Larry Summers is Resigning

CNN is reporting that economic advisor Larry Summers will step down, which will make many, many people happy. He's going back to school:

Larry Summers, President Obama's key economic adviser, will leave the administration by the end of the year and return to Harvard, the White House announced.

Summers, the director of the National Economic Council, becomes the latest member of Obama's economic team to leave.

Last month, Christina D. Romer, chairman of the White House Council of Economic Advisers, left that post to return to the University of California, Berkeley. The president quickly nominated longtime economic adviser Austan D. Goolsbee to replace her. CNBC

To Geithner's Defense

Arianna Huffington has been the leader of the anti-Geithner (and Larry Summers) movement and she has a lot of followers at the Huffington Post. She uses the same tactics that the rightwing uses--guilt by association. Conservatives hate Geithner too just because they have an irrational opposition to the Obama administration.

Republican theatrics a la Glenn Beck yesterday was par for the course for republicans. I'm weary of watching republicans be nothing but useless obstacles.
David Brooks says Geithner has done a good job:

The criticism of his plan to stabilize the financial system came from all directions. House Republicans called it radical. Many liberal economists thought the plan was the product of hapless, zombie thinking and argued that only full bank nationalization would end the crisis. The Wall Street Journal asked 49 economists to grade Geithner. They gave him an F.

Well, the evidence of the past eight months suggests that Geithner was mostly right and his critics were mostly wrong. The financial sector is in much better shape than it was then. TARP money is being repaid, and the debate now is what to do with the billions that were never needed. It now seems clear that nationalization would have been an unnecessary mistake — potentially expensive and dangerously disruptive.

The course of events has vindicated the administration’s handling of its first big challenge. Obama could have flinched when the torrent of criticism was at its peak. But the president’s support for Geithner never wavered. Geithner never lost confidence in his policy. Rahm Emanuel mobilized to improve the presentation of the policy. The political team worked hard to deflect criticism from Geithner onto themselves. NYT

Frontline's The Warning: The Story of the Financial Meltdown

Update Oct. 23: Watch the full video here

Brooksley Born warned of how toxic assets on the banks' books would affect American finances. But no one listened. She also battled Alan Greenspan, appointed by Ronald Reagan. Reagan was a fan of Ayn Rand's politics. Reagan famously said government was the problem and let Wall Street regulate itself. Bill Clinton followed on.
This Frontline looks like a must-see. It starts Oct. 20:

Here's a clip:

Larry Summers Gives a Populist Speech on Regulatory Reforms

The financial sector has had consequences that has led to thousands of Americans being unemployed. When something breaks eight times with such serious consequences it's time for a fundamental change, he said.
"It is the right moment." Summers says he's not a raging populist but "I don't think they should win."
It was necessary to provide financial support to financial systems to prevent a cataclysmic event but now it's time for regulations that protect consumers.

Larry Summers Close-Up in New Yorker Oct. 12 Issue

Peter Orszag, Christina Romer, Larry Summers, Timothy Geithner, Jared Bernstein

An inside look at Obama's economic team and a close-up on Larry Summers (loathed by the left) in the New Yorker's money issue:

In early August, Lawrence H. Summers, President Barack Obama’s top economic adviser, accompanied Vice-President Joseph Biden aboard Air Force Two on a trip to Detroit. Michigan has a fifteen-per-cent unemployment rate, the highest in America, and Detroit has become virtually a ward of the federal government: the United States now owns ten per cent of Chrysler and sixty-one per cent of General Motors. The purpose of Biden’s trip was to announce an additional $2.4 billion in federal grants, to help jump-start the electric-car industry; more than a billion will go to battery and auto manufacturers in Michigan.
Summers, who is the director of the National Economic Council, the White House office that coördinates all economic policy in the Obama Administration, has rarely travelled outside Washington this year, and was in Detroit on a fact-finding mission. After nearly a year of debate about how much federal intervention was needed to beat back the recession—a debate that started during the end of the Presidential campaign—he was somewhat optimistic. The principal measures that Obama had taken—implementing the stimulus package, rescuing the banks, restructuring the automakers—had begun to stabilize the economy. In a speech three weeks earlier, Summers had put it this way: “We were at the brink of catastrophe at the beginning of the year, but we have walked some substantial distance back from the abyss.” It seemed like a good moment to check in on the government’s investments in Michigan.

