In announcing Jacob Lew as his new Treasury Secretary, President Obama has repeated the mistake he made at the outset of his presidency by choosing Tim Geithner.
Geithner was more responsible than anyone else for the supinely pro-Wall Street position that the Obama Administration adopted from the beginning. As detailed in Ron Suskind’s extremely readable “Confidence Men,” Geithner and Lawrence Summers constantly ran interference to make sure that nothing was done to hold the financial sector to account and that all the freebies it received came with no strings attached. The CEOs got to keep their jobs, and they didn’t have to agree to a moratorium on foreclosures or reduce people’s mortgage principal. As a result, the economy has been in the doldrums and most people have seen their savings plummet.
“We could have given the money and gotten something back,” Nobel laureate Joseph Stiglitz told me in 2009. “We didn’t have to just give it to them. We could have saved Wall Street without putting our future in jeopardy.”
If Geithner with his Fed Reserve background exemplified the cozy ties between regulators and the regulated, Lew symbolizes far worse, since he comes from the belly of the beast itself: Citigroup.
William Black, a former savings and loan regulator who has emerged as one of the most trenchant critics of the financial sector, says that Obama’s choice reveals a pattern, and not a very flattering one.
“The obvious aspects of this pattern include: (1) Obama prefers to have Wall Street guys run finance (despite coming to power because Wall Street blew up the world), (2) the revolving door under Obama that connects Wall Street and the White House has been supercharged, and (3) even very short stints in Wall Street have made Obama's finance advisers wealthy,” he writes.
Lew failed his Intro Econ exam in 2010 when he was asked the reason the economy tanked.
“I don't believe that deregulation was the proximate cause," he said during his Senate confirmation hearing for his current position as Office of Management and Budget director. “I would defer to others who are more expert about the industry to try and parse it better than that.”
How purposely dumb can someone be!
Or, as progressive analyst Bob Kuttner writes on the American Prospect website, “It’s hard to know which is worse, the fact that Lew dismissed the direct link between deregulation and the creation of ‘highly abstract, leveraged derivative products,’ or his confession that he is no expert on these issues.”
Lew’s stint with the Clinton Administration before he was with Citigroup also inspires little confidence, since he helped shepherd the derivatives deregulation that made the economy blow up in everyone’s face.
“You served as head of Bill Clinton’s Office of Management and Budget when he was working with a Republican Congress to undermine the Glass-Steagall Act and to enact the Wall Street-friendly Financial Services Modernization Act of 1999 and the Commodity Futures Modernization Act,” John Nichols writes for The Nation. “Progressives opposed these initiatives, warning that they erred too far on the side of deregulation. … Did you share any of those concerns or were you all on board with the deregulation push?”
These are not academic questions, since the banks are even now ingrates still up to their old tricks, frantically lobbying regulatory agencies at all levels to again give them a free pass—yet again.
Wall Street needs to be firmly put in its place for the economy to start working for the rest of us. Jacob Lew is completely the wrong person to carry out that task.
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