Yves Smith nails this one.
Bringing in seasoned professionals has the upside of enabling quick action.
The significant downside is that you bring in old problems, old approaches, old conflict of interest, and old thinking.
As we have said previously, the challenge to Obama and his insiders will be one of leadership, to set coherent policy directives that will bring direction to the old hands consistent with a new reform government.
So far the Obama Administration is not succeeding. We have heard of conflicts of opinion between the old guard, Geithner and Summers, and the new circle under the president. This in part was the cause for the delay in announcing the bad bank this week.
The Obama Administration is still in the 100 day honeymoon period, but the constant stream of old guard appointments, and those with specific questionable personal tax payment records and performance in the Clinton Administration is grooming it for failure. They are spending precious political capital and goodwill senselessly.
We need them to succeed. Badly. They did not create this crisis, but it is their task to find a solution and prevent it from worsening.
But we ought not to kid ourselves or be quiet when they commit the kinds of gaffes which have characterized their first few weeks in office.
"The Obama Administration is as obviously and fully hostage to the interests of the financial services industry as the Bush crowd was.
We have no new thinking, no willingness to take measures that are completely defensible (in fact not doing them takes some creative positioning) like wiping out shareholders at obviously dud banks (Citi is top of the list), forcing bondholder haircuts and/or equity swaps, replacing management, writing off and/or restructuring bad loans, and deciding whether and how to reorganize and restructure the company.Instead, the banks are now getting the AIG treatment: every demand is being met, no tough questions asked, no probing of the accounts (or more important, the accounting)."
Bad Bank Assets Proposal: Even Worse than You Thought - Naked Capitalism