Summers reminds me of record producer Rick Rubin, who often sleeps to produce. Summers catching a few winks:

Summers looked exhausted. The previous day, he hadn’t left the White House until after midnight, and he was up at dawn to make the flight to Detroit. As Granholm talked about layoffs, he eyed a bottle of soda on the table in front of her. Summers drinks many Diet Cokes a day, and he was badly in need of one. He got up, his shirttails peeking out from underneath his jacket, and shuffled over to a counter at the side of the room in search of a caffeinated beverage. All he found was an empty glass, which he carried back to his seat. The manufacturers took turns explaining their plight. Wes Smith, of E. & E. Manufacturing, argued that although the public hates bailouts, “helping manufacturing is popular.” An executive from Atlas Technologies quoted Jeffrey Immelt, the head of G.E., who had recently said that manufacturing jobs should make up twenty per cent of total employment in the United States—twice what it is now. Several of the participants argued that the bank bailouts hadn’t revived lending in their industry, so the government needed to intervene. Ned Staebler, one of Granholm’s top economic advisers, explained excitedly that the new assistance program for struggling companies had already approved its first loan even though he hadn’t advertised the program.
As they spoke, Summers caught Granholm’s attention and mimed a request for some of her soda. She moved the bottle closer to him, smiling. He drank quickly, but it didn’t help. He shifted his weight in his chair. He made jerky, shaking motions with his head. He ran a hand through his hair. Still, by the time Mario Sciberras, of Saline Lectronics, was speaking about what he would do with one of the new loans, Summers was asleep. Read more at the New Yorker

The writer Ryan Lizza talks about the story:

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Gibbs Reiterates: Obama Won't Raise Taxes on Middle Class

I watched both Larry Summers and Timothy Geithner on the Sunday shows yesterday and didn't come to the conclusion that the press did -- that Obama is going to raise taxes on the middle class. The way I saw it is that neither Summers nor Geithner wanted to speak on behalf of Obama. There are some things that Obama's advisors speak about and there are some topics that are off limits. How many different ways can the White House press ask the same question? Watch:

Larry Summers on Meet the Press Aug. 2

Larry Summers does a good job of explaining why criticism against the stimulus is wrong. I'm sure the republicans will continue to call it a big flop, because that's what they do, but at least Larry Summers did his job in making clear the purpose of the stimulus. I think this is complicated stuff for most Americans--some of whom are barely paying attention--to understand. That's why we see the poll numbers on health care drop--they figure if the stimulus isn't working, how is health reform going to work? If they keep hearing the republican message above all (they're so good playing politics), they'll be swayed, unless the democrats can come with a message that's easier to chew on:

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Summers Speaks at Council of Foreign Relations Video

Larry Summers speaks to the Council of Foreign Relations. Consumer and business sentiment is improving and Americans feel like the country is on the right track, Summers said. But he warned, there are always false dawns during financial crisis.
Summers says we need stronger regulations to prevent future financial meltdown.

Larry Summers: Krugman Right Armey Wrong

Paul Krugman is right to caution:

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Dick Armey, one of the tea party leaders, is wrong on spending:

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Larry Summers Severely Heckled

Larry Summers, who was speaking to the Economic Club of Washington, sat calmly while anti-something (capitalism? Summers?) CodePink people held up a pink sign saying they wanted their $$ back:

A recap of what Larry Summers said:

Larry Summers on Face the Nation

Thomas Friedman:

Obama's Auto Task Force Hire Bankruptcy Lawyer

Reuters: President Barack Obama's task force on the auto industry has hired a bankruptcy lawyer to advise it on its options.

