Obama's 'Volcker Rule' shifts power away from Geithner

[sabrina 1]

Source: The Washington Post

By David Cho and Binyamin Appelbaum
Washington Post Staff Writer
Friday, January 22, 2010

For much of last year, Paul Volcker wandered the country arguing for tougher restraints on big banks while the Obama administration pursued a more moderate regulatory agenda driven by Treasury Secretary Timothy F. Geithner.

> snip

Senior administration officials say there is now broad consensus within the White House and the Treasury for the plan advanced by Volcker, who leads an outside economic advisory group for the president. At its heart, Volcker's plan restricts banks from making speculative investments that do not benefit their customers. He has argued that such speculative activity played a key role in the financial crisis. The administration also wants to limit the ability of the largest banks to use borrowed money to fund expansion plans.

Advocates of Volcker's ideas were delighted. "This is a complete change of policy that was announced today. It's a fundamental shift," said Simon Johnson, a professor at MIT's Sloan School of Management. "This is coming from the political side. There are classic signs of major policy changes under pressure . . . but in a new and much more sensible direction."

Industry officials, however, said they were startled and disheartened that Geithner was overruled, in part because they supported the more moderate approach Geithner proposed last year.

Read more: http://www.washingtonpost.com/wp-dyn/content/article/2010/01/21/AR2010012104935.html?hpid=topnews

---

Insiders are saying that while Geithner may be losing power, this shift to Volcker is more because Obama needs him to bolster his new 'get tough' stance against the banks. Volcker is apparently respected by both parties so the WH is hoping that will help Congress in approving these policies.

[msongs]

1. switch to volcker - yet another scheme to get bipartisanship froms repubs who hate obama lol nt

[sabrina 1]

4. I don't think it's a scheme this time ~

The article states that Obama was upset when he saw the banks, after the bail-outs, go back to their same old tricks. He had accepted Geithner's theory that to regulate them too much would not be wise. He fell for the old Republican claims that you can trust the banks to 'do the right thing'. Maybe it was personal for him, having put his faith in Geithner's policies against the advice of more practical progressives.

Whatever, Volckner had been pushing for regulations all along and by the Fall, Obama apparently began to take an interest in his theories, mainly because by then, the banks had taken advantage of him.

That's what happens when you are in a bubble with a cabinet made up of Wall St. insiders. I'd like think he's learning. I'm not sure, but Volckner is not a fool and he should have listened to him in the first place. I also think he sees that his presidency is on the line, and this is one of the major issues that have angered the people.

[barb162]

32. Volker is the right guy to do this. Oh, and screw Geithner already

[dkf]

2. MA is a double edged sword. I'm kind of liking the fire it lit under Obama

[Jennicut]

9. Me too.

Pushing him to actually get in there and fight...I hope.

[Mithreal]

3. Not good enough. Fire Geithner.

[fujiyama]

5. I'll believe it when Geithner's let go

He should never have been there in the first place.

[Left Coast2020]

6. Yes, but if he gets weaker with Volker in charge......

......perhaps the little weasel will resign if he loses his authority. He released a statement contradicting Obama's decision. Whining little boy. Perhaps Obama could put a real professional in that job like Paul Krugman.

[Mithreal]

7. I like Krugman a lot but there are better people

[sabrina 1]

8. That's what I'm hoping for, that he resigns. He wasn't happy

about this, and said so publicly today. He never should have been there to begin with.

Krugman would be better, but I think he is not suited for such a position. I'm sure there are many great economists, like Robert Reich eg, who could fill that position. But they need to be someone who knows that we need to go back to the Glass/Steagal Act, as Volcker does.

[Buns_of_Fire]

21. First, defang the little shitstain. Make him irrelevant.

Then, wait for the customary second-term shuffling of cabinet positions -- assuming Obama wins a second term -- so Timmy can spend more time with his money family.

But then, I don't know how much of a temper the President has. Having a cabinet member publicly contradict the President doesn't seem to be conducive to long-term employment.

[sabrina 1]

24. He didn't come out himself and contradict the president. I

know I said 'publicly' so apologies for that. Someone on the inside speaking to reporters said that Geithner did not agree with these new policies. He obviously said it though, and maybe found a roundabout way to let his views be known. As if anyone cares what he thinks.

I agree with you, he should be defanged, which from the article it seems may have happened already, and then let go.

[MilesColtrane]

10. As useless as John McCain is generally, I think he would be a useful odd bedfellow in...

in this fight.

Good to know that Obama is siding with Tall Paul in this effort to reign in the insanity of the unchecked banking overlords.

[rpannier]

13. There was an article on DU a few weeks ago

McCain has been talking up re-instituting Glass-Steagel

[sabrina 1]

14. I think Volcker wants to do that too. Just this news has

caused the stock market to go down. Wall St. likes Geithner, they don't like Volcker.

[Mithreal]

17. Working with my Senator Maria Cantwell.

[rpannier]

27. I think if Mc Cain co-sponsored with Cantwell

that would get LIEberman and Graham on board. It might even pull in Hatch and possibly Voinovich (Ohio) and Brown -- for all the talk by some republikkans that he's a tea-bagging, neo-conservative Republican. He knows he's dead-in-the-water if he votes too much with the repubs.
He could say he was voting for a bill that McCain sponsored, which would provide some cover -- especially if voters in MASS support it.

[sabrina 1]

28. Good points. I think what Obama (Volcker) want to pass

resembles Glass/Steagall. I also think that some Republicans may support it if only because they too saw the results in Mass. A majority of Mass voters are angry about the banks. This is a perfect time to push this through Congress with elections coming up in a few months. Timing may be on the side of getting a good regulatory bill passed. The article states that it's possible to get Republican support for this right now, as Volcker is respected by Repubs as well as Democrats.

