The Bishop and the Butterfly: Murder, Politics, and the End of the Jazz Age
    Dan Kervick's picture

    Simon Johnson on Daley

    Here is an extremely important piece of new commentary from Simon Johnson.

    http://baselinescenario.com/2011/01/09/the-bill-daley-problem/

    I really think we need to worry about what is going on with President Obama's political and economic team with the appointment of both Daley and Sperling.  With these selections, Obama has moved back toward the 90's with two figures who are both associated with loose money, high-leverage, low-regulation market funadamentalism of the Third Way Democrats.   Why is he doubling down on the failed approaches of the past?

    Well, Obama is already in re-election mode, and has started doing some staff re-shuffling to put his political campaign operation into place, with Axelrod going off to run things in Chicago and Gibbs moving out of the White House and into a (highly paid) private political "consultancy".  He faces an uphill political battle with a very stagnant and recessionary economic picture, and unemployment at a ghastly 9.5% - and that's just the misleadingly low official unemployment number.

    With the country bogged down in these miserable economic doldrums, and faced with a nation full of scared, overleveraged, underemployed and unemployed consumers with evaporated savings and incomes that are flat, Obama has for some combination of practical political motivations, partisan opposition headwinds and stubborn ideological inhibitions refused to rebuild the economy through energetic progressive fiscal intervention, bold household deleveraging initiatives or a redistribution of wealth from accounts where it is abundant and inactive to accounts where it is needed and likely to be much more liquid.

    We have good reason to worry that he is going to pivot in his State of the Union speech toward fiscal austerity and deficit fear-mongering, and even further away from progressivism and government activism.

    But if the political goal is rapid economic growth by the summer of 2012, the only alternative to activist government-driven approaches is to try to get out of the way of commerce, grease the rails of finance and rapidly re-inflate the economy by plowing the road for free-wheeling private activity.  In other words, there is a serioius risk that Obama has settled on the strategy of employing the same high-octane, bubble-based approach to growth beloved by 90's neoliberals, based on poorly regulated speculative and Ponzi lending from an overly large and rent-hungry financial sector.  Of course, this is the attitude that crashed the economy in the first place.

    Comments

    This interview with Ari Berman agrees:

    ARI BERMAN: Well, thanks for having me.

    Well, he’s certainly, as you guys mention in your intro, the candidate of the corporate and political establishment—deep ties to the business industry, not only working for JPMorgan, but also serving on the boards of companies like Boeing, Merck, Abbott Labs, so deep ties there. A big political insider, working as a fixer for President Clinton, commerce secretary, pushing NAFTA, working for Al Gore’s campaign in 2000 again. And then deep ties to the Chicago world, which Obama also knows very well, as the brother of outgoing mayor Richard Daley. So he brings all those different experiences, which I imagine—I guess, the combination of which Obama really wanted in his White House going forward. But it does feel like the Clinton era now is back with a vengeance, and perhaps not in the best way.

    JUAN GONZALEZ: Well, to no surprise, the U.S. Chamber of Commerce immediately praised this appointment of Daley’s—

    ARI BERMAN: Yeah.

    JUAN GONZALEZ:—despite the fact the Chamber has been battling the Obama administration almost from the beginning.

    ARI BERMAN: Well, it was a little surreal to see not only the Chamber, but also Karl Rove, praise Obama’s pick for chief of staff. But I think this is exactly what the Obama administration wanted. As you say, there seems to be a belief—I think somewhat of a surreal one—that the banks are an underrepresented constituency in Washington nowadays and that the way that they have to appease people like the Chamber is to bring in someone who they like and who actually advised them. As you mentioned earlier, he advised the Chamber on financial deregulation before the economic crisis, and once the economic crisis happened, he actually pushed to gut the Consumer Financial Protection Agency. My feeling is more is going to come out about Daley’s work for the Chamber and some of these other groups in what exactly he did in terms of lobbying. But I think the signs that it sent, which are going to be unsettling to listeners of this program and viewers of this program, is the exact things that Obama will like about the appointment.

