I once again find myself lamenting the opportunities wasted by a US President in response to a great cataclysm. In the case of President Obama, it was his response to the financial crisis. The opportunity for greatness presented itself, and was . . . ignored.
The President was swept into office on a wave of Anti-Bush sentiment. The stock market was in freefall, credit was frozen, the recession already 13 months old. As Rahm Emanuel said, “Never waste a good crisis.” A strong leader would have taken advantage of the moment, of the opportunity.
And what an opportunity it was: Over the prior 3 decades, the economy of the United States had been “financialized.” We became much more involved in ‘financial engineering’ than any other more productive engineering. Along with this financialization came increased revenue for the biggest banks and investment houses; greater profits, influence, and power. A wave of deregulation swept over the sector, freeing the banks from meddling oversight.
Thus, as the finance sector got larger and more important, it was paradoxically under ever less scrutiny, supervision, and regulation. With that new found freedom from oversight, the banks promptly blew themselves, and the global economy, to smithereens.
This was the environment in which the President came into office. What did he do in this scenario?
• He appointed two of the architects of the crisis to major White House economic positions: Lawrence Summers as CEA Chair, and Timothy Geithner as Treasury Secretary.
• He made the enormous tactical error of focusing on Health Care Reform, while the banking crisis was still in full flower.
• He failed to marshall adequate resources to respond to the worst economic recession since the Great Depression. via .