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Tue

24

Mar

2009

Obama’s Missing the Opportunity the Banking Crisis Presents
Tuesday, 24 March 2009 17:42
by Andrew Bard Schmookler

On Thursday, with the AIG-bonus scandal breaking, I found ideas –concerning Obama and the handling of the economic crisis—just tumbling out of me. I posted them (some 3,000 words) as they came –on the Ongoing Thoughts thread of that day, at www.nonesoblind.org/blog/?p=2229 —and now I will attempt to order and condense them into a more coherent and manageable presentation. (And I am also presenting some of these ideas again because not everyone will have seen them in their original “Ongoing Thoughts” incarnation.)

I would love for my worries about Obama’s present course to be misguided. I’d love it because I so much more enjoy seeing this guy’s wisdom and genius and singing his praises more than seeing him making a serious mistake. I’d love it because the nation would be a whole lot better off if I’m wrong. And I’d love it because it seems increasingly clear that Obama has chosen his course and will be sticking with it.

But this is how it looks to me. And not just me.

These thoughts, when I formulated them on Thursday, were partly sparked by a piece by E.J. Dionne about the need for Obama to get out in front of “populist anger.” In the ensuing days, a whole chorus of voices have been addressing such themes.

I hope we’re all wrong.

Here’s the quick summary of what I believe to be the central point (and one that’s not –so far as I can tell– being said all over the place by others):
Obama treats the economic crisis as a regrettable distraction and impediment to his addressing his “real” agenda. Instead, he should recognize that this economic crisis presents him with the ideal field of battle against the same forces he’ll have to overcome to achieve all the other parts of his agenda.
Here’s the larger analysis:

There are two dimensions of this economic crisis: the technocratic dimension (how to get the system out of the ditch and back onto the road) and the “morality play” (how to deal with the forces of greed and corruption that drove the country –and the world—into this disaster).

Obama is, most unfortunately, in danger of blowing it on both accounts.

The Stakes: The stakes couldn’t be higher.

On the technocratic side: Obama evidently has great potential as a transformational president, but unless he is seen as successful in dealing with the economic crisis, the American people will not follow him on the rest of his agenda. And unless he solves the banking problem, he’ll not succeed with the banking problem.

On the “morality play” side: Obama has begun his presidency backed by enormous public respect and enthusiasm. But unless the American people continue to see him as on the right side of the issues they feel most strongly about, they will not continue to trust him. And as the AIG-bonus scandal shows, the American people feel strongly about the arrogance and greed and corruption so clearly on display with these bonuses.


The economic crisis is not just a threat to the Obama presidency, but is an enormous opportunity. The American people have far more intense passions –fear, outrage, need– connected with this crisis than with any of the other issues that make up Obama’s agenda. Everyone feels deeply impacted by the economic breakdown, whereas only some feel any deep need with respect to the issues of education and health care and renewable energy.

The economic crisis therefore provides an opportunity for Obama to cement a more profound leader-follower relationship with the American people than virtually any other situation could have afforded him.

So, how Obama handles this crisis can truly either make or break his presidency.

Blowing It: The consensus seems to be gathering that Obama’s on the wrong track.

First, with respect to the technocratic dimension, he seems committed to the Geithner/Summers approach, which involves treating the main corporate actors as salvageable, and pouring more money into to the institutions and the hands that created the mess in the first place. Such economists as Krugman, Roubini, Kuttner, Baker, and Galbraith (and more and more others) see this as a) throwing good money after bad and, even worse, b) transferring money from the victims of this crisis (the American people generally) to the perpetrators.

This second point connects with the morality play aspect. This crisis didn’t just happen; it was the product of selfishness and greed and irresponsibility and corruption that led to de-regulation and led to various shady (but no longer illegal) corporate practices that enriched various individuals but put the whole system at risk. Obama’s policies have seemed indifferent to this dimension, except for a few recent gestures, and they continue to be moving in a direction that treats that moral/corruption dimension as peripheral.

(A growing number of astute and pro-Obama observers –people like E.J. Dionne and Frank Rich—perceive Obama as at best failing to get out ahead of legitimate public anger to properly channel it as a leader, and at worst tying himself too closely to the objects of the public’s anger.)

By assuming that zombie institutions must be saved and by treating the corporate malefactors as respectable partners in rebuilding what they destroyed, Obama risks both failing to rescue the economy and placing himself on the wrong side of line across which the public’s righteous wrath is directed.

Whence Obama’s Errors: Obama is heading down this wrong path for perhaps these two reasons.

First, he chose for his economic team people –e.g. Summers and Geithner—who are themselves too close to the corrupt system they’re supposed to clean up. Why Obama chose them, and not people less tied into that Wall Street world, I don’t know. But it could have to do with the second point.

Second, Obama ran for president with a vision of how he wanted to transform America. At that time, he surely did not envision this historic economic breakdown. Rather, he thought in terms of his issues (health care, education, etc.). The economy and the financial system, we might suppose, he simply assumed that like other presidents since FDR he’d simply get along with.

