Sunday, November 30, 2008

Geithner & Summers: Financial Enablers Return

Admittedly, the economy will be first and foremost on Barack Obama's presidential agenda. The president-elect has liberally sprinkled ex-Clintonites throughout his early cabinet and administration posts, but filling the Treasury with acolytes of former Fed boss Robert Rubin is worrisome.

Amidst, calls to bailout ex-Enron enabler Citibank, the fingerprints of Rubin lie within that companies financial blunders and the economy as a whole.

The Sunday New York Times ran a lengthy article on Citibank's foolish investment practices which enhanced the short term while nearly ruining the country's one-time largest bank.
Citigroup insiders and analysts say that Mr. Prince and Mr. Rubin played pivotal roles in the bank’s current woes, by drafting and blessing a strategy that involved taking greater trading risks to expand its business and reap higher profits.
It was under President Clinton that Rubin, under the Gramm-Leach-Bliley Financial Services Act repealed much of the Depression-era Glass-Steagall Act allowing banks to consolidate seemingly every financial service under one house. Citibank was one of the main beneficiaries of the act allowing it to absorb Travelers Insurance.

With the picks of New York Federal Reserve boss, Tim Geithner as Treasury Secretary and former Clinton treasury chief Lawrence Summers, the point that the same guys at the helm during the nascent stages of the financial debacle have resurfaced under a Democrat in Washington.

It's inevitably that Geithner, while lauded as intelligent and capable, will have to answer questions why Wall Street, located in his jurisdiction, did not prepare for its precipitious fall.

The mentor/pupil scenario that Time magazine puts forth in the Dec. 8 issue is a bit disconcerting also. According to the articles, Geithner (the pupil) was given the secretary's job on the basis that he could "handle" Summers (the mentor). Presumably, Summers would have been reunited with the Treasury office is not for his sexist remarks about women while at the helm at Harvard.

We are to be believed that Summers will not wield power from the National Economic Council and the same people who felt deregulation was a viable option 10 years ago will see the nation's economy differently today?

It was a bit disingenious and politically expedient for Obama to vow to bring change to Washington without a few old hands, yet choosing the very men responsible for the crisis that may swallow his presidency is extremely foolhardy.

No comments: