Obama: No lobbyists... except everyone advising me on the banking crisis

Despite promising to clean up Washington and keep lobbyists out of his administration, President Obama is living in an economic news bubble. He’s allowed himself to be taken captive by banking industry insiders and is now receiving advice on banks only from bankers.

Many Supreme Court justices' most significant votes would have shocked the presidents who nominated them. Why? Because presidents often fail to anticipate what contentious issues will settled by future Supreme Court sessions.

When America was choosing its presidential nominees in 2007 and early 2008, we had no idea we were confronting (at best) a bitter, deep recession and (possibly) Great Depression II. President Obama’s political brilliance is obvious to all. But only since Inauguration Day have we discovered the dangerous consequences of relying on an economic neophyte to save us from economic armageddon.

Appreciating his lack of expertise, Obama has surrounded himself with smart, knowledgeable people. But these “experts” are wedded to the same failed institutions and mindsets that led us to the brink of Great Depression II. There’s not a single Krugman or Stiglitz inside the White House advocating for the screw-bank-shareholders-and-CEOs view held by a majority of Americans and an overwhelming majority of economists.

After running a campaign pledging not to allow lobbyists into his administration, Obama’s letting banking industry insiders mold his thinking. And because he lacks economic training, he’s trusting their opinions. He’s also too insulated from the broad debate that has led many (most?) economists to beg government to temporarily seize failed banks and restructure them rather than keep handing them hundreds of billions every time they demand more.

Here’s Paul Krugman’s latest:

“Our belief and expectation is that we will get all the pillars in place for recovery this year,” the president declared — a belief and expectation that isn’t backed by any data or model I’m aware of. To be sure, leaders are supposed to sound calm and in control. But in the face of the dismal data, this remark sounded out of touch.

And there was no hint in the interview of readiness to do more.

…[Obama] went on to dismiss calls for decisive action [on bankrupt banks] as coming from “blogs” (actually, they’re coming from many other places, including at least one president of a Federal Reserve bank), and suggested that critics want to “nationalize all the banks” (something nobody is proposing).

As I read it, this dismissal — together with the continuing failure to announce any broad plans for bank restructuring — means that the White House has decided to muddle through on the financial front, relying on economic recovery to rescue the banks rather than the other way around. And with the stimulus plan too small to deliver an economic recovery … well, you get the picture.

Sooner or later the administration will realize that more must be done. But when it comes back for more money, will Congress go along?

Posted by James on Monday, March 09, 2009