MIT economist Simon Johnson lays it out on Baseline Scenario:
No modern economy can function without a financial system, so some form of rescue that restored confidence in our banks was necessary – just as it was in Thailand, Indonesia, and Korea in 1997. But in any rescue, the governments with deep pockets (i.e., the economic strategists deciding how to deploy US fiscal resources now and in the 1990s) choose the strings to attach – and the approach adopted for the U.S. has been one of the least conditional and softest ever on troubled banks.
Let’s hope the President’s first big decision — to carry on with the Bush administration’s policy toward Wall Street — is a success. History, and Johnson’s piece, paint a worrisome picture of the odds. Whatever the result, I’d put this decision high on the list of 2009’s most momentous political calls.
What’s your candidate?
neilsagan says
is the continuation of the GWOT.
mjonesmel says
What seems to be Obama’s uncritical acceptance of conventional economics is what probably worries me the most about his chances of long-term success. He’s not even as far to the left on economic issues as Paul Krugman or Robert Reich, and their views are basically Keynesian, and would have been thoroughly “middle of the road” forty years ago.
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p>You don’t have to be committed to Marxist ideology to recognize that allowing the financial system to effectively hold the productive economy hostage, without effective accountability or regulation, may work out better for financial interests than the rest of us. Too bad Obama, or some of his economic advisors, didn’t study at the Economics Department of the University of Massachusetts at Amherst, which is one of the premier “hetrodox” economics departments in the country! See: http://www.umass.edu/economics/
conseph says
In little less than a week the Treasury decided to undertake to support Fannie and Freddie for the next three years to the tune of whatever it takes to keep them from becoming insolvent. We already have over $100 billion “invested” in Fannie and Freddie combined. Now we have a three year open-ended commitment to provide untold billions of additional capital. Yesterday, the Treasury decided to “invest” another $3.8 billion in GMAC bringing our ownership stake to approx. 58%. Both decisions were made without the vote of Congress.
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p>Is this what we voted for over a year ago, billions in financial commitments without a word from our elected representative? Is this the President’s economic gamble now and not the Congress’?
johnd says
But this is a little icky for BMGers so don’t hold your breath. Thanks for bringing this news to light and I will make sure it doesn’t get forgotten.
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p>PS Is there a way we can blame George Bush for this too?
neilsagan says
danno11 says
that Obama is doing what he thinks is best for the economy. I think that he did what’s best for his re-election fund/Dem campaign cash and is hoping nothing bad happens between now and Nov. 2012.