I have made considerable progress in that direction, enough so that I have decided to weigh in on the issue raised by Newsweek's new article How Wall Street Rolled Obama. While I don't think I have it documented, I have felt since the 2008 that despite hopes and expectations, Obama would find it difficult to do anything comparable to what FDR did to restore confidence in the economy. The fact of the matter is, the political and economic cycles did not coincide in the way necessary for radical rethinking of economics that is now evident to more and more people. FDR was elected president 3 years into the Depression and took power close to 3 1/2 years after the 1929 crash. By contrast, Obama was elected less than 2 months after the collapse of Lehman, which put an end to the notion that the mortgage backed security crisis could be ridden out. While the crash did upturn 20 years of dominance of market fundamentalism in the community of economists by reviving Keynesianism, the immediate solutions, ham-fisted as they were, were undertaken out an immediate panic rather than the long-term frustration and desperation that was leading Herbert Hoover to make suggestions to FDR during the interregnum that FDR would take full credit for during the 100 days.
None of this means that Obama could not have been tougher or been a bit more ready to break with the economic establishment of Larry Summers and Timothy Geitner, but I am not so sure such a break would have been as politically feasible as some critics seem to believe. After all, if you the Republicans on Capital Hill can cynically maintain that the bailout was not necessary imagine what would have happened if Obama had chosen to nominate Paul Krugman or some other economist who is not tainted by the economic reforms that made this mess possible. The Republicans might even have blocked that person's nomination with even more heated rhetoric about how a socialist was now in the White House.
Now three years on the Republicans will do what they can to make hay out of the continuing economic crisis, but they do not have a plan, and electoral success may well hurt them even more in the long-run because it won't take long for that to become apparent once the election campaign is over, although that may just mean the election campaign will just not end until after November 2012. I do hope not, because it is now clear as it was to anyone willing to look at the damage done by the mortgage-backed securities bolstered hosing bubble cannot be remedied quickly and will require new creative thinking that will both stabilize the country and reign in Wall Street in ways that people on Main Street will be able to see and appreciate.
