This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

Obama's Biggest Economic Mistakes

Nobody is happy about the performance of the U.S. economy and in particular, the lack of job creation. Obama is taking much of the blame, and there is no point in just "piling on." However, it is worth highlighting the President's most important mistakes in hopes that he will do something to remedy them.

Obama

Bad Personnel Choices and Delegation of Authority

A new President must make more than 3,000 political appointments when he comes into power, a tall order. In addition, he must rely on people in other branches of government. This is where Obama made a number of real blunders.

1. Tim Geithner is at the top of the list. Geithner cheated on his taxes, got caught, and paid fines. That in itself should have disqualified him for the Treasury Secretary position since the Internal Revenue Service is part of Treasury. What message does appointing him send to the American people? But there is more: Geithner was in charge at the Federal Reserve Bank of New York at the time of the AIG bailout (under the Bush presidency). You might remember that AIG staff thought they could get banks to agree to settle for 60 cents on the dollar. Geithner said no, pay the banks in full. That decision cost the American taxpayers $37 billion. Yet somehow, Geithner's track record was not enough to deter Obama from appointing him. A bonehead decision!

2. Larry Summers is Director of the White House National Economic Council. Summers started as an academic followed by senior positions in the Clinton administration. Following a short stint as president of Harvard University, Summers started working in the financial industry. Glenn Greenwald reports that before being appointed, Summers:

...collected roughly $5.2 million in compensation from hedge fund D.E. Shaw ...and was paid more than $2.7 million in speaking fees by several troubled Wall Street firms and other organizations. . . .Financial institutions including JP Morgan Chase, Citigroup, Goldman Sachs, Lehman Brothers and Merrill Lynch paid Summers for speaking appearances in 2008. Fees ranged from $45,000 for a Nov. 12 Merrill Lynch appearance to $135,000 for a one-day visit to Goldman Sachs.

Both Geithner and Summers came to the Obama administration from the financial community and will go back to it when they leave government. What was Obama thinking in appointing them? The two operate as a team. They kept Volcker away from Obama and made sure the Volcker Rule (banning proprietary trading by banks) was not included in the financial reform bill.

Geithner and Summers also made sure that Christina Romer, the now-resigned head of the Council of Economic Advisers, had little influence with Obama. Romer had estimated that a $1.2 billion stimulus package was needed. Jeff Spross reports that her resignation was:

driven largely by frustration over her lack of voice in Obama's economic team, and her inability to get input past the firewall of Larry Summers and Tim Geithner.

I am at a loss over why Obama made these two appointments. There are plenty of good economists without ties to the financial community. Things would be very different if Obama relied on James Galbraith, Paul Krugman, Robert Reich, Laura Tyson and/or Paul Volcker for economic policy.

1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,164.95 -251.90 -1.45%
S&P 500 1,994.99 -26.26 -1.30%
NASDAQ 4,635.24 -48.1670 -1.03%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs