Moving Forward with Obama and the Banks

Mike Lux makes a very good point:

The way Tim Geithner has structured the banking plan, the Obama administration will, sooner or later, almost certainly be facing another AIG bonuses type of outrage. For example, Dean Baker told me that his biggest fear is that some sleazy character will make a fortune off the leverage given by the government, or that a bank will arrange an insider deal under which a front buys its assets at an inflated price, leaving the government with a big loss.

If this happens, I can already hear the cries of the faux populists in the Republican Party, those same folks who created this crisis with their opposition to regulatory oversight of Wall Street. If they were still in charge, we'd be having one of these kinds of scandals every week. But they will be full of howling indignation that Obama let this happen.

Those of us who are opposing this bank plan, in part because we are worried of just these kinds of scandals described above, will need to restrain ourselves from doing too much I-told-you-so-ing, because we will need to be helping to save the Obama team from themselves. We need to be ready, though, to step into the moment with our own very aggressive plan to put the banks into receivership and break them up. No matter how populist Republicans will want to pretend they are, they will never be willing to actually do something that progressive. If Obama is willing to go there, and do it decisively, it will help Obama to get over all the recriminations and saber-rattling that inevitably happens in such a moment.

I very much wish that Obama was moving bolder and more progressive in dealing with the banking crisis. To paraphrase a friend, I feel like he is giving mouth-to-mouth resuscitation to a system that needs to die. But if we are to get through the problems that will almost inevitably come from the Obama/Geithner plan, those of us who want to save Obama's agenda need to be ready with a strategy to turn things around ASAP when another scandal flares. Unlike Bush, Obama is smart enough to change direction when something isn't working, and progressives need to be ready to help him when that day comes.

If those who were right about the economy over the last 8 years are to be believed, conditions will get to the point where the Administration will need to change course and follow a different approach on the banks. Now assuming that the administration's economic advisers are now open to approaches that don't jive with their ideological world view (a pretty big assumption, but it's all we've got), we need to be ready to make the case. There's public support, academic support, and even potential Republican support, so a change of course would be possible, if/when Obama chooses to take it.

The only thing holding us back is Summers, Geithner, and the faith Obama has put in the two of them. Whether conditions make them suddently open to new ideas (what I've always hoped for) or Obama somehow loses his faith in their plan, progressives need to be on stand-by, ready to step in and fill the void.

Update: Lux and others have started a group built around this idea:

My message will be simple: I support Barack Obama, support his budget and his agendas for health care and climate change and immigration reform and the Employee Free Choice Act. But on banking policy, we need A New Way Forward.

Awesome.