Obama and FDR

Kevin Drum found a great quotation from FDR and what he thought of bankers, monopolists, and speculators. It’s so good he deserves to have you go there and read it.

Drum’s point is that while health care may have required conciliation and moderation, “When it comes to financial regulatory reform, Obama needs to let us know whose side he’s on.” So far Obama has played the peacemaker, the reasonable man in the middle, the man who bridges divides. “My administration is the only thing between you and the pitchforks,” he said last March; note that he brought up the pitchforks, but positioned himself as the center, holding back the crazies.

With financial regulation, there is no powerful force in Washington pushing for major change; Obama’s own Treasury Department is pushing for moderation. The closest thing the common man has to an advocate in Washington is Elizabeth Warren, and her job is chair of the TARP Congressional Oversight Panel. So financial regulation has become a negotiation between the centrists at Treasury and the banking lobby, which is an unlikely recipe for change. I’m no Axelrod, but it seems to me that taking a stand would be good politically, too; with unemployment likely going to be high in November, taking the side of the man in the street against the man in the glass tower couldn’t hurt.

There’s another contrast to draw with FDR. This is what Arthur Schlesinger had to say about the FDR administration in 1933 in The Coming of the New Deal (p. 444):

“No business group was more proud and powerful than the bankers; none was more persuaded of its own rectitude; none more accustomed to respectful consultation by government officials. To be attacked as antisocial was bewildering; to be excluded from the formation of public policy was beyond endurance. When one remembered both the premium bankers put on inside information and the chumminess they had enjoyed with past Presidents and Secretaries of the Treasury, the new chill in Washington was the cruelest of punishments.”

Obama came into office hoping to pick up the mantle of FDR. It’s not too late.

By James Kwak

47 thoughts on “Obama and FDR

  1. James: “Obama came into office hoping to pick up the mantle of FDR. It’s not too late.”

    It’s not too late? Didn’t Simon or you explain on this blog that there was only a small window of opportunity right after the change-you-can-believe-in victory Nov. 4th 2008 and say Mai 2009?

    Why is it that we the people elected a very inexperienced junior who fell back on his predecessor’s men (Bush jr to Bush sr) and now a very junior inexperienced senator who fell back on his predecessor’s men (Obama to Clinton hands)? Why oh why?

    Obama has not changed anything!! We’ll get the same reward for failure Fed chairman, we’ll get the same record bonuses on Wall Street. We’ll get watered down ‘reform’ only at the edge: a mere photo opps. We’ll get nice oratory (‘fat cats’), but NO change.

    As someone said: it is bad when you lose after you lost; it is worse when you lose after you won. That’s what happened to all those people who spontaneously celebrated the impeachment by the people and the hope for change.

    There is a Angelides commission in charge with reporting about the crisis, somewhat like Pecora, but not really: the commission has a budget of $ 8 million. That’s the amount Wall Street spends on lobbying avery couple of months.

    Also, a very interesting interview by Bill Moyers with the Mother Jones reporters, a.o. Kevin Drum.

    Please listen/read it. Also the intro by Moyers: well spoken/written.

  2. Abraham Lincoln on the proper relationship between the government and the financial sector:

    “The government should create, issue and circulate all the currency and credits needed to satisfy the spending power of the government and the buying power of consumers. By adoption of these principles, the taxpayers will be saved immense sums of interest. Money will cease to be master and become the servant of humanity.”

  3. Nemo, this is one I disagree with you on. The man is so many MULTIPLES of IQ points ahead of “W” Bush it isn’t even funny. We’re talking about an intellectual heavyweight who went to Oxford vs. a man who is arguably dyslexic.

    Barbara Bush once talked of one of her children being WAY behind the others in reading skills. You must be a wagering man playing in the bond market–which one do YOU want to bet it was Nemo??? This vs. a guy whose mother wrote an 800 dissertation in University and woke her son up around 4:00am to teach her son grammar and reading??? Nemo—get off it man.

    Yes, he can be an FDR. But he needs to take the damned gloves off and get in there and fight. I believe the man has it in him and more.

  4. “Obama came into office hoping to pick up the mantle of FDR.”

