Larry Summers sleeping

Life After Debt Part III – Check out the “Where Are They Now?” File

After discussing in Part I the Bizarro World of government debt and the Part II Weapons of Mass Financial Destruction, in Part III we check in on the people currently residing in the “Where Are They Now” file.

One through-the-looking glass aspect of the never-published ‘Life After Debt’ Treasury Memo is the cast of Treasury department characters copied on it and expected to weigh in on the impending problem of Treasury surplus.  The key players today have really not changed since the end of the Clinton administration.  To wit:

Larry Summers – Was Secretary of the Treasury under Clinton in 2000.  Most recently served as and then stepped down from the post of White House Director of the National Economic Council under President Obama.

Doug Elmendorf – Was Deputy Assistant Secretary for Economic Policy under Clinton in 2000.  Currently head of the Congressional Budget Office during the Obama administration, the non-partisan office responsible for producing all Federal fiscal and financial projections, upon which deficit and budget planning is made.

Gary Gensler – Was Undersecretary for Domestic Finance in the Clinton administration in 2000.  Currently the Chair of the Commodities Futures Trading Commission (CFTC) the primary regulator of commodities trading.  (The same CFTC that recently slapped Barclays with $200 million worth of the total $453 million fine for Libor rigging)

Lee Sachs – Was Assistant Secretary to the Treasury for Financial Markets.  Counselor to Treasury Secretary Geithner in 2009 and 2010, now resigned from that post.

Martin N. Baily – Now is a Senior Fellow at the Brookings Institute, and author with Doug Elmendorf of an explanation of the 2008 credit crunch titled “The Great Credit Squeeze.”

What does it mean that the same team under Clinton immediately went to work for the Obama administration?

On the one hand we can take comfort in the idea of expertise and experience in wielding economic power, influence, and decision making.  Twelve years after serving under Clinton, the band is largely back together and continuing to guide the economic ship.  This is not surprising and in fact has been a hallmark of Obama’s economic and financial policy.  While he occasionally nods to his base with a reference to greedy bankers or sympathizes with the concerns of ‘Occupy Wall Street,’ Obama’s actions — caution and continuity with both the Clinton and the W. Bush administrations — speak loudest.

On the other hand, I get the awful feeling, and I’m not the only one, that keeping intact the same team from twelve years ago almost ensures that we will not get a critical review or substantive critique of what went on before.

Let’s be real here: From the surpluses predicted as far as the eye can see in 2000, to the deficits as far as the eye can see in 2011, big fiscal mistakes have been made.  Financial opportunities were blown.  Debts have ballooned for which future generations will be paying taxes.  Very few of us actually made those decisions that led to the national debts.  This happened under Clinton, W. Bush, and Obama.  Changing an administration periodically offers our system a chance to respond to mistakes, to reach new conclusions based on new data.  But if you bring substantially the same people back, you might not only make the same mistakes, you’ll likely get a high degree of ass-covering that impedes progress.

Summers gets blamed publically, probably rightly, for making too many choices to protect his legacy of economic leadership.  But it is worth noting that the ‘Where are they now” file is full of the same people now in the Obama White House with their fingerprints on this Clinton era Treasury memo.

The memo offers a pointed reminder that we almost had it made in 2000 but circumstances, and yes, people, failed to protect our national credit.  But since we’ve got the same people still in charge, can we expect better decisions and better results in the future?


See Next Post “Life After Debt IV: Another Bizarro World Villain

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I founded Bankers Anonymous because, as a recovering banker, I believe that the gap between the financial world as I know it and the public discourse about finance is more than just a problem for a family trying to balance their checkbook, or politicians trying to score points over next year’s budget – it is a weakness of our civil society. For reals. It’s also really fun for me.

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