On Monday, Obama named New York Federal Reserve Bank President Timothy Geithner to the post of the Treasury Secretary. Former Treasury Secretary under Clinton, Lawrence Summers, was named the Director of the National Economic Council in the White House. Obama also called for a stimulus plan that will "give a jolt to the economy." We host a roundtable discussion about Obama’s latest economic moves. [includes rush transcript]
This is a rush transcript. Copy may not be in its final form.
The Treasury and the Federal Reserve are expected to announce a major lending program today that will finance billions of dollars of consumer loans as well as business debt. President Bush said Monday he expected the country would recover from the “tough situation” and said his administration was working in “close cooperation” with Obama’s economic team to draw up plans to calm the financial markets.
PRESIDENT GEORGE W. BUSH: This is a tough situation for America, but we’ll recover from it, and the first step to recovery is to safeguard our financial system. Last night on Air Force One, coming back from Peru, I talked at length to the secretary about his recommendation on the decisions made to safeguard Citicorp. We have made these kind of decisions in the past. He made one last night. And if need be, we’re going to make these kind of decisions to safeguard our financial system in the future.
Meanwhile, Obama introduced the leading players in his new economic team at a news conference in Chicago. He named New York Federal Reserve Bank President Timothy Geithner to the post of Treasury Secretary. Former Treasury Secretary under Clinton Lawrence Summers named Director of the National Economic Council in the White House. Obama also announced he had chosen Berkeley economics professor Christina Romer to head his Council of Economic Advisers and Melody Barnes as Director of his White House Domestic Policy Council. Obama called for a stimulus plan that will “give a jolt to the economy.”
PRESIDENT-ELECT BARACK OBAMA: We need a recovery plan for both Wall Street and Main Street, a plan that stabilizes our financial system and gets credit flowing again, while at the same time addressing our growing foreclosure crisis, helping our struggling auto industry and creating and saving 2.5 million jobs, jobs rebuilding our infrastructure, our roads, our bridges, modernizing our schools and creating the clean energy infrastructure of the twenty-first century, because at this moment we need to restore both confidence in the markets and restore confidence of middle-class families who find themselves working harder, earning less and falling further and further behind.
I’m joined now by three guests for a discussion on the state of the economy and what to expect in the coming months. Veteran economic journalist, co-founder and co-editor of The American Prospect magazine, Robert Kuttner, joins me on the phone from Florida. His latest book is called Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency.
Investigative journalist Naomi Klein, author of The Shock Doctrine:
The Rise of Disaster Capitalism, joins us on the telephone from Toronto.
We’re also joined here in the firehouse studio by Michael Hudson. He’s
president of the Institute for the Study of Long-Term Economic Trends, Distinguished Research Professor of Economics at the University of Missouri, Kansas City, and author of Super Imperialism: The Economic Strategy of American Empire
, chief economic adviser to Congress member Dennis Kucinich.
We welcome you all to Democracy Now!
I wanted to begin with the appointments. This is how President-elect Obama introduced the next Treasury Secretary, if confirmed, Timothy Geithner.
PRESIDENT-ELECT BARACK OBAMA: Tim Geithner offers not just extensive experience shaping economic policy and managing financial markets, he also has an unparalleled understanding of our current economic crisis in all of its depth, complexity and urgency. Tim will waste no time getting up to speed. He will start his first day on the job with a unique insight into the failures of today’s markets and a clear vision of the steps we must take to revive to them.
And Lawrence Summers, named the Director of the National Economic Council in the White House.
PRESIDENT-ELECT BARACK OBAMA: And as one of the great economic minds of our times, Larry has earned a global reputation for being able to cut to the heart of the most complex and novel policy challenges. With respect to both our current financial crisis and other pressing economic issues of our time, his thinking, writing and speaking have set the terms of the debate. I’m glad he will be by my side playing the critical role of coordinating my administration’s economic policy in the White House, and I will rely heavily on his advice as we navigate the uncharted waters of this economic crisis.
We’re going to begin right now with Naomi Klein. Your response to these appointments and what they signify? If you could begin with Larry Summers, the former Clinton Treasury Secretary.
