Obamanomics
We already knew that even as President-elect Obama was railing against the excesses of Wall Street on the campaign trail, he was pulling in more money from financial and investment sources than any other politician. Now comes news that his economics brain trust is just as conflicted. A story in today’s Bloomberg News shows he’s relying on two people who helped cause the economic meltdown to help him fix it–former Clinton Treasury Secretaries Robert Rubin and Lawrence Summers:
Rubin, one of Obama’s closest economic advisers, was a proponent of deregulation as President Bill Clinton’s Treasury secretary from 1995 to `99. Summers, a Harvard economist who worked under Rubin in the Treasury before replacing him as secretary, joined his boss in defeating an effort to rein in over- the-counter derivatives in 1998.
Brooksley Born, then commissioner of the Commodity Futures Trading Commission, wanted to examine regulating the derivatives, including credit-default swaps, saying they posed “grave dangers” to the economy. Federal Reserve Chairman Alan Greenspan and Rubin issued a rebuke, saying in a statement that they seriously questioned the scope of the CFTC’s jurisdiction in this area.
Maybe Obama should look up Ms. Born. Her prediction of “grave dangers” turned out to be pretty accurate. Unfortunately, our new President has tapped two of the men who helped bury Born’s proposal to advise him instead.
But giving Wall Street free rein to buy and sell trillions in derivatives that eventually swamped our entire financial system wasn’t all Summers and Rubin did. They also joined forces with arch deregulator Phil Gramm to give financial firms even more rope to hang themselves by allowing them to become investment, as well as commercial, banks:
Summers and Rubin also helped secure passage of the 1999 Gramm-Leach-Bliley Act, aimed at spurring competition in banking. The law repealed the 1933 Glass-Steagall Act, which had prohibited commercial banks from offering investment and insurance services. Summers, 54, helped craft the legislation, and Rubin urged Congress to pass it and Clinton to sign it.
Rubin, like Obama’s new chief of staff Rahm Emanuel, went to work in investment banking after his time in government. Unfortunately for his new employer, Citigroup, his decisions didn’t pan out too well there, either.
In 1999, Rubin left the Treasury to serve as a self-described consigliere at Citigroup Inc … Shareholders say Rubin, who has made $150 million at the bank, should’ve curtailed its exposure to subprime mortgages.
To recap: Rubin earned $150 million for nearly bankrupting the giant bank. He obviously brought Washington’s culture of reverse-accountability with him. Now, men like Rubin could be heading through the revolving door again, back into government, to try to guide us out of the economic typhoon they themselves stirred up:
“Rubin’s fingerprints are all over this collapse,” says Leo Gerard, president of the United Steelworkers. “My only hope is that some of these guys who helped cause this problem recognize the mess they made and accept some responsibility for fixing it.”
Here, here.
Hello. Interesting website and well financed it seems.
I too fear Obama will be too conservative in economic reform. However, you are a little behind the curve if thinking Brooksley Born is a man..(\’he\’). She did have pertainent things to say against the deregulators (and arrogant) Bob Rubin and Larry Summers. There is plenty of blame to throw around esp. against Wall Street Democrats and Republicans. The Financial sector has grown at the expense of other more productive sectors in the American economy and thus we\’re cook as Kevin Phillips predicted. I suggest more reading of Mr. Phillips and also follow Senator Bernie Sander\’s career who also led the way against the current widening of the incomes of most Americans while the top one percent rakes our misery into gold.
Thanks for the correction, datadave. We’re going to go wipe the egg from our faces now. And take up our copy of Bad Money again …
[...] Rubin out to a nice lunch and “aggressively lobby” him to give back some of the $150 million he made running Citigroup into the ground.” Source: [...]