Will Obama Whack Geithner and Anoint Volcker?

By Jan 21, 2010, 9:23 AM Author's Blog  

One year into his presidency, Barack Obama is losing support from many corners. The American public is clearly sending Obama specifically and Washington at large a strong message of disapproval. Obama’s liberal base of support within the Democratic Party is growing increasingly disenchanted. Individual supporters such as The New York Times’ Paul Krugman are backing away from Obama.

Obama and team have nobody to blame but themselves. They were elected to bring real change to Washington. The American public defined that change as embracing real truth, transparency, and integrity. To this point, Obama has fallen woefully short on all these fronts and proven himself to be ‘just another politician.’

Obama has tried to scale Mt. Everest when in fact the American public and economy were merely and are still trying to get back to sea level. As Obama looks to regroup and reconnect with the American public, what will he do?

Obama fancies himself a grand visionary and masterful, bold leader. As much as his henchmen (Geithner, Summers, Bernanke, Schapiro) are aligned with the powerful, monied elite on Wall Street, Obama wants to be known as a man of the people. He is quickly learning he can not have it both ways.

So what will he do? My better half and I just had this very discussion. Obama knows his biggest problem is the public perception that his administration has protected Wall Street at the expense of Main Street. He can and is looking to implement procedures which would appear to tax Wall Street and benefit Main Street. In my opinion, these taxes are a mere disguise. The taxes will be collected over a long period of time. The taxes will likely serve to further cement the mantle of “too big to fail.” The taxes will also be skirted by the Wall Street derivative magicians wherever possible.

If Obama thinks the American public will buy these taxes as his means of going after Wall Street in order to protect Main Street, he is sadly mistaken.

Rightly or wrongly, Americans link the message with the messenger. To this end, as long as America sees Tim Geithner delivering the economic message of the day, they will not buy what Barack is trying to sell.

What is the end result of this reality? In order for Obama to rescue his presidency and recpature the support of the American public, I fully believe he will sacrifice Tim Geithner. In doing so, whom can he appoint that has credibility in the marketplace, on the global economic landscape, and with the American public?

Initially, I would have thought Obama would tag JP Morgan’s Jamie Dimon to be the next Treasury Secretary. Not now. What about Elizabeth Warren? No way.

I believe Obama will once again attempt to be bold and appoint Paul Volcker as next Treasury Secretary. Yes, Volcker. The proponent of the reinstitution of the Glass-Steagall Act.

If I’m Tim Geithner and I have yet to sell my house in Westchester County, I’d take it off the market.

What do you think?

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  1. melanie wold says:

    Of course! Volcker! He has been selling this idea since last summer…. A bold one to be sure, but eminently workable. But it is wrong to call it a re-institution of Glass-Steagall. Prop trading and hedge funds did not exist back in 1933.

  2. Greg says:

    Tim Geithner has not worked out for Obama from the beginning. As former New York Fed chief he has close ties with the boys from Wall Street. Tim also worked to reduce the capital thresh hold required by banks which turned out to be one of the pivots of the liquidity crisis-high capital gearing.

    Tim has no vision and I don’t know how he has managed to get where he has got to, it may be his family/money/college connections that pulled him up?

    Volcker would make a better Treasury Secretary but I thought for a brief moment that the article was going to suggest that he may be returning to Head to FED.

    The ball is in Obama’s court, let see how he plays it,

  3. lisa says:

    Dear God I hope so. I had exactly the same thought the moment I read Volker finally had his ear. If Obama wants to show people he’s learned from his mistakes and is ready to fight for them, appointing Volker would be a brilliant start.

  4. gmiller says:

    Volcker is a brave, good man. However, he works for a slimy boss (Obama), is a bit long in the tooth now and must deal with vastly worse circumstances than he did in the late 70’s and 80’s when he and Reagan tamed inflation.

    Our economhy is much sicker now, losing manufacturing base, high unemployment (real numbers much higher than govt’s), public and private debt out of control, real estate bubble popped, money creation and borrowing off the charts, govt. spending off the charts (actual is way higher than the “budget”), inflation just starting to ramp up, gold quadrupled in the decade. Our currency is very badly debased. We are tied down by 3 or 4 wars, depending on how one defines “war.” Actual GDP growth is quite negative, if one deducts the phony money creation and looks at TRUE inflation.

    We need to tame the banks and get credit under control, control illegal immigration and bring industry and jobs back home. This will require a continued, deeper depression(yes, we are in one). Our emphasis should be on life support, building arational economy and putting intergrity into whatever currency we will be using going forward.


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