YVES SMITH ISSUES MUCH NEEDED SMACK DOWN OF LARRY SUMMERS AND TIM GEITHNER

I was going to put this article by Yves Smith in my weekly "READING" post but it deserves a little more time. Also, because it might be a bit long for those on the run, a quick synopsis is warranted.

In the article  - "Larry Summers' Contradictory and Dishonest Defense of the Administration's Bank-Focused Crisis Response" - Smith does a great job of issuing a smack down of former Obama administration Larry Summers, and even gets in a few lines on former Treasury Secretary Tim Geithner. Yves Smith, author of Econned: How Unenlightened Self-Interest Undermined Democracy and Corrupted Democracy, takes Summers and Geithner to task for their on-going efforts to tell the world that, President Obama's White House had no choice but to help Wall Street after the 2008 market collapse. Political realities, the story line goes, forced them to effectively ignore the interests of Main Street.

Smith is especially critical of Summers and Geithner for suggesting that all the Monday Morning Quarterbacking (and criticisms) of the Obama administration's post-2008 decisions should cease. Their rationale? Because only people like them understand the policy world. The rest of us, if we are to believe them, should just sit back and admire their genius in the face of adversity.

While Yves Smith does a great job dissecting the failed economic policies (and outcomes) that were approved and guided by Summers and Geithner she's at her best discussing the political ramifications.

Specifically, Smith points out that the decision to bailout the bankers, while ignoring America's struggling home owners, may have cost the Democrats the House of Representatives in 2010. A fateful development considering the gridlock and political dystopia we're now seeing in Washington.

Worse, according to Smith, because the bank bailout happened while the Obama administration was bumbling through weak and ineffective efforts on behalf of American home owners (HAMP was especially pitiful) the Obama administration soon came to be identified as caring more about Wall Street than Main Street (Tim Geithner's book, Stress Test, does little to change this view). By ignoring common sense proposals - which included allowing bankruptcy judges to write down primary mortgages, or allowing a HOLC-like institution to buy underwater mortgages - the Obama administration effectively told the American people the banks are more important than you and me.

Worse, the American taxpayer was going to backstop the bailout, and the myriad of programs put up by the Treasury Department and the Federal Reserve..

This did much to help blow up President Obama's Hope and Change brand in the minds of most Americans.

Unfortunately, this also helped put President Obama on par politically with the President Bush. He now had an ownership stake in the political failures associated with the financial collapse because he was now contributing to the personal heartache ordinary Americans experienced while the banks got rescued.

There's more, but you get the point. While the article is a bit long, Yves Smith does a good job of rebutting the finer points made by Summers, so I encourage you to read the article.

- Mark