    We have no idea of what Obama was “hoping” for when he came into office. We only know what he said and what he did during the campaign.

    While Obama’s “change you can believe in” rhetoric may have led you to believe that Obama wanted to be the next FDR, his other words and actions put Social Security on the table for negotiation, which seems distinctly anti-FDR to me. From the memory hole:

    And within the last month or so the Brad DeLong’s and Paul Krugmans of the world have been telling us that Obama was never a liberal/progressive, that he was always a moderate technocrat. I don’t disagree. The problem is that with the Right being pulled more and more to the Right, being a moderate means being a conservative of just ten years ago. Perhaps that’s why Obama is perpetuating all of the policies of George W. Bush.

    In other words, don’t hold your breath waiting for Obama to find his inner FDR. I’d settle for him finding his inner Dubya and showing real conviction for whatever he believes in, whether or not I agree with him.

  5. The problem is that people, perhaps including Obama, continue to want to compare him to the wrong Roosevelt. The Roosevelt we need is not FDR, but Teddy the Trustbuster. Or, at the very least, a cross between the two, with a strong lean towards Teddy (at least on the issues of reform).

  6. “Yes, he can be an FDR.”

    He cannot be an FDR if he doesn’t want to be an FDR, and there’s a lot of evidence now that he does not want to be anything like an FDR.

  7. Didn’t Bush graduate from Yale, had better grades than Kerry, and leaned to fly a fighter jet?

  8. Ted K: “I believe the man has it in him and more.”

    You are referring to Obama the candidate.
    Now that his election victory is a long 14 months ago, it is not a matter of what Obama has IN him, but what comes OUT of him!

    Please listen/read the above mentioned interview by Moyers. A.o. the reference to a Mark Patterson: former lobbyist for GS, lobbying – successfully of course – against a law written by then senator Obama. Candidate Obama promising transparency and no lobbyist. Now that former GS lobbyist hold a prominent position at the Treasury. Just 1 of the many, many disappointing examples of what comes out of the Obama white house.

  9. Bryan,
    I don’t think you’re up to the intellectual task here. Here’s one especially for you—-Pirates vs. Ninjas: Who Would Win????

  10. I watched the show with interest as the conversation went nowhere. They talked about the need for simple rules. I was reminded of a 2600 year old Lao Tsu Poem:

    In the beginning leaders who knew of tao
    did not enlighten their citizens.
    We kept the common persons in the dark.
    Why is governing a nation difficult?
    Because the citizens are clever.
    Leaders using complex rules
    cheat a common person.
    Leaders using simple rules
    is a blessing in the land.
    The alternative is just two.
    Know each as primal virtue.
    Primal virtue goes far and deep,
    leading The Way as the source:
    nature’s roles creating life’s bounty,
    form tao’s rules received into simplicity.

  11. Huh? FDR opposed Deposit Insurance. The Congress passed it on its own initiative. It was supported by many bankers as a compromise. The 1933 & 1935 Bills were compromises. The 1935 Bill was heavily influenced by one Senator, Carter Glass. Of it, he made the famous remark:

    “We did not leave enough of the Eccles bill with
    which to light a cigarette.”

    While an exaggeration, he did change the bill.

  12. All the worry and anger that we haven’t done any real reform and that the banks are right back to their old games, while understandable and shared by me, are premature. They’ll keep pressing the game until it falls apart again. And much sooner than most think.

    Folks think the storm has passed and the worst is behind us, etc. But it’s only just begun. Don’t worry, we’ll get another shot at reform when the markets are once again roiling and losses spark the movement of the masses and grab the attention of Congress and the president.

    Maybe this time he won’t let a “crisis go to waste” for something truly needed by this country, rather than just for a partisan political agenda that accomplished nothing (i.e. the hugely wasteful and ineffective “stimulus” legislation).

    What “precipitates” it? It doesn’t really matter. It’s coming and we’ll only “know” in hind sight what the ostensible trigger was. It’s coming.

  13. “So far Obama has played the peacemaker, the reasonable man in the middle, the man who bridges divides.”

