Part I - Economic and Budget Policy
By Patrick Martin
19 January 2009
Timothy Geithner, treasury secretary
A career government official involved in overseeing financial markets, Geithner is one of three protégés of Clinton administration Treasury Secretary Robert Rubin (former co-chairman of Goldman Sachs and until January 9 board member and special counsel at Citigroup) who have been named to top economic and budget positions in the Obama administration. He served in the Clinton administration, helping manage the 1995-96 Mexican peso crisis and the Asian financial crisis of 1997-98. He then worked for the International Monetary Fund before his appointment by President Bush to his current position as president of the Federal Reserve Bank of New York, which conducts the day-to-day operations of the Fed on Wall Street.
Since the Wall Street meltdown began 18 months ago, with the collapse of the subprime mortgage market, Geithner has worked closely with the current treasury secretary, Henry Paulson, and Federal Reserve Chairman Ben Bernanke. During that period, all five of the major New York investment banks—Goldman Sachs, Morgan Stanley, Merrill Lynch, Lehman Brothers and Bear Stearns—have been compelled to convert into commercial banks, merged, been taken over or collapsed.
Once confirmed as treasury secretary, Geithner’s first task will be to distribute the second half of the $700 billion bailout for Wall Street approved last year by the Democratic-controlled Congress. Geithner, Paulson and Bernanke headed the bailout effort that funneled the first $350 billion into the coffers of the major banks, as well as Fannie Mae, Freddie Mac, the insurance company American International Group and US auto companies. Geithner will play the lead role in doling out the remaining $350 billion, which was released to the Treasury last week after the Senate defeated a resolution to block further handouts, and is currently involved in plans to further expand the bank bailout.
Lawrence Summers, director of the White House’s National Economic Council
Formerly undersecretary and then secretary of the treasury in the Clinton
administration, Summers was considered the key crisis manager during the Mexican and Asian currency collapses in the late 1990s. A magazine cover at the time depicted Summers, his boss Robert Rubin, then treasury secretary, and Federal Reserve Board Chairman Alan Greenspan as “the committee to save the world.” In 1999, the Republican-controlled Congress adopted legislation repealing the New Deal-era Glass-Steagall Act, which separated commercial from investment banking and imposed other restrictions on banking operations. Summers and the Clinton administration backed this deregulation of financial markets, which contributed to the collapse of 2008.
After leaving government with the end of the Clinton administration, Summers became president of Harvard University, but his stormy tenure came to an abrupt end after a series of clashes with the faculty, which included his now-notorious comments about the supposedly innate differences between male and female students in relation to the most abstract scientific fields, particularly mathematics.
Summers served as a top economic adviser to the Obama campaign but was chosen for the lower-profile White House position, which, unlike treasury secretary, does not require Senate confirmation, in part because of the prospect of contentious questioning about his views on gender. If Fed Chairman Bernanke is not reappointed this year—his term expires next January—Summers is a likely candidate to succeed him.
Paul Volcker, chairman of the President’s Economic Recovery Advisory Board
The 82-year-old former investment banker was the key figure in the Reagan-era onslaught against the working class which, combined with the betrayals of the trade union leadership, destroyed the unions as a significant social force in the United States. Volcker was appointed chairman of the Federal Reserve Board by Democratic President Jimmy Carter in 1979 and promptly adopted an inflation-fighting strategy based on driving up interest rates to unprecedented levels (above 20 percent at one point), so that corporations could use the resulting mass unemployment to slash wages and benefits and undermine other hard-won workers’ gains.
During most of Volcker’s eight years at the Fed, he worked in tandem with the Reagan administration in its offensive against the labor movement. He hailed Reagan’s mass firing of the striking air traffic controllers and the destruction of their union, PATCO, as a key turning point in bringing inflation under control. At the worst point in the Volcker-induced recession, in 1982-83, the US unemployment rate approached 10 percent, the highest in the post-World War II era.
In his new position as an Obama adviser, Volcker serves as a guarantor to big business and the financial interests that the new administration will proceed ruthlessly against the working class. The Wall Street Journal, in an editorial last week, suggested that Volcker be given the authority to set new financial regulations. Other business spokesmen have suggested Volcker or someone like him as the new “car czar,” with authority over the bailout of the US auto industry and the accompanying cuts in auto workers’ jobs, wages and benefits.
Peter Orszag, director of the Office of Management and Budget
The third Robert Rubin acolyte to take a top financial position with Obama, Orszag moves over from the Congressional Budget Office (CBO), where he was appointed by the new Democratic majority, elected in 2006. He is regarded as the foremost Democratic Party expert on cutting spending for entitlement programs like Medicare and Social Security, and has written extensively on the need for fiscal austerity.
