[Herbert Hoover[_3_]]

Martin Wolf: Has Obama already failed?
Posted by FT Alphaville on Feb 11 07:54.
Amid the storm of criticism, the FTs Martin Wolf asks whether Barack
Obama has already failed by leaving so much up to Congress in his
crucial financial stabilisation and economic stimulus plans. Herewith a
summary:
Has Barack Obamas presidency already failed? In normal times, this
would be a ludicrous question. But these are not normal times. They are
times of great danger.
Today, the new US administration can disown responsibility for its
inheritance; tomorrow, it will own it.
Doing too little is now far riskier than doing too much. If he fails to
act decisively, the president risks being overwhelmed, like his
predecessor. The costs to the US and the world of another failed
presidency do not bear contemplating.
What is needed? The answer is: focus and ferocity. Hoping for the best
is foolish. Obama should expect the worst and act accordingly. Yet
hoping for the best is what one sees in the stimulus programme [last
weeks Wolf comment - here] and €“ so far as can be judged from
Tuesdays sketchy announcement by Tim Geithner, Treasury secretary €“
also in the plans for fixing the banking system.
The new plan seems to make sense if and only if the principal problem
is illiquidity. Offering guarantees and buying some portion of the
toxic assets, while limiting new capital injections to less than the
$350bn left in the Tarp, cannot deal with the insolvency problem
identified by informed observers.
The correct advice remains the one the US gave the Japanese and others
during the 1990s: admit reality, restructure banks and, above all, slay
zombie institutions at once. It is an important, but secondary,
question whether the right answer is to create new €œgood banks€�,
leaving old bad banks to perish, as my colleague, Willem Buiter,
recommends, or new €œbad banks€�, leaving cleansed old banks to survive.
I also am inclined to the former, because the culture of the old banks
seems so toxic.
It is extraordinary that a popular new president, confronting a
once-in-80-years economic crisis, has let Congress shape the outcome.
The banking programme seems to be yet another child of the failed
interventions of the past one and a half years: optimistic and
indecisive. Obama needs to rethink, if it is not already too late.
This entry was posted by FT Alphaville on Wednesday, February 11th,
2009 at 7:54 and is filed under Capital markets, People.