    IMHO, the promotion of Geithner to Treasury Secretary puts Obama squarely on the side of bankers. I was willing to give Geithner a chance, but the SIGTARP report showed Geithner to be a man who not only did nothing as the froth came to a bubble and then to a full boil in the mid-aughts, he then participated in the creation of a terrible solution for the AIG debacle – paying out 100 cents on the dollar for the debts of a bankrupt company, costing the US treasury billions and billions of bucks.

    Obama needs to understand that capitalism collapsed under Bush, and if he wants to restore it, he needs to stop funding the failures of gamblers. Socializing Wall Street’s losses has been a terrible policy for everyone outside of Wall Street.

    I know the PR spin is that “it could have been worse” – but letting investment banks remain under the umbrella of the feds (just what is a bank holding company, if Goldman Sachs is one?!), feeding investment bankers billions of dollars when they topple from the weight of their debt, has been extremely destructive to the economy outside of Wall Street.

    And let’s remember – this is an economy that is still losing jobs by the thousands each month.

  14. And we don’t need Obama channeling any of the Roosevelts. We need Obama to do what he said he’d do – bring the change we need. Continuing to prop up investment bankers is business as usual, not change we need.

  15. I’m reading the book, “The Rise Of Theodore Roosevelt” by Edmund Morris and after TR’s uncle told him, “there would always be an inner circle of corporate executives, politicians, lawyers and judges to “control others and obtain the real rewards”…..Roosevelt remarked, “It was the first glimpse I had of that combination between business and politics which I was in after years so often to oppose.” (Pg. 174)

    Question is do we have a Teddy Roosevelt, type of person in government to tackle the current problems within the financial system? I haven’t seen one yet.

    If we fail to effectively regulate our financial system after this recent catastrophe it certainly bodes ill for the future of our economy. Can’t help but think how angry the founders of our country would be about the failure of the federal government to protect the country from the greed of the financial cabal. It’s amazing that our elected officials don’t see the immense risk to our future economy and the need to control it.

    To flip a bit of Churchill’s quote….never have so few owed so much to so many. The taxpayers are called upon to save the US financial institutions and then these same financial institutions have the audacity to pay their high level executives record bonuses and fight any attempt to regulate the very practices that caused the disaster in the first place. Have they no shame? Amazing that greed is such a powerful drug.

  16. One problem that Obama has is who he has advising him. Lawrence Summers served on the Council of Economics Advisors under Reagan before serving in the Clinton administration. His mentor was Robert Rubin, another Goldman Sachs alum, also an Obama advisor, whom he succeeded as Secretary of the Treasury. Both Rubin and Summers favored deregulation of banks and no regulation of derivatives. They are hardly going to advise the president to support any kind of regulatory legislation.

    Another problem is the growth and current strength of the finanical system’s Washington lobby. The president might propose strong financial reform, but he will face a massively funded lobbying campaign, one that will bury any such attempt in a sea of dollars. Remember, we have the best government that money can buy.

  17. “Obama came into office hoping to pick up the mantle of FDR. It’s not too late.”

    Aside from the political rhetoric, is there any (strong) evidence to suggest President Obama channels FDR or Uncle Teddy busting up monopolies (http://snipurl.com/u1h3x as part of Obama’s White House policy-making and reform proposals….

    Kevin Drum was on the radio Sunday morning and said that he didn’t feel it wasn’t necessarily the size of the banks (too big to fail) but rather the two main areas of weak regulation by Congress – debt and leverage ratios – especially for commercial, equities, hedge fund and the derivatives markets. After having listened to Mr. Geithner a couple of times (especially his interview with Charley Rose), the Obama Administration seem somewhat intimated by Wall Street; Mr. Geithner told Charley Rose that the banks were crying foul when he (Mr. Geithner) was administering the so-called stress tests; and supposedly in another closed door meeting, Geithner and Larry Summers were haggling with the bankers over the issues of the toxic assets – the bankers wanted 60 cents on the dollar, not the 30 cents on the dollar suggested by the government). And with the recent snubbing of some of the banking CEOs to Obama’s invitation to the WH, this is just one more example of how amateurish and lack of ‘hardball politics’ Obama and his administration are displaying. Kevin Drum pointed out that there are times when a conciliatory style of negotiating is appropriate but there are other times, as is with dealing the banks, that a tougher stance is needed (grow some spine as I continue to argue). Kevin quoted Simon Johnson’s idea of intellectual capture–what is good for Wall Street, is good for Main Street.

