Stiglitz: Obama’s economic team “either in the pocket of the banks or they’re incompetent”

Joseph Stiglitz
Joseph Stiglitz

Nobel economics laureate Joseph Stiglitz has been one of the most vocal critics of the Bush/Obama bailout strategy from the start, and this morning Bloomberg is featuring an interview in which Stiglitz says flatly that Team Obama is in effect working for the banks and not the American public.

An excerpt:

The Troubled Asset Relief Program, or TARP, isn’t large enough to recapitalize the banking system, and the administration hasn’t been direct in addressing that shortfall, he said. Stiglitz said there are conflicts of interest at the White House because some of Obama’s advisers have close ties to Wall Street.

“We don’t have enough money, they don’t want to go back to Congress, and they don’t want to do it in an open way and they don’t want to get control” of the banks, a set of constraints that will guarantee failure, Stiglitz said.

The return to taxpayers from the TARP is as low as 25 cents on the dollar, he said. “The bank restructuring has been an absolute mess.”

Rather than continually buying small stakes in banks, weaker banks should be put through a receivership where the shareholders of the banks are wiped out and the bondholders become the shareholders, using taxpayer money to keep the institutions functioning, he said.

In conclusion, says Stiglitz–echoing remarks by author Kevin Phillips, whose MinnPost interview I’ll be posting here Monday–“”This is a strategy trying to recreate that bubble. That’s not likely to provide a long run solution. It’s a solution that says let’s kick the can down the road a little bit.”

Elsewhere: The NYT’s Opinionator blog surveys reactions to Texas Gov. Rick Perry’s secession talk; RealtyTrac reported that March housing foreclosures were up 17 percent over the previous month and 46 percent over the previous year; and Russian policy analyst Igor Panarin, who got some domestic media attention back in December for his prediction that the U.S. will ultimately break up as the Soviet Union did, is comparing Barack Obama to Mikhail Gorbachev.

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Comments (3)

  1. Submitted by Brian Simon on 04/17/2009 - 10:03 am.

    Some of the critics of TARP – that it does not do enough, or is not rough enough on the banks – seem to think the gov’t is omniscient, omnipotent and has unlimited resources available. My understanding is that one – critical – reason we haven’t just ‘taken over’ the banks is that we don’t have enough people to do so. TARP is certainly a flawed program, but when considering alternatives, it is important to maintain a sense of what is realistically possible.

  2. Submitted by Steve Titterud on 04/17/2009 - 11:57 am.

    In Panarin’s map of the “Disintegrated” United States and his conjectures about the future of its dismembered parts, Minnesota will become part of the “Central North American Republic”.

    He thinks we’ll likely be absorbed by Canada.

    Now I’d rather not be absorbed by anyone, but if it’s gotta happen, there’s no country I’d rather be absorbed by than Canada.

    Now, we’d probably have to change a few of our Midwestern speech patterns, and it will sound funny for a while (Eh?). Also, they do have an occasional kerfuffle in forming coalition governments, as recently.

    But these bumps in the road would be a small price to pay for universal health insurance, and a government that isn’t always looking for a bogus excuse to go to war.

    And think of the fishing!

  3. Submitted by Glenn Mesaros on 04/17/2009 - 03:29 pm.

    On April 8, British Conservative Shadow
    Chancellor George Osborne addressed the Royal Society for the Encouragement of Arts, Manufactures and Commerce, and, in what
    was obviously a statement of policy, he made clear that Behavioral Eonomics is at the heart of the “new” Tory program. He identified “two crucial insights” into the limitations of market
    economy: First, “that individual rationality does not ensure collective rationality,” and second, “that even individual
    economic behavior is not always entirely rational.”

    These are two of the key tenets of the fascist, lunatic theory of Behavioral Economics, which Lyndon LaRouche denounced in his April 11 webcast as having the Obama White House in its
    grip, through the likes of Larry Summers.

    How does this pervasive ideology work in the Obama administration?

    “The bankers just had bad behavior. We can retrain them, like monkeys, to make good decisions”

    Same thing for health care:

    “It is a quality problem, not a quantity problem. We can just retrain all the monkeys to make good health care decisions and lower all costs.”

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