Matt Taibbi has done it again -- written a nightmare of a story for Rolling Stone on Obama's economic sell-out of his campaign. The piece is a factual mess, a conspiracy theorist's dream, doesn't even indict Obama for his real failures (which I'll discuss in a post later today) and of course invokes the cold hands of Bob Rubin like a bogeyman at every turn. This is pernicious for a lot of journalistic reasons, but politically it's bad for progressives beacuse conspiracy theories stand in the way of good policy analysis and good activism, replacing them with apathy and fear. Here we go:
- Jamie Rubin. James P. Rubin is a former Assistant Secretary of State in the Clinton Administration and not Bob Rubin's son. He informally helped Hillary Clinton transition into her role as Secretary of State. James S. Rubin is Bob Rubin's son, and had a similarly unofficial role in the economic transition. Neither were on staff, on the advisory boards, or on an agency review team.
- Austan Goolsbee "didn't make the cut." Goolsbee remains one of Obama's key economic advisers and has the president's ear from his posts on the National Economic Council Council of Economic Advisers and the President's Economic Recovery Advisory Board. He skipped transition work and went to work immediately in those posts.
- "Neither did Karen Kornbluh, who had served as Obama's policy director and was instrumental in crafting the Democratic Party's platform." The reasons why Kornbluh didn't get a job remain unclear, but she lost her influence earlier in the year while Obama campaign and she remained in Washington as his Senate Office policy director and later at the DNC, where she played an important role by crafting the 2008 Democratic platform. She currently serves as U.S. Ambassador to the Organization for Economic Co-Operation and Development. [Updated]
- Michael Froman. His connection to Obama is through their time together on the Harvard Law Review, not through Rubin. He did indeed once work for Rubin, and was a member of Obama's transition advisory board; he was not on the transition staff. His portfolio is international economic policy, he does not participate in domestic financial policymaking except in that strategic role; of late his main focus has been managing economic negotiations with China.
- "Geithner, in other words, is hired to head the U.S. Treasury by an executive from Citigroup - Michael Froman." Froman didn't hire Geithner, Obama did, and the move had been expected long before Froman came on board the transition -- Froman had little to do with it other than aiding in vetting. Geithner had impressed Obama while briefing him during the crisis when he was President of the New York Fed and had been a senior Treasury official during the Clinton administration. He has never worked for a bank.
- "Jacob Lew, a former Citi colleague of Rubin's whom Obama named as deputy director at the State Department to focus on international finance." Lew is the Deputy Secretary for Management and Resources, who in fact works on State Department reform and, lately, the civilian surge in Afghanistan. He is responsible for operations, not policy, and doesn't really focus on international finance. He used to head up the Office of Management and Budget during the Clinton administration.
- Over at the Commodity Futures Trading Commission, which is supposed to regulate derivatives trading, Obama appointed Gary Gensler, a former Goldman banker who worked under Rubin in the Clinton White House. Gensler was a failure in the late nineties, but in his new post he has been fighting alongside Senator Maria Cantwell to close the loopholes in derivatives regulation that Taibbi complains about later in the piece.
- The lone progressive in the White House, economist Jared Bernstein, holds the impressive-sounding title of chief economist and national policy adviser - except that the man he is advising is Joe Biden, who seems more interested in foreign policy than financial reform. Bernstein is certainly the most progressive economist on staff. He is also in the room and involved in all major policy debates and decisions. Biden has taken the lead on the stimulus and jobs efforts.
- "Rubin was the man Barack Obama chose to build his White House around." Or maybe he merely built his White House around economic policy experts who had been mid-level officials in the previous Democratic administration? To my knowledge, Rubin has not been involved with policymaking efforts.