    May be President Obama is more of a Moderate in his executive management of the country (at least in his first term) than what his rhetoric suggests; that he can’t stand up to Wall Street because most of the presidential campaign donations came from them and the healthcare industry; that he probably views the success of the U.S. economy is indeed tied in with the successes of Wall Street. So, how many jobs have been created on Main Street since the start of recession and the bailout of the top banking firms?

  18. My point was that you are asking the man to be something that he is not.

    I agree with that the Roosevelt we need today is Teddy, not Franklin. Indeed, it was Prof. Johnson who said the same thing nearly a year ago…

    Of course, it is pretty obvious at this point that Obama is destined to be one of history’s trivia questions.

  19. This thing where the NYFRB lawyers were encouraging AIG to keep things secret and delay things the taxpayer had the right to know was a DOUBLE nail in the coffin for me. I really couldn’t handle it when I read they payed 100cents on the dollar to AIG’s creditors. That was just TOO much. And now one of those creditors (Goldman Sachs) is taking our tax money and using it on bonuses. It was so so disappointing.

    I’ve never been a conspiracy theorist my whole life. As much as I hated Reagan I never thought he was intentionally working against the American people. And I don’t think that about Obama now either, I think Obama genuinely cares for America and its people. But Geithner and this guy Parkinson—these people are pure poison. Obama needs to get them out. If he doesn’t know who to replace them with he needs to call Volcker, Stiglitz or someone and get some external advice. These guys need to go.

  20. It certainly seems to me that Obama’a alleged intelligence is more often asserted than evidenced.

    Even given Emanuellian political premises, Obama has been extraordinarily inept. I imagine most dogcatchers, having set out to be bogus anti-reformers, could have been more convincing in pretending to be on the side of the people.

  21. Untill all these G.S.s (Government Service or Goldman Sachs) go without remuneration for a couple of months, they will not understand Main street.

  22. Drum’s point is that while health care may have required conciliation and moderation, “When it comes to financial regulatory reform, Obama needs to let us know whose side he’s on.”

    I think being congenitally for “conciliation and moderation” pretty much defines which side you’re on, and that would be the side of the status quo, always, whatever it is.

    And it’s very clear by now that more than anything else Obama is deeply conservative in simply preferring the status quo at all costs.

    Drum is simply lying or a being a terminal cultist when he pretends there’s any chance that “the side Obama is on” where it comes to finance “reform” is any different than the side he’s on where it comes to health “reform”.

    In both cases he’s on the side of the racketeering status quo. He’s on the side of the rackets, because the rackets are the status quo.

    Real finance reform, of course, requires the exact same thing that real health care reform would have required.

    What it would require is not “conciliation and moderation” with an irrevocably corrupt and criminal status quo, but the exact opposite.

    It would require an aggressive, uncompromising attack on the status quo, to root it out completely.

    That is indeed the mandate Obama was given, that’s what he implicitly promised, but he was lying. Just like anyone else who’s a product of a criminal system, he’s a system criminal. The only policy we’ll get out of his administration is the intensification of the crimes.

    The Fed now announces that its asset purchases, i.e. the direct looting of the American people, are permanent. It has conceded once and for all that the big banks are permanently insolvent and can only be sustained through this looting. The core of American domestic and foreign policy, for as long as this system exists, shall be this looting. For as long as this system exists, we’ll be slaves.

    And yet we’re still being subjected to this criminal chorale of hacks and cultists still shilling for this system and trying to drum up a miserable little cult of personality around this snivelling little wretch “obama”.

  23. “One problem that Obama has is who he has advising him. Lawrence Summers ….”

    Obama has chosen his advisors!! Hence, in your words, that is a problem of his own making!!! (There were voters in the primaries who wanted to vote for Hillary, but were a little bit hesitant re her selection of econ. advisors: NO deregulation Wall Street friends Clinton aids a la Rubin, Summers, Geithner etc.. That’s why they voted for Obama, and look what we ended up with.)