NAOMI KLEIN: Hi, Amy. It’s good to be with you. Well, I have to say it’s a profound disappointment. And it really does represent a very safe choice, but let’s remember that Barack Obama won this election saying that taking the status quo
, that staying with the same policies that have been governing the country for the recent past, was actually a very dangerous course. And I think, in many ways, we are paying the price of the — frankly, the intellectual dishonesty of the progressive liberal left during the Bush years, because Obama said again and again during the campaign that the crisis on Wall Street represented the culmination of an ideology of deregulation and laissez-faire, trickle-down economics that had guided the country for the past eight years.
And the truth is, as we all know, Amy, that it wasn’t just eight years during which those policies guided US economic policy. They certainly guided them under Reagan, and they certainly guided them under Clinton. And that’s where Larry Summers comes in, because Larry Summers was the last Treasury Secretary under Clinton. And he, along with Alan Greenspan and Robert Rubin, were really the key architects of the policies of deregulation that created the crisis that we are living now. And those key policies, as you know, are the killing of Glass-Steagall that allowed a series of very large bank mergers that created these institutions that are too big and too intermingled to fail, we’re told again and again; the deliberate decision to keep the derivatives out of the reach of financial regulators — that was also a Summers decision; and also allowing the banks to carry these extraordinary levels of debt, thirty-three-to-one in the case of Bear Stearns.
Now, you know, in my book, I — in The Shock Doctrine
, I start a chapter with a quote from Larry Summers. The context in which he said this, it was 1992, and it was when he was making World Bank economic policy as it related to Russia in the midst of a financial crisis. What he said, and this is why I quoted him, because it really shows the extent to which he is truly an ideologue, truly a follower of the very ideology — not just a follower, but a propagator of the very ideology that Obama ran his campaign against. And here’s the quote. This is Larry Summers in 1992: “Spread the truth. The laws of economics are like the laws of engineering. One set of laws works everywhere.” And then he laid out those laws a little bit later. He referred to the three “ations,” and those were privatization, stabilization and liberalization. So he has been preaching the doctrine. He is by no means sort of an innocent bystander. He is a dyed-in-the-wool privatizer, free trader.
And he, along with Tim Geithner, his deputy, played key roles during very important economic crises in other countries, in Russia, during the Asian financial crisis, during the Mexican peso crisis. And when these countries were suffering a profound economic crisis created by deregulation, they preached more deregulation, more privatization and — this is key — they preached economic austerity to disastrous results. So I think this is really troubling. And, you know, one thing that Obama said is that Larry Summers set the terms of the debate for this financial crisis, and that, once again, is very worrying, because if Barack Obama thinks that these are the only terms, the parameters of the debate, then they’re very, very narrow. And we’re seeing just — [no audio]
Naomi, are you there? Well, let’s turn now to Robert Kuttner — we’ll get Naomi Klein back on the line from Toronto — author of Obama’s Challenge and founder of American Prospect magazine. Do you have the same feelings as Naomi Klein about these two choices?
Mostly. I’m not quite as pessimistic as she is, because, first of all, Obama is the president, not Summers. I certainly wish someone other than Larry Summers had been appointed. My candidate had been Sheila Bair, the head of the FDIC, who has moved much more proactively, not just to throw money at banks, but to take them over.
I totally share Naomi’s view of Summers, but I think there are a couple of differences. Number one, we have reality on our side, in the sense that there’s a very, very serious crisis. And if Obama follows the advice of the ’90s version of Larry Summers, he will be politically toast. And I think even Summers, because he’s such an opportunist, has lately been calling for a very large stimulus package, has been calling for tighter regulation of banks. Now you have —- you know, you have no way of knowing whether that’s sincere or whether it’s posturing, but I think Summers is smart enough to recognize that partly because of his own policies, things are in such disastrous shape, the different policies are indicating. Whether he can be the instrument of change is an open question.
I can point to a couple of silver linings here. Number one, in Obama’s own speeches on the subject, he’s been very much on the side of stringent re-regulation of financial institutions as the price of recapitalizing them and also as the necessary policy. There’s a very good person who is going to be in charge of the specifics of what banking regulation should be going forward. That’s Dan Tarullo, who’s one of the two or three real progressives at fairly senior levels inside the Obama administration. So I completely agree with Amy’s assessment of Larry Summers. I’m not quite as despairing -—
Naomi’s, I’m sorry.
