

Who’s In Charge Here, Washington or Wall Street?

06 Monday Apr 2009

Posted by in Politics

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There are both encouraging and discouraging signs today in the battle over who’s in charge, Wall Street or Washington. First the good news. Finally, somebody in D.C. gets it.

“Elizabeth Warren, chief watchdog of America’s $700 billion bank bailout plan, will this week call for the removal of top executives from Citigroup, AIG and other institutions that have received government funds in a damning report that will question the administration’s approach to saving the financial system from collapse.

She declined to give more detail but confirmed that she would refer to insurance group AIG, which has received $173 billion in bailout money, and banking giant Citigroup, which has had $45 billion in funds and more than $316 billion of loan guarantees.”

With one simple sentence Warren summed up what, in my opinion, should be the consensus among those in the Obama administration.

“The very notion that anyone would infuse money into a financially troubled entity without demanding changes in management is preposterous.”

That’s the good news, now for the bad. There are some “administration officials”( I smell Larry Summers) who are busy looking for loopholes in congressional restrictions placed on financial institutions who receive bailout money.

“The Obama administration is engineering its new bailout initiatives in a way that it believes will allow firms benefitting from the programs to avoid restrictions imposed by Congress, including limits on lavish executive pay, according to government officials.

Administration officials have concluded that this approach is vital for persuading firms to participate in programs funded by the $700 billion financial rescue package.”

“Persuading”, aka bribing.

“The administration believes it can sidestep the rules because, in many cases, it has decided not to provide federal aid directly to financial companies, the sources said. Instead, the government has set up special entities that act as middlemen, channeling the bailout funds to the firms and, via this two-step process, stripping away the requirement that the restrictions be imposed, according to officials.”

“Special entities” acting as “middlemen”, aka money launderers.

Speaking of limiting executive pay, Rep. Alan Grayson’s Pay for Performance Act, which does exactly that, passed the House 247-171, with 10 Republicans voting yes.

But there’s rain on that parade, too. Rep. Melissa Bean of Illinois, one of the so-called Blue Dog Democrats, sponsored an amendment which would “allow institutions that enter into a payment schedule with Treasury on terms set by Treasury to no longer be subject to the bonus and compensation restrictions created by the Act.“

It passed 228-198 with the support of 63 Democrats, most of whom also voted for Grayson’s bill. Go figure.