Inside the Crisis

[RoyGBiv]

This is a very long piece. I nonetheless suggest anyone who wants to opine on the economic crisis and Obama's response to it read it in full.

I'm only quoting the concluding paragraph. Apart from various details on policy positions and what different factions within the White House think of them, the thing to take away from this piece should be that there is healthy, active debate going on within this administration and that all parties involved are genuinely trying to find the best solutions to these problems.

Larry Summers and the White House economic team.
by Ryan Lizza

...

So far, none of the worst fears of those who believed that the stimulus was too small or that nationalization was the only option or that taking over car companies would destroy the fabric of capitalism have materialized. Indeed, several private forecasters have credited the stimulus with blunting the impact of the recession—it probably added around three points to the G.D.P. last quarter—and the banking system has dramatically stabilized since the stress tests were completed. But competence has its limits as a source of inspiration. Paul Krugman said, “The stimulus helped, but the question is, ‘Is that enough?’ ” With unemployment at around ten per cent and still on an upward trajectory, the Administration is left arguing not that jobs are being created but that without Obama’s policies things would be worse. It’s not a very pithy slogan. And, undoubtedly, the huge government interventions laid the groundwork for the political backlash against Obama that was unleashed this past August and which has jeopardized his larger agenda on health care, global warming, and financial regulation. Obama and his team have pulled the economy back from the abyss, but they will get credit only when it has been rebuilt.

http://www.newyorker.com/reporting/2009/10/12/091012fa_fact_lizza?currentPage=all

[Demeter]

1. Don't You Believe It

Those worst fears are happening in abundance, and the MSM is finally beginning to admit to it just this month, as is the stock market. The economic numbers are just numbers and artificially manipulated, to boot; it's the lives we live that matter!

[RoyGBiv]

2. I suggest reading the article n/t

[Demeter]

3. It's a Puff Piece Trying to Rehabilitate Larry Summers

Truly not worth the reading. And he's an asshole from way back when.

[RoyGBiv]

4. Odd you think that ...

... considering it reveals the source of many of the mistakes Obama's administration has made so far on dealing with the crisis, many of which point directly to Summers.

[bemildred]

5. OK, I read it.

Contrast with this:

Government Watchdog Says Treasury and Fed Knew (& Lied) Bailed-Out Banks Were Not Healthy


---

Neil Barofsky, the special inspector general for the Troubled Asset Relief Program (SIGTARP), says that despite multiple statements on Oct. 14 of last year that these nine banks were healthy and only receiving government funds for the good of the country's economy, federal officials knew otherwise.

"Contemporaneous reports and officials' statements to SIGTARP during this audit indicate that there were concerns about the health of several of the nine institutions at that time and, as detailed in this report, that their overall selection was far more a result of the officials' belief in their importance to a system that was viewed as being vulnerable to collapse than concerns about their individual health and viability," Barofsky says.

---

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=102&topic_id=4090487&mesg_id=4090487

Which, translated, means they bailed out their cronies. Summers is an interesting guy, but he lacks sufficient humility.

[RoyGBiv]

6. Read that yesterday ...

I admit to be confused what Hank Paulson lying last year about TARP and injections of capital into various financial institutions has to do with the debate within the White House after Obama took office on the size and composition of the stimulus package.

It is an interesting contrast, but not for the reasons that seem implied here.

FWIW, I'm not a huge Summers fan either. Well, I'm not actually a fan at all. But, he's being painted as something close to the devil, and I think that's wrong-headed. I feel pretty much the same about Bernanke, who, btw, was one of those individuals cited in this report you mention as indicating the health of those nine institutions was in question. Neither of these individuals is exactly my cup of economic tea, particularly Summers, but they both bring to the table a certain level of practical experience and an educational background that makes their voice an important part of the internal debate.

From the article, Christina Romer comes across as the individual with her shoes most firmly planted in reality. Of course that's essentially the nature of her job, to provide a reality check and attempt to make sure all parties involved understand just how bad things can be if they do this or that or don't do the other thing. Her contributions to the team provided what Axelrod called the "holy shit" moment they needed to kick them into gear. Perhaps that's the kind of advisor that is lacking and sorely needed in the context of the health care debate, someone to inject a "holy shit" reality check that, combined with the experience of the economic debate, pushes them into leaning on Congress a little harder than they have been.

This is one of the things the article brings to light that I felt was essential to anyone who actually wants to try to understand what's going on here rather than shouting ideological platitudes. None of this is the product of one person. If you pay attention mainly to the mainstream media, all you really get are a few carefully chosen sound bites that don't give any insight into the process taking place and actually work to obscure it.

[bemildred]

7. I can live with that.

Ms Romer does sound like the real deal.

I agree that painting these various "experts" as the devil is wrong-headed, they seem oridinary enough. Summers does have his good points, and the OP does a good job portraying him warts, intellect, and all.

I agree wholeheartedly with the criticisms expressed of faith-based economics and the axiomatic approach inherent in concepts like the "free market" and it's arbitrary "magic" ability to "correct itself". I also disagree with the notion that the market is "efficient" in allocating resources. It certainly does allocate resources, but whether it does so "efficiently" or not is a value laden judgement which depends on what sort of "efficiency" one favors. The market is also very wasteful, throwing all sorts of perfectly functional things into the dustbin because they do not provide a sufficient profit margin to various private financial interests. Those sorts of ideas are dogmas, not empirical facts. We can do much better.

The OP has a certain narrative about the efforts made to rescue the economy and the motives of the parties involved, and I put that up just to demonstrate that there are other narratives that view their motives in a different light. One does not have to think that they are not well-meaning, at least in their own minds, in order to also recognize a large helping of self-interest and close-mindedness in their choices.

[RoyGBiv]

8. Point taken ...

Certainly Summers can be accused of self-interest in some of his opinions ... hell, just in holding the position he does. I tend to think of him more as an uber-wonk who, as an intellectual snob, has no peer, and that often comes across as him falling into, as you say, dogma.

Of course I tend to like intellectual snobs ... assuming I don't have to deal with them every day. :-)

[IrateCitizen]

9. Thoughts after reading...

:puffpiece:

I think it's readily apparent and has been for some time that Larry Summers is a smart son-of-a-bitch. But, at the end of the day, he's still a son-of-a-bitch. This article seemed an effort to present an overly rosy view of the economic policies of the current administration. For those of us who follow economic news from a variety of sources, much of this came across as fluff.

But I did find this to be a nugget in the article:
"(Harvard Psychology Professor Stephen Pinker) added, 'Because he was seen often as hostile to, or uncomprehending of, the humanities, he had a number of natural enemies there.'"

Summers is a case study of everything that is wrong with the economics profession (and many others of the applied sciences as well). It has no sense of connection with qualification of the things that make us human, instead concentrating completely upon quantification of sets of data that are too often narrowly defined and divorced from the less quantifiable aspects of the human condition. He possesses a massive intelligence, but a negligible wisdom.

In this sense, Summers is little different from most others operating in the applied sciences --and, let's face it, economists fancy themselves much closer to the hard sciences of physics and chemistry (with their intricate mathematical models) than the more amorphous social sciences such as psychology and sociology. It's also a phenomenon that troubled me in my previous career as an engineer, compelling my switch to studying and teaching history. Many people I worked with were smart, dedicated people -- but there was absolutely no sense of nor consideration of how our profession impacted the human condition on any level.

[AllentownJake]

10. Summers, along with Rubin, and Geithner

are some of the creators of this crisis. Larry and Paul's ideas in the 1990s have lead us to where we are today. Tim's lack of action while at the Fed are the very root of the crisis.

I'm still trying to figure out why they are around.