But let me ask you something, Bob. William Greider had an interesting piece in The Nation. He said, “On Monday, Geithner was busy executing the government’s massive rescue of Citicorp—the very banking behemoth that Geithner and Summers helped to create back in the Clinton years, along with Federal Reserve [chairman] Alan Greenspan and Robert Rubin, Clinton’s economics guru. Now Rubin is himself a Citicorp executive and his bank is now being saved by his old protégé (Geithner) with the taxpayers’ money. […]
“Geithner has been a central player in the deal-making, from Bear Stearns to AIG to Citi. The strategy has not only failed, it has arguably made things worse as savvy market players saw through the contradictions and rushed out to dump more bank stocks.”
And ultimately, Mark Ames, also in The Nation
, writes ,“Summers was one of the key architects of our financial crisis—hiring him to fix the economy makes as much sense as appointing Paul Wolfowitz to oversee the Iraq withdrawal.”
Your response, Bob Kuttner?
I basically agree. The only thing I can say, and maybe this is because I’m just a congenital optimist and because I have some faith in Obama’s own leadership and intellect — although I have to contradict myself and say if he’s such a smart guy, why did he appoint these fellows? — but I do think Geithner is a competent technocrat. He’s not an investment banker himself. He’s been a civil servant for almost all of his career. And secondly, when he was pursuing these failed policies, he was doing so as part of a threesome that included Bernanke and Paulson. And of the three, Geithner was the most inclined to tough regulation as the price of bailout.
But Greider is absolutely right about the intense conflicts of interest of which Rubin is both the emblem and the substance. And the question is whether Geithner and Summers, in a very different historical moment, can turn into different kinds of people under the leadership of a president who knows that his own survival depends on pursuing a recovery.
I certainly wish that other people had gotten these positions. I’m not quite prepared to conclude before the man is even inaugurated that this dooms the Obama administration to failure, but it certainly would have been better if he had appointed more progressive people.
We’re talking to Bob Kuttner co-founder and co-editor of The American Prospect. He’s written the book Obama’s Challenge. Naomi Klein wrote The Shock Doctrine. And we’ll be joined by Michael Hudson. He’s just back from Berlin. Stay with us.
We talk about the latest appointments by the President-elect, Barack Obama. Naomi Klein, our guest from Toronto, she wrote The Shock Doctrine: The Rise of Disaster Capitalism. She’s just back from Poland. Bob Kuttner is with us, co-founder and co-editor of The American Prospect. He has written the book Obama’s Challenge. And [Michael Hudson], co-founder and president of the Institute for the Study of Long-Term Economic Trends, also professor at the University of Missouri, Kansas City.
You’re just back from Berlin. Talk about the international response and what Bob Kuttner says, well, he’s just an optimist and that whoever he chooses, it doesn’t mean that’s the position Barack Obama will take.
I think, in a way, it does. I think that the deal that Obama has made is that when he talked about change, he wasn’t talking about the vested interests, he wasn’t talking about finance or real estate or the FIRE sector. He’s going to leave Wall Street and the vested interests in the hands of the people who have been a continuity from the Bush administration to the Clinton administration, and he’s going to concentrate on infrastructure and hiring, workplace conditions, the environment. But he’s not going to change the debt position.
And the most worrisome aspect of the appointment of Summers is, indeed, as Naomi pointed out, what he did in Russia under privatization. He created a kleptocratic class of billionaires who will be ruling Russia for the next hundred years. And the key was to use public expenditure that would increase private wealth.
And I think what the plan is that, from everything Obama has said, is that there is going to be a heavy government expenditure on infrastructure here, very much like there was in Chicago, and this infrastructure is going to create huge real estate fortunes for the property along the lines that — in the vicinity of the location of the infrastructure. It’s going to create huge financial fortunes.
Michael Hudson, when he’s talking about infrastructure, is he talking about mass transportation?
Largely that. Transportation is certainly the largest —
I mean, as opposed to highways — as opposed to, you know, highways and roads, but actually mass transit.