    “Another problem is the growth and current strength of the finanical system’s Washington lobby. ”

    Exactly! And that is why Obama should have chosen STRONG advisors who are on the people’s side instead of on Wall Street’s side. And that is why, with his strong grass-root organization, he should have talked to the people (instead of listening to Wall Street), explain the tough medicines needed, and ask the voters to contact their ‘representatives’ to
    1) urge them to vote for STRONG financial regulation, or
    2) let them know they will be ousted at the next election.

    Could have, should have, etc. instead of no-change, bonus rip-off business as usual!!

  24. Beth: “…at least in his first term…”

    Do you realize that his first term could be his last term?

  25. “They talked about the need for simple rules.”

    And rightly so. Thanks for the poem: apparently nothing new under the sun. That’s one of the reasons why it is so frustrating that Obama and his Wall Streeters do NOT follow this old, and necessary, advise.

  26. …yes, ….but not surprising especially if the economy continues to slide downward and the Republicans are able to effectively capture the populist angry over bailouts, taxes, and general discontent with Washington by November’s election. Although, it’s now being reported that moderate Rs are continuing to be pushed out for the more litmus test oriented neo-conservatives so there could still be a 2nd term for the President.

  27. You’re asking Obama to bite the hand that fed him. His campaign was financed by Goldman Sachs and the likes. Surely he can’t be that ungrateful.

    The interesting question is then:
    How did FDR finance his campaign? From his own pocket? In that case our only hope would be that some very rich dude would feel the urge to do something for his country and decide to run in 2012. That or the pitchforks…

  28. I can’t say TR’s skills as an orator are very impressive. At this game our Obama would lick him hands down.

    Man, voters were unsophisticated in the 1900s! To think that such a bad speaker could have got himself elected! We would never let that happen now.

  29. Yet another clarion call:

    To Mr. Johnson, Mr. Kwak et al.

    Congress is returning soon and the Senate will consider the jobs bill that the House passed before the Christmas recess. This bill must pass!

    I urge you(beg you, to be truthful) to NOT provide any political cover whatsoever for the deficit hawks in Congress who will argue against the extension of the Federal UI programs as well as another stimulus package that will prevent the unjust and savage budget cuts being prepared by state governments all over the country.
    As has been pointed out many times, the US had debt, I believe, that was 250% of GDP at the end of WWII, and the world did not come to an end. This should provide at least one argument against the deficit hawks(who, in addition, didn’t object to Bush’s deficits as I’m sure you know).
    Also, it is not necessary to choose between infrastructure projects and the extension of Federal UI and the rescuing of state budgets.
    The writers on this blog are very influential, and I ask you to play a strong role in making sure that millions, perhaps even tens of millions of men, women and children are not thrown into poverty through no fault of their own. Further, as good neo-Keynesians, I know you’re aware that unless aggregate demand is maintained, this immiseration if it’s allowed to occur, will most assuredly up the odds to near-certainty of the second Great Depression we’ve so far managed to avoid.

  30. The person who has the best chance of saving the Republican Party is Barak Obama. The president campaigned on change. He clearly stated that he was not going to allow big business to own and run Washington. If the health care proposal that is moving through congress is his version of change, the citizens of this great country are going to realize what he meant was “chump change”.

    When he and his fellow democrats said more competition is needed in the health insurance industry, what did they do? They came up with the idea of a public option. The essence of the option was to create a not-for-profit health insurance company run by the federal government. They refused to tackle the oligopolistic prone health insurance industry. One of the pillars that made this country and its citizens the most prosperous in the world is the free market system called capitalism. Capitalism is under attack from within the business community and our government refuses to do anything about it.

    With Barak Obama’s refusal to bring about the change he promised by weakening the strangle hold oligopolistic industries have on our “free markets” he is giving the republicans the opportunity to rise from their terminal illness. The citizen is losing his right to access the free market and it is being taken away from them because the oligopolies have bought our politicians including Barak Obama.

    Adam Smith when he discussed “rational self interest” and competitive markets in his book Wealth of Nations, envisioned many consumers buying goods and services from many producers with everyone looking out for their self-interest. By keeping markets “free”, producers pursue their rational self-interest and this best meets the needs of the consumers and the citizens of our country, who are also looking out for their self-interest. Under this system, what is in the producers self interest is to provide the best product possible to the consumer, while striving to be a low cost producer for their niche. If they do not, they will perish.