- "Neil Barofsky, the inspector general charged with overseeing TARP, estimates that the total cost of the Wall Street bailouts could eventually reach $23.7 trillion." It could, if every single loan guaranteed by the Federal government failed at once and all of the assets bought with those loans were destroyed -- and many of those loans are to homeowners, including low-income homeowners, through Fannie Mae and Freddie Mac, or to small businesses. Some of that money went to Chrysler and GM in what was primarily a job saving move. TARP's actual outlays are only $518 billion (still nothing to sneeze at), including foreclosure relief for homeowners. More money has been actually allocated so far on fiscal stimulus, including funds to reinforce the social safety net, than on the bank bailouts.
- "It's the sweetheart deal of the century, putting generations of working-stiff taxpayers on the hook to pay off Bob Rubin's fuck-up-rich tenure at Citi." Actually, the U.S. structural deficit and resultant national debt is mainly a hangover from the Bush Administration, with economic remedies to the financial crisis and the recession making a relatively small piece of the pie. Obama will be rolling back most of Bush's tax cuts for the wealthy, but Taibbi deigns not to mention that.
- "In the end, Frank not only agreed to exempt some 8,000 of the nation's 8,200 banks from oversight by the castrated-in-advance agency, leaving most consumers unprotected." The CFPA, while somewhat compromised, remains a strong agency that will protect consumers. In particular, all the banks in the country will be subject to the CFPA's rules, and they will be able to inspect any bank they identify as problematic. You can also ask Elizabeth Warren, who came up with the idea, what she thinks of Frank's proposal. Oh, I did.
- "A masterpiece of legislative chicanery, the measure would have given the White House permanent and unlimited authority to execute future bailouts of megaconglomerates like Citigroup and Bear Stearns." Er, no. It allows the government to liquidate megaconglomerates like Citigroup and Bear Stearns, just as the FDIC dissolves failing small banks. It's not quite what we're looking for, yet -- there is a lot of legislating left to do -- but here's what the measure really does.
- "The new bailout authority also mandated that future bailouts would not include an exchange of equity 'in any form' - meaning that taxpayers would get nothing in return for underwriting Wall Street's mistakes." No, that means we won't be injecting capital into banks anymore. No more buying AIG shares. But if the government loans money to these banks, taxpayers could still get a return on those loans.
- "Even more outrageous, it specifically prohibited Congress from rejecting tax giveaways to Wall Street, as it did last year, by removing all congressional oversight of future bailouts." The legislation actually only allows federal regulators to use funds taxed from banks to assist them in a crisis; if they want to use taxpayer money, Congress can say no.
Phew. That's just after a skim. Things he doesn't mention: Actual administration policy failures, like not fighting for cramdown, the slow-moving foreclosure mitigation program, or the fact that the stimulus was too small. He doesn't mention the efforts of the Chamber of Commerce or the Financial Services Roundtable to defeat financial regulatory reform, which are much more pernicious than anything the Administration has done. He doesn't mention key economic adviser Christy Roemer, Assistant Treasury Secretary Alan Krueger, a highly regarded labor economist, or Larry Summers' strange journey to the left. It's almost as if he cherry-picked what he thought would fit with his narrative. Is it disconcerting that employees of the financial industry make a ton of money? Yes. Is it the revolving door between Washington and Wall Street problematic? Yes. Does the Administration take it too easy on the banks? Absolutely. Are White House advisers too centrist for progressive tastes? Sure. But when you try and tell that story with a lot of lies and innuendo, and misunderstand the basic policies that these people are producing, you don't hurt them. Now anyone who criticizes the Administration will just be lumped in with Taibbi's meandering conspiracy. (Sidenote, I thought it was Goldman Sachs we all had to be worried about?) The problems Taibbi tries to describe aren't some kind of ridiculous cabal. They come from group-think and structural influences and as a result of a complex interplay of interests and institutions; the policies they produce aren't either good or evil, they're in need of analysis to determine which help regular people, which hurt them and how to change the latter into the former. Doing the work is hard. But if you want to make a dent, you have to do it.
-- Tim Fernholz