The task force hired Matthew Feldman, a partner in the business reorganization and restructuring department at New York law firm Willkie Farr & Gallagher LLP, the law firm said in a news release on Friday.

Feldman will be advising U.S. Treasury Secretary Timothy Geithner and Lawrence Summers, the director of the National Economic Council, on reorganization efforts by auto manufacturers and suppliers, Willkie said in a statement.

He will leave the firm by the end of March to start his position in Washington, according to Willkie.

Obama Scraps Auto Czar Names Task Force

Apparently, people were ready for a czar. Instead, Geithner will be in charge of the task force:

The news, which administration officials e-mailed around last night, took industry executives by surprise. For days, they had been expecting an announcement that the job would go to celebrity financier Steven Rattner, the private-equity executive and former New York Times reporter. One exec told us: 'We would have preferred having a single, go-to person focused on the restructuring. This isn't bad, but the other would have been better.' Politico

Several people on a task force are better than a czar. It lessens the danger of getting suckered manufacturers. Obama's probably saving some cash too.

CNN: President Obama is creating a task force to oversee the restructuring of the auto industry, a senior administration official said Monday.

General Motors (GM, Fortune 500) and Chrysler LLC face deadlines Tuesday for submitting plans to the administration detailing how they can turn themselves around.

The task force will include members from the Departments of Treasury, Labor, Transportation, Commerce, and Energy, the National Economic Council, the White House Office of Energy and Environment, the Council of Economic Advisers and the Environmental Protection Agency, the official said.

It will be overseen by Treasury Secretary Tim Geithner and NEC Director Larry Summers and provide advice and analysis about the auto industry.

Geithner will oversee the loan agreements with the automakers.

In addition, Ron Bloom, a nationally recognized restructuring expert, will join the administration's team as a senior adviser at the Treasury Department, the senior administration official said.

Next: Reducing Mortgages To Stem Foreclosures

On Wednesday in Phoenix, Obama will announce a plan to stop home foreclosures.

Bloomberg: The White House is willing to spend more than the $50 billion already pledged to stem home foreclosures and intends to focus its efforts on reducing monthly mortgage payments, rather than principal, said Lawrence Summers, the president’s top economic adviser.

“We’re prepared to do what is necessary,” Summers said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” yesterday. “Going directly at the problem means addressing affordability by addressing payments.”

Mounting foreclosures have hammered an already weakened housing market, helping to drive the economy deeper into recession. Economists surveyed by Bloomberg News forecast that gross domestic product will contract 2 percent this year, its biggest decline since 1946.

President Barack Obama will outline his proposal to deal with the housing crisis next week. The announcement will come after lawmakers voted on Obama’s $787 billion fiscal stimulus that’s aimed at restarting growth and providing for 3.5 million jobs. Read the rest

Democrats are already working on legislation:

Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, said the administration's program would probably require changes to federal law. Some of those are already working their way through Congress. But Frank said he is looking to pull them together into a single housing package.

The legislation would include a provision changing the bankruptcy law to allow judges to modify the mortgages of distressed homeowners, including by reducing the principal of the loan to the property's current market value, he said. This proposal has already gained support from one House committee but drawn fierce objections from Republicans and the financial industry. Though Obama supports this provision, he declined to include it in the stimulus bill approved yesterday, fearing the bankruptcy measure would derail the overall legislation, Democratic congressional sources said.

Another provision, Frank said, would provide legal protection to lenders who reduce interest rates or otherwise modify the terms of troubled loans for homeowners. Some previous foreclosure prevention efforts have been hampered by the threat that investors who own securities backed by the mortgages would sue to block loan modifications, according to the financial services industry. WaPo

Meanwhile, banks have put a moratorium on foreclosures. How good of them.