Orszag worked in the Clinton White House, first as an economist at the Council of Economic Advisers, then as a special assistant to the president for economic policy. After leaving the Clinton administration, he served as head of the Hamilton Project, a think tank devoted to controlling government spending set up and financed by Robert Rubin.
In an interview on his role at the CBO, he declared, “I have not viewed CBO’s job as just to passively evaluate what Congress proposes, but rather to be an analytical resource. And part of that is to highlight things that are true and that people may not want to hear, including that we need to address health-care costs.”
Mary Schapiro, chairwoman of the Securities and Exchange Commission
A former member of the Securities and Exchange Commission (SEC) first appointed by Ronald Reagan, Schapiro is a classic case of an industry insider taking over a supposedly independent regulatory agency. After six years on the SEC, Schapiro was appointed chairman of the federal Commodity Futures Trading Commission by President Clinton in 1994, where she was responsible for regulating the US futures markets in agricultural commodities, metals, energy and financial products. She also served on the President's Working Group on Financial Markets with other top federal officials.
For the past 12 years, after leaving government at the end of Clinton’s first term, Schapiro has worked for the securities industry as an advocate of “self-regulation,” first with the National Association of Securities Dealers, the industry trade association, and most recently as head of the Financial Industry Regulatory Authority. She served on the board of directors at Duke Energy and Kraft Foods.
A front-page article in the January 15 Wall Street Journal carried the headline “Obama's Pick to Head SEC Has Record of Being a Regulator With a Light Touch,” and noted that “a close examination of Ms. Schapiro's record as a regulator shows she has infrequently pursued tough action against big Wall Street firms.”
Part II - Internal Security
By Tom Eley
20 January 2009
President-elect Obama has assembled a cabinet drawn from the upper echelons of American society and the right wing of the Democratic Party. The right-wing character of the Obama nominees is described by the media under the approving labels of "centrist," "moderate," and—most of all—"pragmatic." This terminology signifies that the incoming Obama team consists entirely of individuals who pass muster with the corporate financial aristocracy.
The New York Times reported Monday that Obama has repeatedly discussed his cabinet selections with his defeated Republican opponent, Senator John McCain, and that McCain has told colleagues "that many of these appointments he would have made himself," according to Senator Lindsey Graham, a South Carolina Republican and arch-conservative who has also had input into the formation of the new administration.
McCain, Graham and Co. have a far greater role in the selection of Obama's cabinet than the millions of young people and working people who supported Obama in the belief that he would put an end to the war in Iraq and reverse the right-wing, pro-big business policies of the Bush administration.
Today's series of profiles deals with those cabinet and other high-ranking officials in the incoming administration responsible for the Justice Department, intelligence and Homeland Security—i.e., the domestic repressive functions of the US government.
Eric Holder, attorney general
While Holder is being hailed as the first African-American to hold his position, his selection does not represent a reversal of the anti-democratic policies pursued by the Justice Department under the Bush administration. Holder is a trusted defender of both corporate America in general and the American capitalist state, having served as deputy attorney general in the Clinton administration (1997-2001) and then as a high-priced lawyer at Covington & Burling, where he represented an assortment of major corporations.
Most notorious was his role defending the food giant Chiquita Brands International, Inc., whose multimillionaire executives were facing potential charges of aiding terrorism because of their financing and arming of right-wing death squads in Colombia. Using his Justice Department connections—and taking advantage of the Bush administration's sympathy for the Colombian fascists—Holder managed to get Chiquita off the hook with a small fine, despite overwhelming evidence that it had hired gunmen to kidnap, torture and murder Colombian workers, peasants and union officials.
With support emerging from prominent Republicans, it is likely Eric Holder will be confirmed as attorney general in the incoming Obama administration. Holder's nomination has withstood somewhat muted criticism from the Republican right. This related to Holder's involvement, as deputy attorney general in the Clinton administration, in the presidential pardon for billionaire fugitive investor Marc Rich, as well as in commutations for 16 Puerto Rican nationalists who had been imprisoned for decades on politically motivated convictions for nonviolent crimes.
Republicans announcing their support for Holder include Senator Orrin Hatch of Utah, who serves on the Judiciary Committee; Mel Martinez of Florida; Frances Townsend, President George W. Bush's homeland security adviser; William P. Barr, attorney general under President George H.W. Bush; and Larry Thompson, who served as attorney general in the current Bush administration. After Holder expressed agreement with Sen. Lindsey Graham that the nation is at war with terrorists, Graham responded, "I'm almost ready to vote for you right now."
