Article in the New York Times today:
Geithner Said to Have Prevailed on the Bailout. And over whom has Geithner prevailed? Dissenting voices in his own administration:
In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials.
Mr. Geithner, who will announce the broad outlines of the plan on Tuesday, successfully fought against more severe limits on executive pay for companies receiving government aid.
He resisted those who wanted to dictate how banks would spend their rescue money. And he prevailed over top administration aides who wanted to replace bank executives and wipe out shareholders at institutions receiving aid.
Yves Smith at Naked Capitalism is calling the Geithner plan a
fiasco:
In other words, Geithner followed the Paulson script of pushing hard to make the bailout industry friendly, to the extent of compromising the effort to get the plan fleshed out in adequate detail.
Smith is probably right that the plan won’t be much better than the one we got last fall from Paulson, though I think her general pessimism is misplaced. Geithner’s plan prevailed over countervailing opposition from David Axelrod and others within the Obama administration pushing for far more radical control over the banks we’re bailing out. It makes sense that the Obama administration would divide internally over how to deal with this problem and many others. Obama wasn’t elected by the left on a platform of social-democracy. He was elected by a coalition of students, white collar workers, blacks, and disaffected Republicans. The economy is the issue where mainstream American politicians tend to be the most conservative. The fact that the Obama administration is governing from the center and even from the same position as Bush on these issues at the moment shouldn’t come as a surprise.
Nevertheless, due to the severity of the situation we’re facing—the worst economic disaster of a generation, possibly a century—I expect the tone coming out of the White House to change rapidly. If this banking bill doesn’t sufficiently turn things around, it’s going to strengthen voices of opposition within the Obama administration, and we can expect even a drastic push to the left: not just caps on executive pay but also greater control over what institutions can do with bailout money. Geithner could easily be gone in a year.
The problem with Smith’s analysis and the analysis of those who take a “screw the Democrats” line isn’t that their criticisms of the plan are flawed but rather that they don’t take a nuanced-enough attitude toward politics in general. The Obama administration is hardly a homogenous body—to say nothing of the Democratic Party as a whole. The diverse interests present in the administration reflect the diverse class interests that brought Obama to power. While the interests present in the Bush Administration were uniform by comparison—representing a Dukes of Hazard mentality toward the world—one can begin to see the rudiments of actual class struggle playing out in the White House. I say “rudiments”, because there is hardly an open struggle right now between the interests of the people and the interests of the bourgeoisie. But it’s going to be impossible for Obama to continue to govern in the interests of a portion of his constituency which is growing in power while at the same time catering to the received wisdom of the financial markets that got us where we are. People are really fed up not just with the greed but with the seeming arbitrariness of the whole system, they want substantive change, and they’re not going to be able to get it so long as the Obama administration keeps one foot in the policies of the Bush administration. The class conflict we see playing out in the open is going to push him further to the left.