Yes, that’s certainly the key. And mass transit in almost every country creates an increase in real estate values along the routes that could actually — the rental increase that’s created by this transportation could actually finance the entire transport system. For instance, in London, when they built the Tube extension to their financial district, they created thirteen billion pounds worth of increased real estate value, and the Tube itself cost only eight billion dollars [sic.]. But they left this thirteen billion of real estate value in the hands of the private landlords.
Same thing in Chicago in the United States. There can be a very heavy investment in mass transportation here. This is going to create enormous real estate values. The tax system will leave these in private hands. And I think all of the tax proposals that Mr. Obama has spoken about have to do with income tax, primarily. The rich people prefer not to earn income, because you have to pay taxes on them. They prefer to make capital gains. So the intention of the economic team that Mr. Obama’s brought in is really to create a huge capital gains economy and even more disparity of wealth, while leaving in place the one thing that should have been addressed in the last year, and that’s the enormous debt overhead. Nothing is happening at all on that. He’s adding to debt, not reducing it.
Barack Obama, throughout the campaign, continually said that wealthy people should be taxed and went after the Bush tax cuts. But now, in yesterday’s address, he seemed to back off, saying, well, he would let them expire perhaps — that’s a possibility — in, I think it was 2011. Your thoughts?
The kicker is that when he’s talking — Obama is talking about tax, he’s talking about income tax. Most wealth is not taxed, because most wealth takes its return in the form of capital gains. Most wealth doesn’t pay FICA wage withholding or others. So what Obama is talking about is taxation at the margin. He is not talking about the kind of wealth and the kind of returns that Wall Street gets, which are not subject to taxation at all. In fact, the giveaways that the Treasury put into the bank bailout law says that because the banks have bought affiliates that have cash loss carryforwards, they’re not going to even be subject to income taxation. So the whole issue of — the devil is in the details of the small print, and Mr. Obama, thanks to his appointing Summers and Geithner in this team, is going to leave it there. The Russian kleptocrats didn’t have to pay taxes. As the phrase went from the Queen of Mean, “only the little people pay taxes.” And I’m afraid that’s going to be the case under Mr. Obama also.
Bob Kuttner, why are the banks not asked the same questions that the auto industry is asked. You have Nancy Pelosi and the others saying, “When you bring us a plan, maybe we’ll talk about giving you money.” Do the banks have any plan with the money that they are getting?
No, and of course that’s what we should be doing. I think rather than just throwing money at them, we probably ought to nationalize one or two banks. That way, the money that the taxpayers are putting into the banks does what money usually does in a capitalist society: it produces ownership. And the amount of money that taxpayers are putting into banks at this point is more than the total value of the stocks of these banks as valued by Wall Street. Well, if you’re putting in a majority share of the money, you should get a majority share of the ownership. If banks are too traumatized to resume lending, even with public money, then if we had a publicly owned bank or two, we could show them how to do it.
We could also have a complete look at their books, which we don’t now have. One of the questions being asked about Tim Geithner is that if the Federal Reserve is the agency charged with examining bank holding companies and it was the strategy of Citigroup as a bank holding company, as shown in Sunday’s Times investigative piece, the strategy of the holding company was to do all of these exotic speculative investments. Where was Tim Geithner’s Federal Reserve of New York, which has the examiners that are supposed to be examining the bank at the holding company level? Why didn’t they get a look at the books?
If we don’t have the tools to allow examiners to get in, inside, deep inside the plumbing, and understand what dangerous risks bank speculators are taking, we need to do two things. We need to change the laws so that the agencies can have adequate supervisory power. The agencies need to use that adequate supervisory power. And in the meantime, we ought to take this money and just nationalize a couple of banks outright.
I completely agree with you that there is a double standard vis-à-vis the banks and vis-à-vis Detroit. It’s a little bit easier if you have the political will to just take over a bank than it is to take over an auto company, because the question remains, even if we were to require the auto executives to come up with a plan for conversion to fuel-efficient cars and fire the auto executives and get people who were competent and put public representatives on the company boards, you still have to come up with products that consumers want to buy. And that has so far eluded Detroit. It has not eluded the Japanese competitors of Detroit. But, oddly enough, the recipe of how you fix a bank is somewhat easier than the recipe of how you fix an auto company. You require that it stick to its knitting, take in deposits, make loans, stay away from these exotic financial instruments, get rid of conflicts of interest, have transparency. And if we had the political will, it would not be that difficult to get the banking sector back on track. Detroit, if anything, is even harder. I think Pelosi is right to say that we don’t want to throw money at Detroit until we see the plan, but we ought to be doing at least as much with the banking sector.
