Change? Not Much

Barack Obama has now announced his economic team, and the consistent theme is continuity with the policies of the Bush administration. Tim Geithner will be the new Secretary of the Treasury. He is so well respected on Wall Street that the market jumped five percent in an hour when his nomination was announced. It’s come out since that Geithner, as head of the New York Federal Reserve Bank, has already played a significant role in the various bailouts that have marked the last three months. He has, apparently, been working hand in glove with Hank Paulson. Today Paulson praised his successor, perhaps too effusively for us conservatives:

I have the highest regard for Tim — his judgment and creativity have been critical to designing and implementing the necessary actions we’ve taken to protect and strengthen our financial system.

Today Obama announced that Berkeley professor Christina Romer will chair his Council of Economic Advisers. Once again, no sharp break with the recent past appears in prospect. This recent interview with Romer and her husband/collaborator is instructive. Here is what she has to say about Ben Bernanke’s leadership of the Fed:

Not until the Volcker, Greenspan and now Bernanke era do you get a basically pretty sensible model–the view that inflation is bad, the sustainable rate of unemployment is moderate and inflation will respond to slack. …

When you read Ben Bernanke’s statements and papers, you see a very sensible framework and a reasonable view of what the Federal Reserve can and cannot accomplish. I think the actions he has taken are consistent with the views he expressed before becoming chair.

So, we’d view Chairman Bernanke as a triumph for our paper. In fact, if you were to read our paper and ask who would be the perfect person, it probably would have been either Stan Fischer or Ben Bernanke–that’s what came out of our analysis.

And again, Bernanke has been dealt a horrible hand–the meltdown in financial markets, the collapse of housing prices, huge oil price shocks–and I think the Fed has done a good job of trying to navigate us through this. …

[F]aced with what could have turned into a panic in 2008, the Fed responded aggressively. It’s exactly the textbook description of what they should have done. Now the innovative things, such as lending to investment banks, raise big regulatory issues that I think someone needs to be thinking about a lot-making sure they’re dealing with them correctly. But again the big picture was, don’t let the New York financial market go under because it would have devastating real economic consequences. That was exactly the right focus for policy.

It doesn’t appear that Obama’s team has much criticism of the Bush administration’s economic policies, particularly those that have been pursued during the current financial crisis. Politics can indeed be very strange. Who would have guessed, a few months ago, that when Obama announced his administration’s economic team, some conservatives would be disappointed that so little change from the policies of the Bush administration appears in prospect?


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