Buyer''s Remorse ONE Budget Battles and the Obama Economy We start here because that''s where President Obama starts. In any speech about his record as president, or in response to any question about his economic policies, Obama invariably starts off with some version of: "First, we saved the country from a Second Great Depression."1 And, in a sense, that''s true. No president since Franklin Roosevelt had entered the Oval Office facing such economic disaster. Thanks to endemic foul play and often outright criminal behavior by leaders of financial institutions, brought on by a relaxing of controls on Wall Street that started under Bill Clinton and continued under George W. Bush, Obama inherited an economy in free fall. In January 2009, he discovered things were far, far worse than most economists or the Bush administration were willing to admit when the bottom fell out in September 2008. Almost overnight, the GDP contracted by 5.

1 percent, making the Great Recession the worst financial crisis since the Great Depression. According to the Department of Labor, 8.7 million jobs were lost from February 2008 through February 2010, and unemployment rose from 4.7 percent in November 2007 to a peak of 10 percent in October 2009.2 Acting quickly, Obama did manage to stanch the bleeding, avoid the "double-dip" recession many feared, and slowly put the economy back on the path to recovery. (European countries were less lucky. Addicted to austerity measures that further contracted the economy, England and the Eurozone experienced a double recession, and only narrowly avoided a "triple-dip.")3 But, as would prove true of his handling of other challenges during his presidency, Obama''s response to the fiscal crisis was too tentative and too timid.

In the end, his actions fell far short of what was needed and not only stunted and delayed the recovery but, in some areas, made matters worse. As a result, today, seven years later, we are still not completely out of the hole. While financial markets have soared, the overall economy remains sluggish. Progress, while steady, has been slow. The income gap is wider than ever before. Wages are stagnant, and have been for over a decade. Forty-five million Americans are still stuck below the poverty line. As of this writing, job growth still hasn''t recovered to pre-recession levels: We are still 3 million jobs short of where we need to be.

Some 8.5 million Americans are out of work. And consumer confidence remains low. Obama will leave office without bringing the country back to full economic recovery. In fact, under his watch, inequality grew even worse.4 Cast of Characters On these economic matters, there''s little doubt where Obama first went wrong. It all began with the people he appointed to his team of economic advisers. Trying to pull the country back from the economic brink, of course, was not how Barack Obama wanted to begin his presidency.

He had other priorities in mind: health care; climate change; ending the wars in Iraq and Afghanistan; changing the poisonous atmosphere in Washington; and introducing a new era of postpartisan governance. But events forced his hand. With the entire economy about to go belly-up, Obama had no choice but to make that his first priority. To do so, he needed a lot of help. After all, he wasn''t a businessman, manager, or economist. He had no experience in finance or Wall Street. He needed to recruit his own band of experts. That was not surprising.

What was surprising was that, instead of reaching out to new people--fresh faces like him, who represented a clean break from the failed economic policies of the recent past--Obama surrounded himself with a couple of big Wall Street insiders and a gaggle of leftover Clinton and Bush administration officials. In other words, many of the very people whose reckless policies had caused this gigantic mess in the first place. And who now spent more time arguing among themselves than devising a solid recovery plan for the Obama administration. Leading the team was former Clinton Treasury secretary Larry Summers, whose specialty seems to be pissing people off. Everything about Summers should mark him as the last person on earth Barack Obama would agree to be in the same room with, let alone make his chief financial adviser. At Treasury during the Clinton years, he helped trigger the 2008 recession by advocating repeal of the Glass-Steagall Act, the New Deal-era legislation that had put up a wall between commercial and investment banks to prevent reckless speculation. He also blocked efforts by the much-more-prescient Brooksley Born, head of the Commodity Futures Trading Commission, to regulate derivatives, the financial instruments that did so much damage in 2008.5 He spent his next five years as president of Harvard, before being forced to resign after making disparaging remarks about women and African-Americans, while losing Harvard about $1.

8 billion through risky investments. Summers then moved to Wall Street, where he made millions as partner in a hedge fund, advising major financial institutions including Goldman Sachs, JPMorgan Chase, Citigroup, Merrill Lynch, and Lehman Brothers--the very firms he was expected to crack down on later. But didn''t.6 Given that checkered past, you''d think Larry Summers would be persona non grata around the Obama White House. Instead, he emerged as Obama''s first choice for Treasury secretary, and probably would have landed the job were it not for Hillary Clinton. Once she emerged as the leading candidate for secretary of state, Obama''s advisers decided it wouldn''t look good to have two top Clintonites in the cabinet. So Summers was named chairman of the president''s internal, powerful National Economic Council, instead.7 Note: Whatever magic Summers worked on Obama did not dissipate even after two contentious years as chair of the NEC.

In mid-2013, Obama stunned the financial world by openly floating the name of Summers as a leading candidate to replace Ben Bernanke as chairman of the Federal Reserve. A vocal outcry from progressives, the media, and veteran Fed-watchers finally forced him to throw Summers overboard and nominate Janet Yellen.8 Obama''s number-two choice as Treasury secretary was Tim Geithner, another Clinton alumnus and Wall Street insider--and another big mistake. During the Clinton administration, Geithner had worked briefly at Treasury under Summers and Secretary Robert Rubin (the two guys we have to thank for financial deregulation) before becoming head of the New York Federal Reserve. In his book Revival, Richard Wolffe reports that another reason Geithner became Treasury secretary was that he told Obama that was the only job he''d leave the New York Reserve for--whereas Summers, desperate to redeem himself after his humiliating departure from Harvard, was willing to take anything.9 Still, Geithner was a strange choice. At the New York Fed, he had worked closely with Treasury Secretary Hank Paulson on two major decisions in the early crisis period: letting Lehman Brothers collapse, yet bailing out the giant insurance company AIG. Major AIG shareholder Hank Greenberg alleges that Geithner, Hank Paulson, and Fed chair Ben Bernanke actually acted illegally by deciding to "rescue" AIG, while in effect funneling whatever financial resources the company still held to big banks.

In June 2015, federal judge Thomas Wheeler agreed with Greenberg that the Fed had exceeded its legal authority, arguing that "there is nothing in the Federal Reserve Act or in any federal statute that would permit a Federal Reserve Bank to take over a private corporation and run its business as if the Government were the owner." In addition, Judge Wheeler concluded that "the Government treated AIG much more harshly than other institutions in need of financial assistance" and that this treatment "was misguided and had no legitimate purpose." As of this writing, the case is under appeal.10 In any event, at Treasury, Geithner was expected to coddle his former Wall Street drinking buddies. Which he did, and then some. And Geithner wasn''t a one-off. Late in his term, Obama tried to smuggle Antonio Weiss, another Wall Street insider, into his administration. A senior investment banker at Lazard, Weiss was nominated as undersecretary of Treasury for domestic finance, but he was shot down by Senators Elizabeth Warren and Bernie Sanders, who claimed he didn''t have enough regulatory experience and was too close to the financial industry.

In January 2015, realizing he could never win Senate confirmation, Weiss withdrew his name from consideration and accepted a position as counselor to Geithner''s successor, Treasury Secretary Jack Lew.11 Back to 2009. Three more Clinton White House survivors also made the president''s economic team: Gene Sperling, Bruce Reed, and the aforementioned Jack Lew. Having once helped Bill Clinton reach a historic budget compromise in 1997 with Newt Gingrich, this trio of Clintonites believed they could pull the same rab.