Naomi Klein, your comment?
NAOMI KLEIN: Yeah. I mean, just coming back to what we can expect from Summers and Geithner, I mean, I think it’s clear that there’s going to be a major departure from the ideology of the idea that the government can’t do anything. We’re going to see major stimulus, economic stimulus. We’re going to see major investments in infrastructure, as Michael Hudson was discussing. And one hopes that there will be a lot of investment in green infrastructure, as well.
But the key issue — and this is where we need to, I think, concentrate our energies, because it isn’t just — you know, we all want to be optimistic, but I think part of what got us into this situation where we’re seeing these very disappointing appointments has been the fact that we have not been honest about the legacy of the Clinton years. So much misinformation was spread during the election campaign, because it was a nice message to present the ’90s as these wonder years in contrast to the Bush years. And that is exactly what created a situation where you could have a Summers being presented as the wise man instead of going down with Alan Greenspan. You know, when Alan Greenspan’s reputation was raked over the coals, it should have been Rubin and Summers alongside him. And I think we have nobody to blame, really, but ourselves for that failure. So, essentially, that was an electoral strategy, and it was an electoral strategy that relied on intellectual dishonesty.
And now, I think, to continue to make excuses for Obama is a real mistake, because he’s not running for election anymore. He’s already won, so there’s no reason to be pandering in this way.
And in terms of the real issue here, yes, there will be stimulus. Yes, there will be expenditure. But how is it going to be paid for? And Obama ran an election campaign promising to increase taxes on the wealthy, and Rahm Emanuel has already hinted that he might not do that right away. We’re already seeing some hesitation about the commitment to not renew the Bush tax cuts.
And then there’s a huge fight over capital gains tax and the kind of taxes paid by hedge funds. And here, I think it’s important to remember that Larry Summers is coming straight from a hedge fund. He’s the managing director of the hedge fund D.E. Shaw Group, which is one of the most secretive hedge funds around. So the real question, I think, is not whether they will spend taxpayer money — they will, on infrastructure — but the point is, will they just rack up huge debts, huge deficits, or will they actually pay for this with taxes on the wealthy, which is what they promised to do and what we’re seeing Gordon Brown begin to do in Britain, because if they don’t pay for this in an equitable way, in a progressive way, then what will happen is that these huge investments in infrastructure will create a huge economic crisis down the road, it will be blamed on Obama, and then there will be a wave of privatizations of these new investments in public spending, and there will be a whole new bubble.
You don’t agree, Michael Hudson?
Well, here’s the problem: most infrastructure is built by states and localities. And I don’t think there will be a privatization of this new infrastructure, because right now the states and localities are broke. Here in New York City, they’ve already announced they’re cutting back the Second Avenue subway, they’re raising transport fares. All over the United States, municipalities are broke. The idea of bringing in Summers is to do this from the very beginning with private funds that will be provided largely by the government itself. And if you look at all of these —- the bailout money that’s been given, yesterday Bloomberg calculated it was 7.7 -—
The mayor of New York?
No, the Bloomberg Financial Service calculated that it was $7.7 trillion of just the government taking over from the financial sector this year. And of all of this $7.7 trillion, what hasn’t been done? One thing that has not been bailed out has been the Pension Benefit Guaranty Corporation for corporate pension funds. Already, the PBGC is $25 billion in deficit. And Congress a few years ago passed a law that this year, if they’re not fully funded, they’re going to have to suddenly make up the entire shortfall, which is essentially going to render many corporations insolvent for their pension funds, forcing a shift away from guaranteed pensions to sort of “whatever we have, we’ll pay you,” standardized contributions, but not standardized payout.
So there’s going to be an enormous squeeze on labor, a squeeze on the kind of labor that was employed in states and municipalities, public unions for infrastructure, to essentially privatize it from the beginning with government guarantees, government funds. And it will be a bonanza for the banks. And that’s how they’re going to earn their way out of debt, by lending for the private funds instead of government funds for this [inaudible].