As the administration moved closer to announcing its plan, J.P. Morgan Chase, Bank of America, Citigroup and several other lenders announced temporary moratoriums on foreclosures of owner-occupied properties. The moratorium, while temporary, gives the Obama administration some needed time, Frank said. "It takes a little of the heat off of Geithner," he said.

Larry Summers on Fox News Sunday and This Week

Part 2

Here's the shortened version of Summers on Fox News and This Week

Transcript of Summers and Michael Steele, the new RNC head, on This Week.

Summers and Boehner on Meet the Press Jan. 25

Larry Summers, who heads Obama's National Economic Council, said on Meet the Press this morning that it's likely the Obama administration will let the Bush tax cuts expire next year. Republicans would like to let these tax cuts for the rich continue. Obama wants to give more tax cuts to the middle class.

What Obama is inheriting:

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House republican leader John Boehner says there's too much government spending in the plan.

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Geithner Says Bailout Money Will Be Accounted For

CNN: In prepared remarks before the Senate Finance Committee Wednesday morning, Geithner called on senators to support President Obama's proposed stimulus plan. The comments come as the Senate panel prepares to consider whether to confirm Geithner as the nation's top financial officer.

"Senators, the ultimate costs of this crisis will be greater, if we do not act with sufficient strength now," Geithner's testimony read. "In a crisis of this magnitude, the most prudent course is the most forceful course."

In his testimony, Geithner - who is currently the president of the Federal Reserve Bank of New York - also advocated "aggressive action to address the housing crisis and to get credit flowing again," though he offered no specifics.

The comments come a day after President Obama took office, only to confront the worst-ever Inauguration Day selloff in the stock market.

Geithner says the bailout, that everyone affectionately calls TARP (troubled asset relief program), will have taxpayer protections.

Geithner said a revised TARP plan will contain "tough conditions to protect the taxpayer and the necessary transparency to allow the American people to see how and where their money is being spent and the results those investments are delivering."

The comments echo those made recently by another top Obama economic aide, National Economic Council chief-designate Larry Summers.

Geithner apologizes for his "careless" and "unintentional" mistake of not paying his social security taxes.

Obama Asks For Better Ideas Krugman Bites

Inaugural rehearsal
Obama told all the people complaining about the economic stimulus package to present better ideas if they didn't like what he was offering (and if you ask me, any opposition isn't serious, only political theater), so Paul Krugman did.
Krugman, a recent Nobel Prize winner for his economics and NYT columnist, says the economic recovery package needs a bigger number:

First, Mr. Obama should scrap his proposal for $150 billion in business tax cuts, which would do little to help the economy. Ideally he’d scrap the proposed $150 billion payroll tax cut as well, though I’m aware that it was a campaign promise.

Money not squandered on ineffective tax cuts could be used to provide further relief to Americans in distress — enhanced unemployment benefits, expanded Medicaid and more. And why not get an early start on the insurance subsidies — probably running at $100 billion or more per year — that will be essential if we’re going to achieve universal health care?

Mainly, though, Mr. Obama needs to make his plan bigger. To see why, consider a new report from his own economic team. NYT

Obama has asked for the remaining TARP money and President Bush agreed to release it:

President-elect Barack Obama made his case to Congress for the release of $350 billion in remaining federal bailout funds.

A top Obama economic aide laid out new priorities for the use of the remaining balance under the Treasury Department's $700 billion Troubled Asset Relief Program, or TARP. In a letter addressed to the leadership of the Senate and House of Representatives, the Obama team strikes a note of urgency about winning the release of the funds.

"President-elect Obama believes it is not too late to change course, but it will be if we don't take dramatic action as soon as possible," says the letter, written by Larry Summers, director-designate of the National Economic Council. CNN

CNN Money has a pretty good summary of Obama's stimulus plan:

The plan proposes four main categories of measures: Investment in infrastructure, funds to cash-strapped states, expansion of safety net programs to protect the vulnerable, and tax cuts.

Infrastructure: The job creation machine
A key aspect to the the stimulus plan is investment in the nation's infrastructure, which Obama expects to help create between 3 million and 4 million jobs.