    Given that Obama told business leader he will pursue more trade agreements, Sperling and Daley are naturals for those, too.  "We love our working class, and will help them by shipping more jobs overseas; we'll raise other boats, so sorry."


    I think the Obama administration has been captured, if it was not all ready owned,  by the business interests of the status quo.  They have bought the behind the scenes spin that maintaining opacity of the true financial position of the banks/our economy, (hat tip to that same status quo), the economic situation will worsen less catastrophically than it would were we to actually intervene in a meaningful way and at the expense of business.  Perhaps they'll delay further collapse or even diffuse it, spreading out the effects long enough to get reelected.  The net result of this seems to me to be inevitable, while the effect of the people's growing distrust of government, as well as the lack of meaningful economic reconciliation, and its enshrinement of a stagnant economy don't seem to factor into their policy initiatives. 


    all ready owned,

     

    Them banksters were so far ahead of us on this one, they picked the cool brother with the attractive autobiography to walk point for them and we (Me, at least) went for the okey-doke.

    It's worth remembering that Prez's first venture into national politics was a primary run against the <>Minister of Defense<> who named his son after the great Huey P. Newton and recruited the martyred Fred Hampton into the Panthers.

    That should have told us somethin'


    Well I went for the okey-doke as well JR, and given the choices offered in the general election would likely do so again.  That doesn't make me feel any better about the current situation though.


    In retrospect, as the mea culpa delivereed yesterday to Gasket would indicate, I really think Hilary would have vindicated progressive principles better.

    What a putz! (not Obama, tho he is--me)


    Guess again, Jollyroger; notice anything about her as SoS?  Ms. Ratchet-up-the-rhetoric of threat, then ask for diplomatic solutions?  Her hubbie was Mr. Third Way.  And no, that doesn't make her a neo-Liberal, but she travels in those exalted circles now.


    Yeah, on the foreign policy side, she's right there w/Bibi.

    That said, she has more self-respect than Prez, and, as the old joke used to go "there is some shit she wlll not eat..."

    When they tried to roll her, I think she would have snapped into attack mode before she thought better of it...


    It's not like we haven't got the third Clinton term anyway...


    Well, Jeez, Dan K! What do you want? The Dow is Up! Bank profits are up at record levels! CEO compensation and perqs have never been better! India and China offer tremendous opportunity for growth, along with a tantalizing pool of labor made available for half-pennies on the dollar!

    Combine all this with the GOP message to the rest of us that we should just quit our whining, pull ourselves up by our Free Market bootstraps and all become hedge fund managers, and you've developed the strategic recipe for electoral success in 2012.

    What's not to like? Happy Days Are Here Again!

    At least until the next inevitable crash, but the election will have been won by that time. Nothing works like success! 


    The story of his hires just gets more and more grotesque. 

    And sorry folks - but to go on about Hilary, of WalMart fame, who sits in Cabinet and signs off on all of it, who supported a husband who literally just advised Obama to go in precisely this direction and hire these kind of people, well... that just strikes me as madness. 

    Obama has been shit. Hilary has been shit. Compared to the real-life suffering of tens of millions, I couldn't give a damn about either of these two assholes, and whether one of them might magically reverse their actions and statements of the past 20 years and revolt against the powers that be. Dream on.

    The fact is that the Admin needs new advisors, ones with imagination, ones that have had fuck all to do with the machinery put in place these past 20 years.

    And a Daley? Jesus. That's shit frosting if there ever was.


    True, but Hillary is shit with a chip on her shoulder (Heighdy-ho) Remember Mr. Hanky the Christmas Poo?

    Like I said above, running dogs, etc. etc.


    Sleepin asks a good question.  What is it you want?  More to the point, what does Simon Johnson want?  The status quo ante?

