Obama's Economic Dream Team?

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By Stephen Lendman (about the author) Page 2 of 5 page(s)

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-- all conventional policy tools aren't working;

-- consumer spending is in free fall;

-- investment spending is plunging;

-- unemployment may top 10%; and

-- recovery won't occur before 2011.

According to Oppenheimer & Co. analyst Meredith Whitney, US credit card lenders may withdraw over $2 trillion of lines (or about 45%) over the next 18 months because of regulatory changes and to minimize risk. She calls credit cards the key source of consumer liquidity after jobs. As a result, she expects sharp consumer spending declines.

Millions of accounts will be closed, credit lines cut, and interest rates raised to minimize a tsunami of expected defaults. Whitney also said that "the entire mortgage market hit a wall, and we believe it will, for the first time ever, show actual shrinkage over the next few months." The credit card market is 18 months behind mortgages and will begin contracting in 2010. She also expects a further 20% drop in home prices, earlier called Citigroup a goner, said it can't remain in its current form, and believes it's in such a mess that even (distinguished mathematician and physicist) "Stephen Hawking couldn't turn this company around."

She didn't say but may feel the same about most other major banks. In early November she called the economy and financials "so far off the tracks it's hard to see anything helping right now." Securitization isn't coming back, the entire mortgage market is contracting, banks aren't lending, loan balances are getting smaller, and bank earnings going forward will be up to 70% less than consensus forecasts, and she calls this conservative. Banks are in big trouble, and none are immune.

"Dream Team" Selections

Timothy Geithner

Currently the New York Federal Reserve Bank president and vice-chairman of the Fed Open Market Committee (FOMC), he'll head the team as Treasury Secretary along with current Fed chairman Bernanke whose term runs until January 31, 2010.

After his education, he joined (international consultants) Kissinger Associates for three years and then the US Treasury's International Affairs division in 1988. He remained at Treasury in various posts until 2002 when he left for the Council on Foreign Relations as a Senior Fellow in the international economics department. He also served at the International Monetary Fund as director of Policy Development and Review from 2001 - 2003 after which he was named New York Fed president.

With these credentials, he's an insider's insider and hardly a surprising pick. Wall Street approved with a sharp rally that continued through Thanksgiving week as others on the economic team were also praised. And why not, elitists all and assembled for a common purpose that hardly needs explaining.

Geithner's been partnered with Paulson and Bernanke in their Treasury-looting scheme. His appointment signals more of the same which is why Wall Street approves. It's also reported that he was the principal architect behind the Bear Stearns bailout, and various other deals, including Fannie and Freddie, Merrill Lynch, Washington Mutual, Wachovia, the demise of Lehman Bros., Citigroup, and AIG.

It's gotten $150 billion so far (and counting) to buy some of its collateralized debt obligations (CDOs) to clean out its credit default swap (CDS) insurance on them. But the effort only deals with a small part of AIG's CDSs, and its woes are similar to what ails all of Wall Street. If Geithner won't address them any differently, he's the wrong man at the wrong time for a vital task to cure a very sick economy.

Take the $55 trillion CDS problem alone. If enough of them default in the coming months, no amount of bailing will save things. Yet Paulson and Geithner believe these levered bets should be paid in full.

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I am a 72 year old, retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.

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