President-elect Obama was asked about his plans for the auto industry at his news conference yesterday, and he talked about his support for a bailout of the Big Three.
BARACK OBAMA: We can’t allow the auto industry simply to vanish. We’ve got to make sure that it is there and that the workers and suppliers and businesses that rely on the auto industry stay in business. What I also have said is that we can’t just write a blank check to the auto industry. Taxpayers can’t be expected to pony up more money for an auto industry that has been resistant to change.
I wanted to turn now to a new film. Well, it came out a couple years ago, and it’s about the electric car. In 1996, General Motors introduced the EV-1 electric car in California and Arizona. Hundreds of the electric cars were soon on the road. Then they all disappeared. The mystery behind their disappearance the subject of this documentary, Who Killed the Electric Car? We featured the documentary on Democracy Now! last year, and we interviewed the filmmaker. In this clip, we start with Peter Horton, the actor, and then Tom Hanks is on David Letterman, and it goes from there.
PETER HORTON: There’s nothing like driving a car, where you realize, as you’re sitting in traffic, there’s no pollution coming out of your tailpipe. There’s — it’s just, you know, battery [inaudible].
DAVID LETTERMAN: By driving an electric car, what are you sparing us from?
TOM HANKS: I’m saving America, Dave. That’s what I’m doing. I am saving America by driving electric cars.
AMY GOODMAN: That was Tom Hanks, speaking on the David Letterman show. Despite the praise from drivers, General Motors stopped manufacturing the cars and forced all drivers to return their EV-1s. GM was able to do this, because none of the cars had actually been sold, only leased. After the electric cars were removed from the road, they were sent to Arizona, where they were crushed.
CHRIS PAINE: We flew over General Motors, and looking down, we could see right next to the racetrack where the EV-1 was first tested, we saw, I don’t know, maybe fifty EV-1s, crushed and put on top of semi flatbeds right next to the yellow crusher. General Motors is almost finished off, I think. I don’t imagine there’s very many EV-1s left that haven’t been crushed out. It’s pretty sad.
DAVE BARTHMUSS: There’s one of four things that will happen with the EV-1s. They will go to colleges and universities, engineering schools. They’ll go to museums and other displays across the country. Other EV-1 vehicles are being driven by our engineers. And the other option for the EV-1s at the end of their life is recycling. But know that every one — every part of the EV-1 is going to be recycled, dismantled through a third party and then reused. Everything is going to be recycled. We’re not just going to crush it and send it off to a landfill.
JIM BOYD: When I saw the picture of the pile of crushed cars, it hurt. And I — you know, I thought it was pretty spiteful.
IRIS OVSHINSKY: To see on the computer, on the internet, the crushed EV-1s that GM did, that was tragic.
STANFORD OVSHINSKY: It was wrong. It was wrong.
An excerpt of Who Killed the Electric Car by Chris Paine, the filmmaker. Robert Kuttner, could you imagine if the CEO of GM, instead of coming with the other CEOs of Chrysler and Ford in a private jet, came in an electric car? Of course, though, he couldn’t, because GM killed the electric car.
You know, that film is one of the most profound documentaries of our time. And GM was actually ahead of Toyota. We’re now working our way back towards a plug-in electric car via modified hybrids, but they had the technology twelve, fourteen years ago. And you can’t make this stuff up. The patent for the battery that made possible the EV-1 was bought by Exxon Mobil, just so that it would never be utilized again. I think that’s why, in restructuring the auto industry, you’ve got to get rid of these executives. It’s not just enough to throw money at them. And it just gives you a sense of how profound the challenge is.
And, you know, just analogizing this to Bob Rubin for a second, in a country where market capitalism has as much power as it does in the United States, whether the villain of the piece is GM or whether the villain of the piece is Bob Rubin and Citigroup, it’s bigger than any one person. It’s a system that you have to fight. And it’s a mark of their power, the residual power of the system, that even when the system has come to a crisis of its own making, and you have a president as attractive and as intelligent as Barack Obama, the institutional pressures to reappoint the same scoundrels are overwhelming.
