Summers supports Obama administration policy stupidity

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Banking and the entire private sector in a capitalist society is necessarily procyclical. Only the Federal government can be countercyclical, and,
indeed that’s it’s role in supporting aggregate demand in a slowdown. The blame for current conditions falls unambiguously on current policy. Comments below

Obama Plans to Press Banks Monday to Start Lending Again

Dec. 13 (CNBC) —President Barack Obama’s economic advisers are talking tough about the banks ahead of his meeting Monday with heads of financial institutions.

Larry Summers and Christina Romer say Obama will press bankers to ease lending to help Americans get back to work.

As Summers put it, bankers need to recognize that “they’ve got obligations to the country after all that’s been done for them.”
He says no major bank would be intact without the government’s bailout of the financial sector, and now they need to do all they can to get credit flowing again.

Why would we want to demand releveraging of the private sector and not growth through increased incomes via my proposals for a payroll tax holiday, per capita revenue distribution, and an $8/job for anyone willing and able to work to facilitate private sector expansion as demand is restored?

Only one reason- the usual deficit myths.

Summers spoke Sunday on CNN’s “State of the Union” program.
Romer, on NBC’s “Meet the Press,” said Americans are still paying the price for Wall Street excesses.

No, we are still paying the price for poor policy response due to disgraceful flawed mainstream economics mired in deficit myths that has blocked the obvious means of supporting aggregate demand readily available.

On Saturday, Obama singled out financial institutions for causing much of the economic tailspin and criticized their opposition to tighter federal oversight of their industry.

Why does he care if “they” oppose any particular policy?

This shows a profound weakness of leadership where he can’t use his bully pulpit to lobby congress to do the ‘right thing.’

Unfortunately, however, due to the lack of a fundamental understanding of banking and the financial sector in general the administration’s proposals fall far short of the mark even if they did get them passed.

While applauding House passage Friday of overhaul legislation and urging quick Senate action, Obama expressed frustration with banks that were helped by a taxpayer bailout and now are “fighting tooth and nail with their lobbyists” against new government controls.
In his weekly radio and Internet address Saturday, Obama said the economy is only now beginning to recover from the “irresponsibility” of Wall Street institutions that “gambled on risky loans and complex financial products” in pursuit of short-term profits and big bonuses with little regard for long-term consequences.

Its just barely stopped the slide from a too little too late fiscal adjustment that added precious little to the work done by the fiscal ‘automatic stabilizers’ of rising transfer payments and falling incomes due to the slowdown.

Not to forget Fed policy that further removes personal interest income, which should be a good thing as it allows for lower taxes for a given level of federal spending. But of course that’s not recognized and therefore the 0 rate policy is instead a wet blanket on demand.

“It was, as some have put it, risk management without the management,” he said.

Right back to you.

The president also told CBS’ “60 Minutes” that “the people on Wall Street still don’t get it. … They’re still puzzled why it is that people are mad at the banks. Well, let’s see. You guys are drawing down $10, $20 million bonuses after America went through the worst economic year … in decades and you guys caused the problem,” Obama said in an excerpt released in advance of Sunday night’s broadcast of his interview.

Right back to you.

The only question is whether this is innocent fraud or subversion.

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