Robert Reich: 'Paul Volcker to Barack Obama'

[flpoljunkie]

FRIDAY, MARCH 13, 2009

Paul Volcker to Barack Obama

Former Fed Chair Paul Volcker is briefing President Obama today on how well the stimulus package is doing. I have no inside knowledge of what he's saying, but if I were Volcker (and I'm not -- he's almost two feet taller than I am), I'd say the following:

Mr. President, it's way too early to know exactly what the stimulus is doing because the money is barely out the door, but I've got to tell you I'm worried as hell. Unemployment is at 8 percent, and underemployment is over 14 percent of the workforce. The economy is shrinking much faster than it was when you put the stimulus together. It will be more than a trillion dollars short of its full capacity this year, and I have every reason to believe the same next. State governments alone are hundreds of billions in the hole, creating a huge drag. So your $787 billion over two years, only two-thirds of which is direct spending, isn't going to get us nearly far enough. I'd strongly recommend you make ready a second stimulus, about the same size, and get it enacted as soon as possible, with the proviso that it will be implemented if and when unemplyment hits 8.5 percent or underemployment reaches 15 percent.

Oh, and by the way, Mr. President. You may not want to hear this, but your Treasury Secretary is making things worse. His dithering on what to do about Wall Street, and his incapacity to speak clearly to the Street and to the public about what needs to be done, is spooking everyone. Why doesn't he just put the irrevocably insolvent banks into receivership under the FDIC, sell off their assets, protect depositors, and reimburse taxpayers with whatever remains? Let the rest of the banks fend for themselves -- working out their bad loans with their creditors. As to AIG, well, that's a complete basketcase. Put it out of its suffering. Take it over, sell its assets, protect policy holders (you'll need to create a big co-insurance plan with every other major insurer in the world), then get out.

Want a cigar?

http://robertreich.blogspot.com/2009/03/former-fed-chair-paul-volcker-is.html

[MannyGoldstein]

1. Geithner Should Be Replaced by A Democrat n/t

[Demeter]

2. Geithner Should Be Replaced By a Non-Corporate Tool

Someone with intelligence, honesty, ethics, and guts.

[Historic NY]

3. They need to get the designated Deputys & Asst. Secretaries in place..

Geithner is flying solo he has yet to fill 15 key positions.

http://www.breitbart.com/article.php?id=CNG.4b23a31c3686bc071c5b2ae66b18d1d8.601&show_article=1

[MasonJar]

4. Reich is right. I am sure Volcker is also supportive of this interpretation

Geithner is a disaster.

[sad sally]

8. Geithner acts and sounds like a kid that did something very bad

and got caught. I'm certainly no expert on body language but the way he looks down and off to the side, arching eyebrows, and even though there's no stuttering like Hank Paulson, he doesn't come across as believing what he's saying.

Very sad to think this is the man in charge of the Treasury Dept for the next four years. Also disappointing to think this is the best person President Obama could come up with to lead and explain how the economy will/can be fixed.

[Hawkowl]

11. Astute

Very good description of Geithner! I hadn't thought of it in this way but you are right. Not only is he not believable, but I think that he is distincly uncomfortable because HE doesn't believe his solutions are working. He's just a bad actor trying to maintain a charade to slow the collapse of the house of cards.

[RollWithIt]

5. We're 2 months in, this kind of hyperbole is unwarranted and ill advised

I don't understand his logic. Of course he's going to want to listen to what a former Fed Chair has to say because it's a good idea to at least LISTEN to it. His comments about a government takeover of AIG are completely unrealistic. I respect him as a person but I just think he's way off base.

[lamp_shade]

6. Reich's nose seems to be a little out of joint these days. I wonder why?

[PurityOfEssence]

7. Pssst....Bob...The President is a CORPORATIST, he's not going to undercut private enterprise

After enough speeches saying how necessary it is that the stimulus money go out through private corporations, and how lovely it is that 90% of the people's money will be spent by guardians of personal enterprise, it can't be seen as mere appeasement of the right. At some point, it has to be accepted that this is the man himself.

The danger of private enterprise has been writ large by this catastrophe, and cozying up to the Libertarian ideals of Randian virtuous selfishness has revealed a fundamental flaw: businesses are in it for THEMSELVES, whereas government is at least ostensibly out there to "promote the general welfare". There is every reason to expect that selfish profiteering will cause the ruin of others at times; capitalism is largely based on "getting away with it" and feeds upon other humans. (I'm a pretty solid capitalist, but it has to have pretty elaborate controls or it lapses quickly into economic feudalism and outright oppression, not to mention that it FAILS.)

This will, of course, be taken as a blasphemous assault on an unquestionable hero, and that is the crux of the problem.

[Hawkowl]

9. We're screwed

The economic "team" Obama has put together is very weak. The treasury secretary is next to useless. The "stimulus" package was a wasted opportunity. I was listening to Peter Defazio (D) from Oregon the other day and only SEVEN PERCENT of the stimulus package was for "infrastructure". Defazio was describing his meeting with the president who kept insisting there was $200 billion in infrastructure. Clearly, since Obama is not a stupid man, he is being completely misled by his advisers. Tax cuts of $10 per week were a purely political tool that was not even used to get any political capital.

I don't hate Obama. I'm not even disillusioned, since having followed his career for the last 15 years I knew he would move even more to the center once elected. However, I am grim. Very grim indeed because although Obama is undoubtedly a political genius, his economic policies are astoundingly inadequate for the task at hand. We are going to think back of 2008 as the good old days of the economy. The key causal factors in causing this depression have not been addressed: accelerating foreclosures and insolvent banks and the resulting cessation of credit. The stimulus package resembles a prescribed aspirin by the doctor when you have a heart attack.

The feeble minded congress critters are absolutely fucking clueless on the economy. Rethuglicans complaining that the stimulus package was spending too much money, while we have conservative democrats like Evan Bayh deliberately slowing everything down because they want what? To prove a point? I'm just completely resigned that at best, we are going to follow the Japanese model of banking crisis of the 1990's that kept their country in recession FOR TEN GODDAMN YEARS.

This sucks. I don't hate Obama, I just have no confidence in his ability to turn this economy around in his first term. Just don't see it happening unless he sacks his idiot wall street cabinet. For those of you he are screaming it's only been 50 or 60 days- it doesn't matter. Obama the chess master can lose the entire match with only the first three incorrect opening moves.

[Myrina]

10. Spot on analysis!

:applause: Thank you!

[freemarketer6]

12. Not as charitable as you, but that was excellent. We will know

by June whether Obama will be a single term president.