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Post Suskind's *Confidence Men*
Created by John Eipper on 12/07/12 2:37 AM

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Suskind's *Confidence Men* (Paul Levine, Denmark, 12/07/12 2:37 am)

I am a great admirer of Cameron Sawyer's contributions to WAIS. But I am astonished that he would opine on Ron Suskind's Confidence Men (5 December) without reading it. Perhaps some reviews have misled him? Suskind's book is less a polemic than a detailed narrative of Obama's first term as president, with the focus on domestic policy. He is critical of aspects of the president's policies--or rather policy failures. Here is a summary of his criticisms:

1) There was a lack of focus in Obama's policy. "When Obama took on three great challenges at once--the economic crisis, financial restructuring, and health care reform--it seemed no one had the temerity to say, 'Mr. President, any one of those three would be more than enough to challenge a new president with so little executive experience.'"

2) There was a failure to put together the best team for making economic policy. As a result, there was more of what Walter Lippmann called "drift" than "mastery." Obama's choice of Summers and Geithner was unfortunate when better people were available. Faced with economic crisis, an inexperienced president relied on the retro policies of the former Clinton administration. Summers and Geithner had been part of the Clinton team that had gutted and then destroyed the Glass-Steagle Act and rejected regulation of derivatives. Summers's outsized ego and Geithner's timidity created dissonance and ended up undermining Obama's reform policies. Early on, a powerful colleague, Sen. Byron Dorgan, told Obama bluntly he had made a mistake in choosing Summers and Geithner whom he knew well. "You've picked the wrong people," he said. "I don't understand how you could do this. You've picked the wrong people!"

3) There was dysfunction in the running of the executive. Obama's choice of Rahm Emanuel to run the White House ended in an often chaotic administration. Moreover, a macho blunderer, Emanuel conspired with Summers to sideline the considerable female talent in the administration who called for more positive action: Christina Romer, Sheila Baer and Elizabeth Warren.

4) There was a pattern of inaction: of deferring decisions to more discussion or, what Obama called "relitigation." Even when Obama made a decision to act boldly, Geithner subtly subverted or diluted decisive action. "When dramatic reform or restructuring was proffered--for Wall Street, for jobs programs, for deregulation of all kinds, he'd often say, Let's assess the 'Hippocratic risk.' The risk, in short, of doing harm. For a new president, with a powerful intellect but little experience, this stance was always available as a sensible course. As Obama learned the limits of pure intellect, in hour after hour of relitigations, Geithner's posture increasingly felt like a prudential path, rather than backing away from history's call to arms."

5) The consequence was that Wall Street would be rewarded without extracting a cost: the banks were revived but not reformed. Even Obama's supporters realized this. Alan Krueger, a top labor economist, observed, "We lost the country with those AIG bonuses." A prominent banker said: "For Washington not to demand anything when it saved us, even stuff that we knew is for our long-term good, was one of the stupidest moves in modern times. I figured Obama understood that--it wasn't a nuanced point--and that he'd act as we started to pull out of the abyss six months ago. But he didn't, and I don't know who to thank. I feel like I should go over and hug Tim. It's a shame we can't pay him, 'cause that's a guy who really earned a big-time bonus."

As Suskind concludes: "A titanic crisis . . . had come and gone, and neither Washington nor Wall Street had fundamentally changed."

In closing, let me ally myself with the comments offered by David Westbrook on the economy (5 December) and Gilbert Doctorow on Larry Summers (6 December). And let me leave the final words to Paul Volcker, one of the legendary figures Obama bypassed in choosing Summers and Geithner:

"The trouble with the United States recently is we spent several decades not producing many civil engineers and producing a huge number of financial engineers. And the result is shitty bridges and a shitty financial system!"

JE comments: Ah, the AIG bonuses. How much indignation they caused, but most of the nation has now forgotten them.  America doesn't keep grudges long.

My thanks to Paul Levine for this excellent overview of the Suskind book. I'd especially like to continue our discussion on point 5, above. Should we blame Geithner for reviving but not reforming the banking system?  Or Summers, WAISdom's whipping boy of the week?  How much genuine change was even possible, given the gridlocked Congress?  To revive the financial system was a "national security threat" that everyone could support; to impose any significant reform would involve ideological debate and endless accusations of government meddling and socialism and the like.

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