Opinion

The Great Debate

Why Obama won’t axe his economic advisers

SUMMERS

The following is a guest post by Joshua Spivak, a research fellow at the Hugh L. Carey Center for Government Reform at Wagner College and a lawyer. The opinions expressed are his own.

Trying to draw some direct implications between the country’s economic doldrums and the Obama administration, House Minority Leader John Boehner called for the firing of the administration’s economic team, including Treasury Secretary Timothy Geithner.

Boehner may just be looking to score some easy political points, but he is following in a grand tradition. With nearly every electoral or polling downturn, a president is faced with calls to remove cabinet members and other senior advisors.

Fortunately for Geithner, and for the other cabinet members, Obama certainly knows firing members of his team most likely wont help his or his party’s cause. Cabinet members, who serve as the face for a host of political decisions, are lighting rods for attacks. By calling for their removal, political opponents are able to claim that the president is unable to properly choose or manage his subordinates, and is therefore not qualified for the job.

As past presidents have seen, there is little benefit to having the cabinet member removed. All this action does is open the President, and his party, to criticism for blatant political opportunism and disloyalty for not taking a needed action before an election.

Instead, presidents tend to wait until just after an election to remove Cabinet members. George W. Bush took such action with the canning of his first Secretary of Treasury Paul O’Neill in 2002, just after the midterm elections. Lyndon Johnson took a more indirect route to removing his embattled defense secretary. Johnson got Robert McNamara appointed head of the World Bank, an appointment the relieved McNamara found out about in the morning newspaper.

from Commentaries:

Regulators are opaque, too

Matthew GoldsteinSo much for more transparency in the financial system.

It's hard for regulators to demand greater transparency from Wall Street banks when they can't even live up to their own standard of greater disclosure. A case in point is the Treasury Department's press release touting its decision to permit "10 of the largest U.S. financial institutions" to begin repaying $68 billion in federal bailout money. The only trouble is Treasury doesn't name any of the banks that can begin repaying money to the Troubled Asset Relief Program.

Treasury, it appears, has left it up to each of the "10 of the largest U.S. financial institutions" to make their own announcements about their intentions to repay the TARP. And some, like Morgan Stanley, didn't waste anytime putting out a PR trumpeting its plan to repay $10 billion in TARP money.

Now it's not like this list of banks is any big secret. For weeks now, it's been well-known that Goldman Sachs, JPMorgan Chase, American Express, Bank of New York Mellon--to name a few--were itching to repay the bailout money.

One rule for banks, another for autos

jimsaftcolumn6– James Saft is a Reuters columnist. The opinions expressed are his own –

There is one law, it appears, for failing U.S. automakers but sadly quite another for similarly failing banks.

The Obama administration has decided to play hardball with auto firms; rejecting recovery plans from General Motors and Chrysler LLC (GM.N) and warning they could be thrown into bankruptcy. Chrysler, which is controlled by Cerberus Capital Management CBS.UL, has 30 days to complete an alliance with Italy’s Fiat SpA (FIA.MI) or face losing its government funding. GM chief executive Rick Wagoner is out at government request, as will be most of his board of directors in coming months.

Geithner’s naked subsidy redefines toxic

jimsaftcolumn31– James Saft is a Reuters columnist. The opinions expressed are his own

Treasury Secretary Geithner is all but admitting that U.S. banks are suffering not from market failure but self-inflicted collateral damage.

The U.S. Treasury on Monday detailed an up to $1 trillion plan to buy up assets from banks in partnership with private investors, using financing bankrolled by the government, financing that is only secured by the value of the doubtful assets the fund buys.

One portion will be dedicated to buying complex securities from banks employing capital contributed by private investors and the government topped up with funds borrowed from the Federal Reserve. A second portion will buy older securities that are, or were, rated AAA, using, you guessed it, more non-recourse funding.

A show trial for AIG?

 Diana Furchtgott-Roth– Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute. —

Republicans and Democrats in Congress, along with President Obama and Treasury Secretary Geithner, have been raking AIG over the coals in hearings and speeches for paying employees bonuses totaling $165 million. But today’s Los Angeles Times reports that the Treasury Department specifically agreed to the bonuses in a 586-page agreement signed on November 25. The deal allows AIG to pay out bonuses for the 2009 year that equal bonuses paid for 2007.

It stands to reason that the contracts to pay bonuses would have been known to Treasury officials a half-year ago, when they reviewed AIG’s financial position before funneling $85 billion into the firm to prevent its collapse. Basic due-diligence scrutiny of the firm’s books would have revealed the contractual obligations to make bonus payments to retain talented staff. What is puzzling is why the administration pretends not to know.

Nationalization by autumn, bank on it

– James Saft is a Reuters columnist. The opinions expressed are his own –

jimsaftcolumnLike it or not the United States will be forced to nationalize large swathes of its banking system by the time the leaves fall from the trees in Washington.

The tragedy is that we will have to wait that long and that the costs will mount.

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