Thus, I speculate, for Obama this economic/financial crisis has been just an unwelcome distraction. He’s stayed fixated on his long-held goals, and has hoped to get this damned economy out of the ditch so he can get to what he thinks of as his real goals. With this “Just fix it!” mentality, he perhaps thought that he’d be best served by some very smart and experienced technocratic experts—people like Summers and Geithner.

Being too tied into the system that’s failed us, Summers and Geithner are perhaps not only insensitive to the need for moral cleansing but also too slow to understand how much of that system needs to be simply swept away and rebuilt from the ground up.

And so Obama, begrudging the centrality of all these issues, impatient to get to the “real” issues, continues to depend upon the undependable vision of his Wall Street insiders and, still regarding this matter as important but peripheral, refuses to confront this issue head on in all its depth and significance.

The Opportunity Obama Needs to See: Here’s what I would say to President Obama:

STOP THINKING OF THE ECONOMY AS A DISTRACTION AND THINK OF IT INSTEAD AS THE OPPORTUNITY THAT CIRCUMSTANCE HAS DEALT YOU. THE EVILS IN THIS FINANCIAL MORALITY PLAY ARE CENTRAL ENOUGH TO THE LARGER WAR: THIS IS THE FIELD OF BATTLE, AND SO RISE AND FIGHT IT HERE. INDEED, IT’S NOT JUST THAT THIS FIELD OF BATTLE HAS BEEN FORCED UPON YOU—IT COULD WELL BE THE BEST POSSIBLE PLACE TO WAGE THE FIGHT.

It is best for two main reasons.

First, as indicated above, the intensity of the feelings of the American people around this crisis create an opening for leadership fuller and deeper than any president has enjoyed since FDR. You’d never get this access to the allegiance and trust and gratitude of the American people over issues like health care or torture or taking care of the environment.

Second, if one looks beneath the technocratic dimension of this crisis, at the morality play and all the forces that fed into it, one finds there the same fundamental forces at work that will be your enemy on all the other issues you care about.

From my notes: The economic crisis as morality play is as good a place to begin to transform America as any. It’s a chance to discredit some political/economic forces that have been a central part of our national degradation.

Why did America go from a country, in the 1950s, where the average CEO pay was 20 (or was it 40?) times that of the worker on the shop floor to a country where the CEOs are making more than 400 times as much as the average workers? How did that happen?

How come Congress past legislation back in the 1990s that freed corporations to screw all the people who relied upon them for pension support in their older years. (I read about this in TIME magazine a few years ago.)

How come these guys, who created this corrupt financial system of toxic mortgages and credit default swaps can have so little shame that even after the mess they made while making themselves into Masters of the Universe (the financial system grew to be a much bigger share of American corporate wealth than it had ever been) these guys are still shamelessly trying to game the system for as much bonus money as they can get.

If one looks at how it is that various corporations 1) wrote loans to people they knew couldn’t pay, 2) sold bundles of shaky credit hidden in packages sold as AAA secure debt, 3) approved such unrealistic ratings, 4) wrote insurance policies on defaults they didn’t have nearly the assets required to back them up; how it is that government removed all the barriers, erected in the last Great Depression, to prevent such disasters—if one looks at all this one finds the same set of insatiable greed and indifference to the public good and shirking of responsibility that you will come up against when you try to get your health care and education (etc.) agendas enacted.

From my notes:

Our national slide toward bankruptcy is the outward and material sign of the moral bankruptcy that expressed itself through these greedy and unscrupulous financial and political players.

So why not fight them here and now, on this ground. Get firmly onto the right side of the morality play and use it to expose the economic forces, the moral bankruptcy, the political corruption that will be your enemies in all the battles to come.

Here is where you can weaken them. Here is where you have the attention and the passion of the American people poised to achieve the major shift of perceptions and values and allegiances that are essential to move from the society we’ve become over the past three decades into the society you want us to become.

Fight this battle the right way now, and all the other battles will be far easier later. After all this gets exposed, who will heed the right-wing call that “government is the problem” and “we should leave it to the markets”? After all this is exposed, who will credit the cries of “rugged individualism” and accusations of “socialism”?

After the corruption of the politicians in the pockets of the big money gets glimpsed by the American people, in the context of this disaster that’s stolen their cherished economic security, costing them perhaps their homes, or their jobs, or their life’s savings, how much power will those politicians have to enter the public arena in the service of Big Pharma or Big Oil or whatever other major monied interest you have to take on to get your “real” agenda enacted.

This IS the Real Agenda. It is the fight for America’s soul. All the other issues are outgrowths of that core issue. Will America renounce the forces of disintegration—the selfishness and insatiability greed and irresponsibility and betrayal of the public trust—and become the America of our best ideals? That’s the question behind health care reform and renewable energy and environmental protection and stopping torture and the rule of law and educational opportunities for all, etc. That’s the core issue.

And once you see the economic crisis not as a distraction but as a battlefield of great opportunity in the SAME war, you’ll see the shift you need to make and begin to salvage the great potential for you to be the transformational president America so desperately needs.

Make the shift now. This opportunity is not far from being squandered.
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