Knowing that consumer confidence has been severely shaken and the markets are panicked, resulting in volatile swings, President-elect Obama sought to project the image of a leader in control when he announced his economic “Dream Team” on Monday. Mr. Obama acknowledged that he has selected New York Federal Reserve Bank President Timothy F. Geithner Treasury Secretary, former Harvard President Lawrence H. Summers as head of the National Economic Council, and Berkeley Professor Christina D. Romer as head of the Council of Economic Advisers. In addition, Mr. Obama named Melody Barnes Director of the Domestic Policy Council.
Given the state of the nation’s economy Mr. Obama’s economic team has little time to waste and the President-elect acknowledged as much at a Chicago news conference. “With our economy in distress, we cannot hesitate and we cannot delay. Our families can't afford to keep on waiting and hoping for a solution.”
The new administration’s economic team will have hand off to them by the Bush administration the remnants of the first bailout package that was originally intended to shore up financial institutions’ bad mortgage loans but has since been recast as a more universal relief package for firms. At the same time President-elect Obama has committed to proposing an economic stimulus package as his first order of business after being sworn-in on January 20. Though Mr. Obama’s team has yet to reveal all of the details, the President-elect made the creation of 2.5 million jobs by 2011 in transportation infrastructure, public school construction and renovation, and “green” projects a goal.
Compounding the economic free fall is the seemingly never ending procession of companies that are looking to the federal government for aid. Last week the auto industry came to Capitol Hill looking for a lifeline to breathe new life into old brands. The result of that hearing was auto execs being raked over hot coals for their use of a corporate jet to fly to Washington while their companies are drowning in red ink. Right behind Detroit auto executives on line are the senior executives from Citigroup, and not far behind them are a number of industries and individual firms that cannot see a light at the end of the tunnel.
For Geithner it is a return ticket to a crisis he never left. It was at the New York Fed that several weeks ago Treasury Secretary Henry Paulson called the executives of the nation’s banks around the table to inform them that the federal government was prepared to assist their companies and intervene in the market. Geithner will now have the broad authority granted by the law under the bailout legislation; including the authority to distribute billions of dollars of federal aid.
The Bush administration has sought to work closely with the Obama team given the economic picture and for the purpose of calming some frayed nerves. President Bush briefed President-elect Obama yesterday morning as the administration announced it would protect Citigroup against potential losses of $306 billion. The collapse of one of the nation’s largest financial institutions could conceivably set off a nationwide panic and result in the bottom completely falling out from underneath the nation. The image of a cooperative transition is meant to also regain the confidence of jittery consumers. A clean handoff alone might help convey a sense of calmness in a time of obvious crisis.
Lawrence Summers is no newcomer to the ways of Washington or controversy for that matter. During his tenure as President of Harvard University his comment suggesting that the absence of women in upper level science and math programs was due to the “innate” differences between men and women resulted in a firestorm of protest that led to Summer’s resignation. It was not Summer’s first controversy on the Ivy League campus. He had previously challenged Professor Cornel West over his absences from the university and accused him of neglecting serious scholarship. West eventually left and returned to Princeton University. Prior to leading Harvard Summers, an economist by training, served on the President’s Council of Economic Advisers during the Reagan administration, was chief economist of the World Bank, Deputy Treasury Secretary under Robert Rubin during the Clinton years and succeeding Rubin as Treasurer. Both Summers and Geithner are protégés of Robert Rubin.
With the economic team in place, their first order of business will be flushing out President-elect Obama’s stimulus package and determining the best use of the remaining funds allocated for the initial $700 billion bailout.