And it’s only when Obama looks over the cliff of the failure of his own administration, because he has not thought boldly enough, that he may change his plans and move in a more radical direction. But so far, the direction that he’s moved in, whether it’s on taxing rich people, whether it’s on restructuring the auto industry, whether it’s on re-regulating Wall Street, is disappointing. The same thing was true at the beginning of the Roosevelt administration. And all you can do is hope that pressure from folks like us, pressure from ordinary people and from social movements, and pressure from the dire circumstances that we face will push the administration into a more progressive direction.
I think the idea that Mr. Obama is going to change his economic philosophy is quixotic. In Berlin, almost everybody there was sure that Obama was going to be another Gorbachev, somebody laying low, somebody going along with, seemingly conforming, so that all of a sudden, once he was in, he could do a revolution. And almost everybody was hoping against hope that that would be the case. And instead of looking like Gorbachev, now, all of a sudden Mr. Obama is looking like Yeltsin: just the umbrella for these kleptocrats to come back in.
And the point that Mr. Kuttner made, I think the bottom line for that is the fatal alliance between the American auto industry and the oil industry. And it was the auto industry that bought up public transportation in Los Angeles and other cities after World War II and tore it down so that people would not have public transportation, so they’d have to use oil and drive cars.
Naomi Klein, we only have a few more minutes. When you were last on, you talked about structural adjustment programs for banks in the auto industry. But why aren’t — if the US taxpayers are going to bail out the wealthiest corporations and banks in this country, why aren’t demands made, like all the boards have to resign, the leadership has to be thrown out, and that if the US is going to inject money, sometimes the poorest people in this country, there have to be certain rules maybe that also include you cannot build another SUV, Naomi Klein?
NAOMI KLEIN: Well, exactly. I mean, this is why these past few months have been such an enormous wasted opportunity, because, you know, the point I made when I was last on the show is that, you know, when anybody comes looking for a loan, whoever has the money has the leverage. And we know that from the International Monetary Fund. You know that from your local bank. They set the conditions of that loan. And when you look at the deals that have been negotiated, not just by Henry Paulson, but also by Tim Geithner — you know, he’s the one who negotiated — he was really the key person on the JPMorgan-Bear Stearns deal. He was also central in the AIG deal. And what we see is that, again and again, taxpayers have taken on enormous risks from these companies. But they have not been exerting control in terms of re-regulating not just the individual companies, but the sector as a whole, because it’s the sector as a whole that is lining up. It’s the sector as a whole that is lining up for these equity deals, that has lined up for $2 trillion in emergency loans. And so, you know, when exactly is the re-regulation going to happen, if not as a condition attached to these loans? This is the moment of high leverage. So it isn’t just about seats on the board and isn’t just about firing the boss; it’s about re-regulating exactly what Larry Summers and Tim Geithner deregulated under the Clinton administration. And the real question is, you know, do these people have the humility to fix their own mistakes?
And, you know, what I think we’re seeing from Larry Summers is that — you know, my question is, is his ego too big to fail? I mean, he doesn’t — these guys should not be promoted at this point. They should — their reputations really should be destroyed by their own track records. But they’re all of these people that are just constantly talking about how brilliant they are, despite the abysmal track record in this country and in other countries in which they’ve meddled, like South Korea and Russia.
But, you know, the key issue here, I think, coming back to —
AMY GOODMAN: We have thirty seconds.
NAOMI KLEIN: Well, you know, the issue is that Obama is coming to these decisions because he is under enormous pressure from above, from Wall Street, elite pressure. And the question is, how do you transition from sort of a pro-Obama campaign movement to an independent social movement that puts real counter-pressure on him from below? And those are the conditions under which Roosevelt sold the New Deal as a compromise to the elites. And we don’t have those dynamics right now. What we have are, you know, people who are sort of super fans for Obama, constantly apologizing for every decision that he makes, versus gloves-off elites who are putting real pressure on him behind the scenes. And we’re seeing the results.
Naomi Klein, Michael Hudson, Robert Kuttner, I want to thank you all for being with us. Naomi Klein’s book, The Shock Doctrine: The Rise of Disaster Capitalism. Michael Hudson, just back from Berlin, he is the president of the Institute for the Study of Long-Term Economic Trends. And Robert Kuttner’s book is called Obama’s Challenge: America’s Economic Crisis and the Power of a Transformative Presidency. He is the co-founder of The American Prospect magazine.