Guess this is the day to post questions and leave the answer for readers to add.
First, the background of President-elect Obama’s announcement of the economic team for the new administration.
Today, Vice President-Elect Biden and I are pleased to announce the nomination of four individuals who meet these criteria to lead our economic team: Timothy Geithner as Secretary of the Treasury; Lawrence Summers as the Director of our National Economic Council; Christina Romer as Chair of the Council of Economic Advisors; and Melody Barnes as Director of the Domestic Policy Council.
Next, a Namoi Klein post the Editilla emailed that I’ve been holding.
One thing we know for certain is that the market will react violently to any signal that there is a new sheriff in town who will impose serious regulation, invest in people and cut off the free money for corporations. In short, the markets can be relied on to vote in precisely the opposite way that Americans have just voted. (A recent USA Today/Gallup poll found that 60 percent of Americans strongly favor “stricter regulations on financial institutions,” while just 21 percent support aid to financial companies.)
There is no way to reconcile the public’s vote for change with the market’s foot-stomping for more of the same. Any and all moves to change course will be met with short-term market shocks. The good news is that once it is clear that the new rules will be applied across the board and with fairness, the market will stabilize and adjust. Furthermore, the timing for this turbulence has never been better.
Over the past three months, we’ve been shocked so frequently that market stability would come as more of a surprise. That gives Obama a window to disregard the calls for a seamless transition and do the hard stuff first. Few will be able to blame him for a crisis that clearly predates him, or fault him for honoring the clearly expressed wishes of the electorate. The longer he waits, however, the more memories fade…
When transferring power from a functional, trustworthy regime, everyone favors a smooth transition. When exiting an era marked by criminality and bankrupt ideology, a little rockiness at the start would be a very good sign. more details emerge, the clearer it becomes that Washington’s handling of the Wall Street bailout is not merely incompetent. It is borderline criminal.
In a moment of high panic in late September, the US Treasury unilaterally pushed through a radical change in how bank mergers are taxed–a change long sought by the industry. Despite the fact that this move will deprive the government of as much as $140 billion in tax revenue, lawmakers found out only after the fact. According to the Washington Post, more than a dozen tax attorneys agree that “Treasury had no authority to issue the [tax change] notice.”
Of equally dubious legality are the equity deals Treasury has negotiated with many of the country’s banks. According to Congressman Barney Frank, one of the architects of the legislation that enables the deals, “Any use of these funds for any purpose other than lending–for bonuses, for severance pay, for dividends, for acquisitions of other institutions, etc.–is a violation of the act.” Yet this is exactly how the funds are being used.
Then there is the nearly $2 trillion the Federal Reserve has handed out in emergency loans. Incredibly, the Fed will not reveal which corporations have received these loans or what it has accepted as collateral. Bloomberg News believes that this secrecy violates the law and has filed a federal suit demanding full disclosure.
First up with an opinion on Obama’s announcement – or the first I found – Talking Points.
The appointments have prompted some to observe that his economic team is heavy with proponents of what came to be called “Rubinomics” — an embrace of balanced budgets, deregulation, and free trade as routes to prosperity.
That said, those who might worry that these choices portend a shift in Obama’s emphasis should note that thanks to the meltdown and the talk of bailing out major corporations with taxpayer funds, the need for aggressive regulation of Wall Street right now seems far more obvious than it may have in the early 1990s. So it seems unlikely that the choices signal any kind of ideological shift on Obama’s part. Rather, they’re about sending a reassuring message to international markets.
Indeed, the presser was yet another reminder of just how enormous the expectations for Obama are right now and how urgently he needs to depress them by adequately preparing the electorate for the long and difficult road ahead.
“This won’t be easy,” Obama said. “There are no shortcuts or quick fixes to this crisis, which has been many years in the making — and the economy is likely to get worse before it gets better. Full recovery won’t happen immediately.”
Contrast the opinion from Talking Points to this from CNN.
Sources close to the Obama transition team say Berkeley Economics Professor Christina Romer will be the Chair of the President’s Council of Economic Advisers.
What makes this selection more interesting than some of the other Obama picks is she’s a female, a California academic, and a Washington outsider.
An important distinction is that this is different than the job Lawrence Summers is expected to get as director of the National Economic Council.
The Council of Economic Advisers is a group of economists, including three who are appointed by the president and need Senate confirmation, who advise the president on economic policy.
The CEA is part of the executive office.
The National Economic Council (NEC) coordinates the president’s economic policy between the department of Housing and Urban Development, Health and Human Services, Labor, Treasury, and the Federal Deposit Insurance Corporation, among others.
The Summers appointment does not require confirmation.
Background information on Romer provides interesting insight on the qualifications of this member of Obama’s team.
Romer’s early work focused on a comparison of macroeconomic volatility before and after World War II. Romer showed that much of what had appeared to be a decrease in volatility was due to better economic data collection.
She has also researched the causes of the Great Depression in the United States and how the US recovered from the depression.
She did extensive work on monetary policy in the 1950s, using the notes from the meetings of the Federal Reserve Board meetings to study how the Federal Reserve made its decisions.
Her recent work has focused on the impact of tax policy on government and general economic growth.
Much of Ms. Romer’s work has been on macroeconomic history – studying, for example, the causes of the Great Depression, something that proves quite valuable now as the U.S. economy faces down a similar crisis. Her most recent work, co-authored with her husband, includes the analysis of tax policy on economic growth — at http://elsa.berkeley.edu/~cromer/nadraft1108.pdf and http://elsa.berkeley.edu/~cromer/draft708.pdf.
So, did today’s announcement signal “new sheriff in town”?
Meanwhile, what do we do with the current “sheriff” who also made an announcement today – his of another bailout – Citigroup?