    I'll give Johnson his props.  He is a smart guy with a good perspective on his 13 banks and very good at explaining how they operate to non-bankers --up to a point.  He recognizes these banks as oligarchs who hold governments hostage though the global economy but then suggests the solution is to make them smaller, require more capital and stricter regulations.  Who exactly is supposed to do that?  The hostage governments?  And how can they possibly do that without disrupting the global economy?

    Johnson quite correctly notes that "These banks have captured the hearts and minds of top regulators and most of the political class (across the spectrum), most recently with completely specious arguments about why banks cannot be compelled to operate more safely."   What he does not see is his own cognitive capture by the prevailing economic theories of the past few decades.

    The problem with the banks is that they are oligarchs.  Stricter capital requirements and illusory regulations will not fix that.


    I guess I was hoping that people would be more interested in discussing the policy substance raised by Johnson's essay and my post, and didn't just want to get into another circle jerk of Democratic flaggelation, self-pity and misery porn.


     the policy substance

     

    We've already lost on <>policy substance<a>


    You know Dan, when Simon Johnson ends his pice with:

    <blockquote>Let’s be honest.  With the appointment of Bill Daley, the big banks have won completely this round of boom-bust-bailout.  The risk inherent to our financial system is now higher than it was in the early/mid-2000s.  We are set up for another illusory financial expansion and another debilitating crisis.</blockquote>

    I'm not sure there's anything I can add to "policy substance".  Seems to me that it transcends policy and reflects more on a lack of imagination on the part of those in the seat[s] of power.  [insert "Democratic flaggelation, self-pity and misery porn here]

     


    BTW, Johnson's editorial , at least from my reading, was not so much about policy as it was about the appointment of Daley and what that means for us earthbound mortals.


    But what it means, according to Johnson, is that a large group of financial experts, cutting across the ideological spectrum, who have been recommending a financial regulatory policy agenda designed to stabilize, shrink and diversify an overly-leveraged financial system, filled with too big too fail financial firms, have lost this round with the appointment of Daley.  The links Johnson provide are all about financial policy.


     have lost this round 

     

    We get another round?  Cool, I thought we had lost the whole damn game.

    The Euroshitstorm abateth not, nor the state and local fiscal meltdowns.  All we hear are "families have to tighten their belts, so governments should too.."(as if families can print money...)

    The latest unemp. numbers, rather than causing consternation followed by emergency spending measures, made Prez proud of himself, cause .4% fewer folks even maintain the hope of a job.

    Good times!

     


    I know,and have read a large number of Johnson's links heretofore.  I esp liked his statement:  "This is not a left-right issue – again, look at the list of people who co-signed Professor Admati’s recent letter to the Financial Times.  This is a question of technical competence.  Do the people running the country – including both the executive branch and the legislature – understand economics and finance or not?"  So from his, and my perspective, the discussion is not so much about the policy we are promulgating as a nation as it is the competence of the actors we've elected or appointed to recommmend and choose the preferred policy we implement.


    Whether they are competent or not, they are politicians.  Thus, they are potentially capable of being influenced by political activism and pressure.


    You know I think our biggest problem is so few people understand economics, that it is easy for pols to bullshit the public when it comes to economic policy.  We can write letters to our elected officials, but trying to get people united in a front on these issues is almost a non-starter.  I think we're held captive until things get better or fall apart.  Meanwhile we can engage in our discussion here, (or circle jerk as I think you or someone here put it).  I'm personally gonna watch a movie now.


    Johnson has literally spent the entire last year and a half speaking to any group whjo would host him on the dangers of Too Big to Fail.  He has tried to have faith in any amendment to FinReg that was being considered, chronicling each move every step of the way.  He's appeared before Congressional committees...and imagine now that there are actually some weak laws that could be used to make some changes that might help to prevent the next financial crisis, that this administration is Too Weak to Care.


    Plus, blogs left alone for 10 hours seem to go where they go.