Wall St. is reacting negatively to this news. I hope Obama doesn't cave to pressure as it is expected to be a fight with the Banks. This could be the first real issue he takes on and gets the support of the people who elected him. What a difference it would make if he had the base on his side.

[MannyGoldstein]

11. Two Inappropriate Uses of the Word "Moderate"

The Obama Administration's policies have been "far right", not "moderate".

Probably will remain so, but maybe we'll be surprised.

[BurtWorm]

15. Right on the money.

So to speak.

:toast:

[Mithreal]

19. Moderate seems to mean, Stand for nothing and fall for anything.

And average Americans know it.

[mister1979]

12. Fire Geithner altogether

Tim Geithner has proven to be in it to help the robber barons get richer and take away everyones money. He should be jerked out of this administration altogether.

[high density]

16. Sounds like big progress to me

But naturally the "Obama can do no good" crowd is on here letting us know that this isn't enough. Even if Geithner was fired then it would be bitching about his replacement. This has been a shitty week for Democrats so let's enjoy this bit of good news from the White House. For all we know they could let Geithner remain hanging on for a while simply for some BS idea of investor (i.e. speculator) confidence, who knows.

Advocates of Volcker's ideas were delighted. "This is a complete change of policy that was announced today. It's a fundamental shift," said Simon Johnson, a professor at MIT's Sloan School of Management. "This is coming from the political side. There are classic signs of major policy changes under pressure . . . but in a new and much more sensible direction."

Industry officials, however, said they were startled and disheartened that Geithner was overruled, in part because they supported the more moderate approach Geithner proposed last year.

[Mithreal]

18. There exists distinction between words and actions. Deal with it.

"Obama can do no good" crowd is not helpful and provokes anger.

I have taken on people calling others cheerleaders too so don't get the wrong idea.

The President will deserve more cover from average Americans when he proves he can set aside all his naivete about pleasing both the people and powerful lobbyists.

My boots were and are on the ground. If you want to turn this into a fight over general support of Obama you may not appreciate the consequences. Your so-called "Obama can do no good" crowd on DU wants the man to succeed despite himself and become great. Oversimplify with this name calling and you may reap what you sew.

[sabrina 1]

20. I think I would be included in the 'Obama can do no good'

crowd if you mean people who have been upset over many of his policies. The truth is that is a very bad description of those of us who expected more from a Democratic majority.

Yes, this is good news but contrary to the 'Obama can do no harm' crowd, it is absolutely necessary to speak out and even take some drastic action when your country is being led down a similar path to the one Bush went down.

If it took losing a Senate is what it took to get attention, then it was worth it, since we COULD get that seat back in 2012.

The truth is, as many are saying, Geithner never should have been there from the start.

I see now that the WH is sticking with Bernanke. So, it's not a question of Obama can do no good, obviously he can. But keepiing Bernanke is a very bad idea and people will say that.

[Uncle Joe]

22. What is so moderate about Geithner's policies?

They seem extraordinarily risky to me.

Thanks for the thread, sabrina.

[sabrina 1]

23. You're welcome.

I don't believe Geithner's policies were moderate at all. He clearly opposes banks being regulated. Maybe because he agreed that there is a need for 'some' regulation, although what that would b according to him, I do not know. He is opposed to Volcker's views, and for me, that is enough to believe that Volcker probably has it right.

[No Elephants]

25. Have Democrats now been reduced to arguing over which Republican should serve as Secretary of the

Treasury under a Democratic President?

If Gates gets fired or retires, will we debate which Republican should take his place, too?

After all, Republicans have been telling us for years that Democrats are no good at defense or finances. Are we now manifesting Stockholm Syndrome?

Democrat Up!

[sabrina 1]

26. Yes, crazy isn't it? Obama has indeed verified that false

charge against Democrats by making it seem there is no one in the country other than far right, Iran Contra criminals like Gates who can deal with defense issues in this country.

Regarding Volcker, isn't he a Democrat? He was Carter's Chairman of the Federal Reserve.

[No Elephants]

29. Hard to tell.. He was Reagan's chair, too. That's how I knew him.

And, as both Clinton and Obama have shown, a Democrat appointing a Republican is not unknown, so I would not assume he is a Democrat simply bc Carter appointe him. I think some people do, though.

If he is a Democrat, cool. I'd be happy to stand corrected. Too late to edit my post, but I'll stick in a reply.

[No Elephants]

30. Ooops. Too late to edit, but Volcker may be a Democrat, tho' he served under Reagan.

[sabrina 1]

31. I did check to see what his political affiliation was and he is a Democrat.

http://en.wikipedia.org/wiki/Paul_Volcker

Paul Volcker, a Democrat,<5> was appointed Chairman of the Federal Reserve in August 1979 by President Jimmy Carter and reappointed in 1983 by President Ronald Reagan.

He was fired by Reagan ~

Nobel laureate Joseph Stiglitz said about him in an interview:

Paul Volcker, the previous Fed Chairman known for keeping inflation under control, was fired because the Reagan administration didn't believe he was an adequate de-regulator.

[TomCADem]

33. Exactly, Volcker Was Appointed By Carter, Fired By Reagan...

...and Volcker was credited and blamed for keeping inflation under control by engaging a contractionary monetary policy.

[PeaceDreamer]

34. Geithner protects banks so he can make millions when he leaves

He saw the money Rubin got from Citi after being in the Treasury and he won't do anything to stop his future payday!

[sabrina 1]

35. He needs to be let go. Along with Summers and the rest of the

Wall St./ Goldman Sachs crew. I really do not know what Obama was thinking when he put these people in his cabinet. I hope he sees the harm they have done to his presidency.