    This consolidation of markets began in the late 1960’s early 1970’s in the auto industry when three giant corporations and one union transformed it from a free market to an industry that was controlled by these entities. As this transformation was occurring, the auto company’s and auto union’s self-interest became separated from what the consumer wanted and/or needed. Competition between the companies broke down and this gave an opening for foreign competition to enter our markets and the beginning of the end of the American auto industry as we knew it.

    Other industries saw what was happening in the auto industry and saw that government was not objecting so naturally they followed the same path with little concern on any ones part that we were losing our free market system to a more centralized market system of oligopolies. As a result, we now have major markets where the producing entities self-interest is not always in line with the self-interest of the consumer. What is in the self-interest of the entities in these industries is to keep the oligopoly alive. Thus, this was the creation of special interests and lobbyists.

    These oligopolies have bought the protection of our representatives in Washington and state capitals. I am baffled by the fact that corporations and unions cannot vote in this country, however they are allowed to buy votes with their contributions.

    We lost track of a key ingredient that Adam Smith identified as necessary in order for “rational self interest” to work. There must be many producers. In too many industries, the number of producers has shrunk and the ones remaining have gotten “too big to fail”. This is true in the auto industry, the banking industry, Wall Street, health care and will soon be true in the computer software industry.

    In the end, the republicans may be thanking Barak Obama for providing them a bailout package called the free market.

  31. I read the comments of those who would require “change” from this new bringer of hope. The reality is that no regulation can stop greed and corruption. The enemy is not money, it is simply the product of the corruption. To punish achievement of all to satisfy the dreams of the socialist utopian is to deny one the spoils of their own toil because all such changes tend to have unintended consequences.

    This current purveyour of “hope and change” is neither, but simply a chameleon who fashions his message for the group to whom he is speaking. As indicated earlier, this message is not new, nor the rhetoric; it is simply the reitoration of prior Marxists views only with an Al Jolson flair.

    Seeing through the emotional hype of baseless utterings by this “agent of change” is the duty of the informed and because they failed, he too will have failed to take advantage of a historic opportunity.

  32. Sorry, James, but the President I rooted so hard for and voted for, has shown us that he has the guts of the Man-O-War jellyfish, and none of the lethal sting. I guarantee that virtually every citizen would stand up and cheer if he decided to give up concilliation for meaningful action, including showing Geithner and Summer to the door and then giving them a swift kick into oblivion. Let them both work on K Street where they must now have secret offices. I still have small hopes that Obama will stop being terrified of being Presidential and make the most of potential historical immortality presented by this moment in history.

  33. I watched the Moyers interview of Drum and Corn, and loved every minute. Gosh, if this stuff could just be on the mainstream media, and someone would break away from their “Desparate Housewives” mentality long enough to watch and care. President Obama has such a great opportunity (in this bonus season) to have his own heroic FDR moment, and be counted as great by future historians.

  34. Carol,
    I agree with both your comments and your tone. To respond to “why oh why did we elect a junior stateman in a time of crisis?” I see many reasons. First, you would expect the jr. statesman to have learned a few things from his senior pastor of 20 years, the Rev. Wright. Apparently Obama slept through the sermons.
    However, the basic problem is that we have the Constitution of the US rather than a parliamentary democracy. We never know WHO we elect until after they are in office. There is no party discipline or policy to hold officials accountable to. Elections are based on the cult of personality rather than on party platforms. Is there any surprise that politicians are free to “flip-flop” whether they are Dems or Rrrrs, when the only qualification for office is someone whom the “guys” would like to drink a beer with?
    Also, we could have elected a very senior statesman, McCain, but he was clearly destitute of ideas or solutions. Sometime seniority is just a pompous old fart like Reagan. Seniority solves nothing.
    I personally voted for Cynthia McKinny, the OTHER Black candidate and the OTHER female in the race. I doubt she would have “flip-flopped” but you never know until they are in office.
    Sadly, the US Constitution was merely the first attempt at democracy, and far from the best. We should take Jefferson’s advice and have a revolution every 20 years and throw the old constitution out.

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