- First, it was the administration's ongoing insistence (via Geithner) that this is a liquidity crisis, not a credit crisis -- the Wall Street view.
- Then it was the failure to do anything more than express "anger" at the AIG bonuses.
- Then it was Geithner's plan to, yet again, bail out banks at taxpayer expense.
- Then it was the administration's decision to force GM into bankruptcy, fire its CEO, and hit its bondholders -- setting up a bizarre double-standard with Wall Street.
- Then it was a "stress test" for banks in which the baseline scenario has already been eclipsed by the deterioration of the economy -- once again slamming the administration's credibility
- Then it was the revelation that Larry Summers made $5+ million from Wall Street last year, which added to the perception that he, Geithner, Rahm Emmanuel, etc. are reluctant to bite the hands that feed them.
- Now it is the leaked announcement that "all banks have passed the stress test!", combined with a refusal to share the results of that stress test on a bank-by-bank basis.
Obama has never explained why he's acting so out of character here, so we have to speculate. The charitable explanation is that Tim Geithner is paralyzed by fear of triggering another post-Lehman credit meltdown and has convinced Obama that that's what will happen if the government holds banks and their bondholders accountable or just comes clean about the shape that banks are in.
As I've said, I disagree with this. No one is arguing for the sort of uncontrolled bankruptcy that Lehman went through. And the seizure, restructuring, and sale of a few major institutions should not be unmanageable, especially if the bondholders are required to pick up the tab.
The more disturbing explanation, meanwhile, is that the Obama administration really is in Wall Street's hip pocket. Jonathan Weil at Bloomberg thinks there's a chance this is the case. And Obama certainly isn't doing anything to discourage this.
By maintaining a double-standard and refusing to address the elephant in the room, Obama is risking his credibility and his reputation for telling it like it is. This behavior, both toward the banks and toward Americans, is a disturbing echo of the Bush administration. It's time for Obama to address it head on.