Monday, December 15, 2008

It is Over

The worst fears what JJ Cramer has been talking about – complicity of Geithner – in Lehman fall and AIG bailout are out. You got the gray lady publishing an editorial on this matter. It is amply clear to the market that letting Lehman to die was catastrophe of some sort. Why was is it allowed to die? My guess it is the rivalry of Goldman Sachs gang (read Paulson) with other Wall Street banks. What did AIG bailout buy? Security to counter party deals by Goldman.

Seems like Geithner nomination is gone. Senate hearing will not be pleasant if Obama does not back out. Besides is there any political upside in ‘taking on’ of these Lefty forces? Unfortunately does not seem so.

It is the question of what do Obama Administration wants to do – keep on undertaking desperate attempts to save the sinking ship of Geithner nomination or to cut the losses and nominate another candidate? Because it is quite possible that all these mighty ‘cover ups’ by Obama will be insufficient to get Geithner confirmed. And then the next question, even after all these herculean and distracting efforts Geithner is confirmed; what will be his legitimacy and effectiveness; especially in these trying economic times? Goal is not to prove ‘political stubbornness’ (we have seen all that in last 8 years); but solve the daunting problems of America. So what if one nomination fails?

Obama got elected because the Iraq issue was relegated behind by Iraqi PM Maliki when he said they won’t need American boots longer and compared to instable hand of McCain in economic affair Obama appeared to have more balanced judgment. Meaning, Obama can ill afford to loose any credibility when it comes to economic issues. Having Geithner in this position after what our gray lady has said; it is hard to imagine it is all going to be any effective.

Yah, Summers could be good and he will not have this Wall Street baggage. But as Frank Rich has been harping so long in NYT, time has come to leave behind all this Rubin economics and Rubin’s protégés. Ben Bernanke needs to go too for the total mess of Lehman Brothers.

May be Obama will need a clean slate (Sheila Bair, any takers?). Summers could be okay since he is advisory only and not much tainted. But to forget his role in removing ‘Glass-Steahgal’ is to ignore Summer’s failures knowingly. Only Paul Volcker seems to be an appropriate choice for this economic team.

It will be interesting to watch what will consume Obama politically – Illinois Governor affair or Geithner appointment. And then we will see if Obama Team has learnt anything from the criticism of Ed Rendell.

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