Construction projects: Fund the rebuilding of crumbling roads and bridges. Obama wants to rebuild schools and modernize classrooms, labs and libraries.

Renewable energy: Double production of alternative energy in the next three years by modernizing 75% of federal buildings, investing in solar panels and wind turbines and by making cars more fuel-efficient. Obama also wants to modernize the nation's electrical grid with a new, cost-efficient "smart" grid that can deliver electricity from clean, alternative energy sources.

Broadband: Expand broadband Internet lines across rural and urban areas of America.

Health care records: Modernize the health care system by computerizing all of the nations' medical records in the next five years.

Science, research and technology: Invest in scientific innovation to create new industries, new jobs and medical breakthroughs.

State relief: Funding for budget shortfalls
As states face budget shortfalls, Obama's plan seeks to help states pay for Medicaid and unemployment benefits.

State fiscal relief will be allocated to prevent increases in state and local taxes, provided they use the money to maintain essential services like police, fire, education, and health care.

Safety net: Helping the most vulnerable
Obama proposes temporary programs to protect those most vulnerable to the effects of the recession.

Federal aid will go to temporary increases in food stamp spending, extensions and expansions of unemployment insurance, as well as health care coverage for unemployed.

Tax cuts: Breaks for businesses and the middle-class
The president-elect will propose roughly $300 billion in tax cuts for individuals and businesses, adding up to about 40% of the total stimulus plan.

Middle-class tax cut: An estimated 95% of low-income and middle-class families will receive a refundable tax cut equal to $500 a year for individuals and $1,000 for couples. The credit would essentially be a payroll tax credit, with companies able to reduce the tax they withhold from employees' paychecks.

Small business write-offs: Obama would increase the amount of expenses small businesses can write off to $250,000 in 2009 and 2010 from the current $125,000 level.

Tax cuts for companies suffering losses: He would extend the so-called net-operating loss carryback to five years from two years. For businesses that book losses in 2008 and 2009, the provision allows companies to apply their losses to past and future tax bills so that they can get money back on taxes they've already paid or would otherwise have to pay. CNN

Larry Summers on Obama's Job Creation Plan

Larry Summers, Director of Obama's National Economic Council, wrote in the Washington Post today about Obama's plan for jobs and how boosting consumer spending isn't going to cut it. I agree. Consumerism can't continue to prop up our economy. It's also destroying the planet. We need a real economy. Meanwhile, conservatives are whining about corporate tax cuts.

WaPo: Our president-elect understands both the peril and the promise of the situation and the importance of responding to changing conditions. That is why his economic team is crafting a broad proposal, the American Recovery and Reinvestment Plan, to support the jobs and incomes essential for recovery while also making a down payment on our nation's long-term financial health.

A key pillar of the Obama plan is job creation. In the face of deteriorating economic forecasts, Obama has revised his goal upward, to 3 million. For one thing, significantly fewer positions would be created in the absence of any recovery plan. Second, more than 80 percent of these 3 million jobs will be in the private sector, including emerging sectors such as environmental technology. This is a bold goal. But economists across the political spectrum recognize that it is far less risky to stand firmly against the forces propelling our economy downward than to be timid in the face of a mounting crisis.

Here's the beef:

Some argue that instead of attempting to both create jobs and invest in our long-run growth, we should focus exclusively on short-term policies that generate consumer spending. But that approach led to some of the challenges we face today -- and it is that approach that we must reject if we are going to strengthen our middle class and our economy over the long run. Far from being an excuse for inaction or delay, the magnitude of the work ahead is all the more reason to begin that work.

Biden to Lead Economic Meeting Today

From the Obama peeps:

Vice President-elect Biden is in Washington today to be briefed by Larry Summers, Director of the National Economic Council, and other White House economic advisors on new economic developments and the upcoming economic recovery package.

The meeting starts at 10:45 eastern.