A Thumbs-Down on Obama's Economic Team
For this Obama girl, my Obamania ended when the president appointed his economic team. Obama nominated Tim Geithner as secretary of the treasury, Larry Summers as head of the National Economic Council (NEC), and Mary Schapiro as chairman of the SEC. This is not CHANGE that we can believe in, but recycling that will fail.
Not only do I think that this group is not up to the job, but even worse they caused or, at the very least, did not prevent the economic problems that we are now facing when they were part of the Clinton administration. Summers and Geithner are acolytes of former Treasury Secretary Robert Rubin, whose previously stellar reputation as treasury secretary was shredded by his post-Treasury work at Citigroup. The nation's largest bank went on life support under his watch. His gospel of Rubinomics, which calls for financial deregulation, has been discredited during this financial crisis.
Many consider Larry Summers a brilliant economist, but it was he as Clinton's treasury secretary who pushed for passage of the Financial Services Modernization Act, the most sweeping overhaul of the financial industry since the Great Depression. This bill struck down the regulatory barriers between the merger of commercial and investments banks, and insurance companies and stock brokers. Basically, all those banks that are now too big to fail and are failing were created by Larry Summers.
In his unquenchable thirst for deregulation, Summers backed Senator Phil Gramm's Commodity Future's Trading Commission Act, which banned the regulation of the nascent credit derivatives market. These are the same financial instruments that Warren Buffett famously described as weapons of mass destruction and have since exploded.
Not everyone in the Clinton administration was enamored with credit derivatives. Brooksley Born, chairman of the Commodity Futures Trading Commission, testifying before Congress in 1997, said, "Credit derivatives threaten our regulated markets or, indeed, our economy without any federal agency knowing about it." Some speculate that her advice went unheeded by the Three Musketeers -- Greenspan, Rubin, and Summers -- because she was a woman.
In my book, Summers is batting 0-2, so I am confused at why the man that detonated a financial Pearl Harbor on us should have another chance to wreck havoc. His defenders say that he has reformed and sees the error of his ways. In the same way that I would not put a reformed alcoholic in charge of a bar, I would not put a reformed deregulator like Summers in charge of a government that desperately needs regulation.