Saturday, April 4, 2009

Fire the Bankers

Yesterday we learned that President Obama's chief economic advisor, former Treasury Secretary Lawrence Summers, received about 5.2 million dollars in compensation from a hedge fund.  Today we learned that the Obama administration is trying to establish its bailout programs in such a way as to avoid many rules that Congress imposed on companies that receive bailout money.  Some of these rules include restrictions on executive pay for companies that get federal money.  This week new reports also told us that Wall Street firms are planning on using some bailout money to buy assets from their troubled Wall Street Competitors.

One of the Obama administration's faults is that it is too close to Wall Street Financiers. Early in his first term Bill Clinton followed Robert Rubin's advice and focused on deficit reduction and since then the Democratic Party has grown closer to Wall Street interests and this is a problem.  

Part of the financial crisis is due to large Wall Street investment banks that grew "too big to fail."  They grew this during way in part during the Clinton administration and the deregulation legislation favored by Treasury Secretaries Rubin and Summers.  Now Summers is back in the government after making million on Wall Street.  Current Treasury Secretary Time Geithner is a Summers acolyte and spent his entire career as a civil servant but he is connected with many of the government officials whose policies led to this fiasco.  

President Obama needs to realize that it is not enough to restore Wall Street to health.  He and his administration need to restore balance between the financial sector and the rest of the country.  He can't do this if he keeps the same people in place that got us into this mess.  I am not ready to call for Geithner's resignation and I am skeptically optimistic about his public/private plan to deal with troubled Wall Street firms.  However, Lawrence Summers has got to go and go now.

This imbalance and perceived favoritism toward Wall Street will doom a lot of needed future recovery programs.  President Obama needs to get rid of those helped bring on this crisis, he needs to listen to those who warned what was going on, and he needs to guard against any real or perceived bias in favor of Wall Street firms.

Failure to do this, I fear, will lead to a nationwide recovery becoming merely just a Wall Street Recovery.   

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