Best of luck to Obama's economic gladiators

November 25, 2008|By JAY HANCOCK

They were grimly silent, as if they grasped the challenge all too well. But if anybody could succeed, this was the team.

The best.

The brightest.

The vanguard of a generation, equipped with blazing intellects and cautious confidence.

President-elect Barack Obama's economics squad, formally introduced in Chicago yesterday, brings to mind the "whiz-kid" technocrats who launched President Lyndon B. Johnson's Great Society in the 1960s and pushed the country deeper into Vietnam.

Products of the finest universities, trained in the latest methods, the Obama nominees are all the more impressive when measured against their predecessors.

The Bush administration's incompetence and contempt for the very idea of economic policy helped get us into this spot.

But like previous whiz kids, the Obama folks will find that understanding a problem is not the same as fixing it. Citigroup's second multibillion-dollar bailout in two months, announced late Sunday, shows that the subprime-mortgage blast zone is still expanding.

Yesterday's debut was about resumes, not policy. Obama wouldn't even put an estimated number on his proposed fiscal stimulus. (Hint: It's probably heading toward the half-trillion-dollar mark.)

Larry Summers, nominated to head the National Economic Council, is "one of the great economic minds of our time," "brings a singular combination of skill, intellect and experience," and "helped guide us through several major international financial crises," Obama said.

(No mention of Summers' term as Harvard president, where he was drummed out after suggesting there are innate differences in men's and women's ability to do higher math.)

Professor Christina Romer, slated as chairwoman of the Council of Economic Advisers, is "one of the most expert people in America on economic crises and how to solve them."

Melody Barnes, future director of the Domestic Policy Council, is "one of the most respected policy experts in America."

Nobody exemplifies the new technocratic ethos like Timothy Geithner, nominated as Treasury secretary. The same age as Obama, he holds degrees from Dartmouth and the Johns Hopkins School of Advanced International Studies.

In an interview this year with The Wall Street Journal, he acknowledged that policymakers aren't perfect but suggested that "overdoing" government intervention is preferable to the alternative.

Geithner has the advantage over other nominees because he's already in power, as the president of the Federal Reserve Bank of New York.

"With stellar performances and outstanding results at every stage of his career, Tim has earned the confidence and respect of business, financial and community leaders, members of Congress and political leaders around the world," Obama said.

The superhero emblem virtually flashed at the TV cameras.

No wonder even conservative New York Times columnist David Brooks wrote that "the personnel decisions have been superb" from the Obama team.

"As much as I want to resent these overeducated Achievatrons (not to mention the incursion of a French-style government dominated by highly trained Enarchs), I find myself tremendously impressed by the Obama transition," he wrote.

The idea is that Obama will solve the crisis with the same cool competence with which he ran his campaign, widely hailed as one of the best ever. The "dangerously inexperienced" label that the McCain campaign tried to hang on him disappeared the day after the election.

But figuring out what to do about $60 trillion in dicey derivatives called credit default swaps isn't the same as recruiting campaign volunteers and raising money on the Internet.

Yesterday, the Dow Jones industrial average soared 397 points on what the wire services described as relief over the Citigroup rescue. It's worth recalling that the Dow popped 936 points after the first bailout of Citigroup and several other big banking companies - only six Mondays ago.

"We stepped back from the cliff," a top independent economist told the Times that day.

But the cliff is chasing us inland. Citigroup will now have uploaded $45 billion in taxpayer funds, an astonishing amount. That's just one company. Other outfits might need re-rescuing, too.

The problems that caused this blowup have not disappeared. Homeowners continue to default on their mortgages. Rising unemployment threatens to extend that trend. The full extent of how derivatives have spread financial poison across the globe is still not fully understood.

To Obama's credit, he cautions that things will get worse before they get better. But don't be surprised if he and his team stumble a little.

Geithner initially underestimated the severity of the crisis.

Like many others, he once believed that derivatives would reduce the chances of a global meltdown, not increase them. In the 1990s, he worked at Treasury under then-Secretary Robert E. Rubin, who later joined Citigroup and whose fingerprints are all over the stupid investments that required the bailouts.

Obama missed a chance yesterday to talk about extending President George W. Bush's tax cuts for the wealthy at least until the crisis is over. As dumb as the cuts might have been, even a whiff of tax increases is not what markets need now.

Here's wishing Geithner "stellar performances and outstanding results" in his newest assignment, too. If he comes through, he really will deserve a halo.

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