Sunday, March 22, 2009

Tone Deaf Obama Presidency

There are three economic issues which are really engulfing and tormenting Obama Presidency and as of today, President Obama does not seem to address those challenges any better. These are as follows.

1. The fundamental perception with Obama Administration is it is as wedded to Big Money fat cat Wall Street banks as like Bush Administration. There does not seem to be any difference. Two recent articles in Washington Post (quite a better coverage now) illustrate that – one by John Landry and another one by William Greider. Paul Krugman has his beef with White House when he accuses that Obama Administration is essentially unable to muster political courage to nationalize bank. It is not necessary to agree with Krugman but the point is there is ‘no constituency’ which President Obama is able to make satisfy in this mess.

If this all sounds like ‘class warfare’, then so be it. The question is whether President Obama wants to side with Wall Street or American People. His choices are currently falling in the camp of existing Wall Street rich guys who have fleeced us.

At core the issue is Obama’s insistence that unless the established banking sector is bailed out American economy will not improve. Public has finally come to reject this premise. What people have come to believe is President Obama, like Bush, is refusing to accept the fundamental culpability of American Financial Industry in making this country bankrupt and the way this industry has played havoc with people’s life by destroying their retirement, jobs and houses. Further, all these bailouts which Bush and Obama administration have given to these guys; these bankers, our Administration and our Congress all have failed to use this money vigilantly and carefully. Essentially American people no more believe that Obama Administration or this Congress will use Tax Payers money more carefully going forward. That is there is no point of return now, which Frank Rich essentially captured as ‘Obama’s Katrina Moment’. Yes, the trust is gone.

So the only politically accepted response in these circumstances for President Obama is to start planning solutions to American’s Banking problem by side stepping these existing established folks. Why does President Obama keep on insisting that we have to save current banks to get Main Street going? Why should Americans believe when Geithner and Summers of this world tell President Obama such gospels and unfortunately President Obama believes them? No, American economy can not be beholden to these bankers any more and is perfectly capable of rising on it’s own without these existing bankers. President Obama needs to accept that. He is failing in his political leadership in not realizing this cardinal truth and not showing appropriate imagination in seeding ‘new start-up banks’ bypassing all these criminals who have delivered fatal blow to American Economy and to America at large. That should be President Obama’s ‘new deal’. We need a president we would thunder ‘if America’s prosperity needs new banks and new Wall Street, I will do that’. We do not want second president in row who carries ‘water’ for Wall Street. This is not a liberal shtick. Capitalism means competition. If existing bankers refuse to realize changed situation and continue to behave as if it is 2006; then we want American government to help start new banks with private partners. We do not need these same suckers pleaded at infinitum to start lending. If not Walls Fargo, BofA; then some one else. That is the way Capitalism is expected to work in this country. Besides these new banks, and existing ones which are not embroiled in CDO mess, can perfectly adopt new compensation guidelines where compensation is tied to long term success and not related to short term risk taking. President Obama is failing in being creative in boot strapping these new players. Government should favor those rather than existing rascals.

To clarify, these new banks are not same as what Geithner is proposing with his new private-public partnership firms to buy toxic assets. It is still meant to curry the water for BofA and Wells Fargo of this world where their balance sheets are dressed up. It is not about lending directly money to the Main Street.

2. The second problem is how to punish criminals on Wall Street (that is must for President Obama if he wants to stick to rule of law which his advisor Summers is so fond of). No amount of blathering is going to excuse Geithner, Sen. Dodd and in the end President Obama in letting bonuses flow to AIG folks who do not deserve those. But the issue is not only about these guys but prosecuting all past employees of AIG and other banks who made all wrong and risk bets without following rules and regulations. Nothing short of criminal proceeding of those folks will bring the justice here. Americans are not fool enough to believe in some kind of abstract idealized world where everybody is brought to justice for moral reasons. No, we are asking justice here because the kind of damage these bankers have done is even more than Osama Bin Laden. They destroyed lives of Americans, brought misery to rest of the world and in the process have stolen tax payer money too.

It is for same reasons Goldman Sachs of this world need to be investigated for the payout money they have got from AIG. Our ‘hooker’ ex-governor Spitzor is right on money here in his article in Slate where he points out that the real scandal is paying in full AIG bets to those bankers. It is ‘corruption’ of highest order and it will do grave injustice if Congress and Obama Administration refuse to investigate and bring necessary criminal charges.

Here is the thing – why in the world Fed folks and Obama Administration are refusing names of all these beneficiaries of financial bailouts? As so many of these commentators are saying, transparency must come. Lack of transparency is criminal. Obama Administration is no better than Bush if it continues this path, obscuring how tax payer money is used.

3. Final dent in President Obama’s credibility is the gap between CBO estimates of deficits and Peter Orszag’s estimate. Peter is with high credibility, but still it is obvious that Obama Administration is playing same games as like any other White House Administration – to make optimistic budgetary projections to justify some political agenda of lesser consequences. Essentially President Obama is spending his way without bothering to ‘stick to truth’ when it comes to the budget. This is not the Barack Obama who campaigned truthfulness and this is not the candidate Obama we voted for. Maureen Dowd is right, there is some different occupant in White House who we do not recognize.

It is sad that such a popular and intelligent leader to loose his way in such a short time. But unfortunately that is where we have arrived. If President Obama hears us and mends his way (his latest interview is a wash, he continues to maintain all the wrong premises and refuses to alter his misguided policy); we can still recover from here. Else this will be one more long fight with America’s Political Establishment. It reminds all the struggle Americans undertook to fight Bush. Sad that we are back to it so early and tragically that ‘tone deaf’ president happens to be our beloved President Obama.

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