Republicans may fondly remember Holder's critical role in expanding an independent counsel's investigation of Bill Clinton that ultimately led to his impeachment over his affair with White House intern Monica Lewinsky. Holder advised then-Attorney General Janet Reno to allow for the expansion of the investigation's scope.
Under John Ashcroft, Alberto Gonzales and Michael Mukasey in the Bush administration, the office of attorney general served as a center of conspiracy against democratic rights, authorizing torture, illegal wiretapping, and firing United States Attorneys who did not completely toe the Bush administration line, among other nefarious activities. Holder will attempt to effect a change of image. In congressional hearings, he said that he considered "waterboarding"—that is, drowning—torture. The Bush administration has defended the procedure as a "harsh interrogation method."
However, in other areas, Holder has made clear that he intends to carry on the policies of the Bush administration. He both supported the initial passage of the Patriot Act in 2001 and played a key role in the talks that led to its reauthorization in 2005—when Obama himself voted for it.
As attorney general, Holder would be obliged to investigate the crimes of the Bush administration. In his nomination hearings, he said he would do no such thing. "The decisions that were made by a prior administration were difficult ones," he said. "It is an easy thing for somebody to look back in hindsight and be critical of the decisions that were made." He indicated that, while he favors closing the Guantanamo Bay prison camp, this will be a lengthy process in which prisoners' legal status will remain indeterminate.
Leon Panetta, director of the Central Intelligence Agency
Panetta was a surprise selection to be the next director of the Central Intelligence Agency, the US spy agency and long a center of counterrevolution, because of his lack of hands-on experience in intelligence work. This was almost a requirement for the job, however, under the current circumstances, since Obama was seeking to rehabilitate the image of an agency that has become identified worldwide with kidnapping, secret imprisonment and torture. Obama initially intended to name a CIA veteran, John Brennan, who was the candidate's top intelligence adviser, but Brennan faced criticism over his role in decisions on interrogation during the Bush administration.
Panetta would play the same political role as George H.W. Bush, another "outsider" but a trusted ruling class figure, brought in to refurbish the agency after the assassination scandals of the early 1970s. He began his political career as a Republican working in the administration of Richard Nixon, but switched to the Democratic Party in 1971, and was elected to the US Congress from California in 1976, serving there for 16 years and specializing in budgetary matters. Clinton chose him as his first director of the United States Office of Management and Budget.
In 1994, Panetta became White House chief of staff, serving in that capacity until 1997, the critical years in which Clinton governed in collaboration with the Republican congressional leadership that took control of Congress in 1994. The single "achievement" of those years was the elimination of the federal welfare program, Aid to Families with Dependent Children, in a bipartisan deal.
More recently, Panetta has shifted his focus to foreign affairs, working as a member of the Iraq Study Group, the bipartisan establishment group that sought, beginning in 2006, to effect a tactical change in US policies in Iraq.
Admiral Dennis C. Blair, director of National Intelligence
Blair is one of a record four retired military officers chosen for high positions in the Obama administration, and the second Navy man in a row, following retired Vice Admiral Michael McConnell, to hold the position of DNI, created to oversee the entire intelligence establishment in the wake of the 9/11 attacks.
Blair is a career military man who rose to the rank of commander-in-chief of United States Pacific Command, which is the highest-ranking position for all US forces in the Asia-Pacific region. He also served as director of the joint staff in the Office of the Chairman of Joint Chiefs of Staff. After retiring from the US Navy in 2002, Blair has been involved in US military and foreign policy circles, holding a chair at the US Army War College and serving on and holding a chair at a geo-strategic think tank, the National Bureau of Asian Research. He also served as president of the important US-government think tank, Institute for Defense Analyses (IDA).
Blair could be prosecuted for war crimes in relationship to the 1999 East Timor massacres, which took place during his period as head of the Pacific Command. Apparently, Blair disobeyed orders from the Clinton administration on two occasions. As the massacres against the pro-independence movement in East Timor became an embarrassment for the Clinton administration, which presented its simultaneous imperialist adventure against Yugoslavia as a "humanitarian mission," Clinton called on Blair to meet with General Wiranto, head of the Indonesian military, and order him to end support for the pro-Indonesian militia. Blair instead presented Wiranto with an offer of increased military assistance and invited the Indonesian strongman to be his personal guest in Hawaii. Wiranto took this as an American blessing for an escalation of violence in East Timor.
When State Department officials learned that Blair had not delivered the message to Wiranto, they called on him to do so again. Again he refused. Only several months later, after many more independence supporters had been killed, did Blair act to cut off US military assistance to the Indonesian army.
Blair's career also highlights the incestuous relationship between the military and the defense industry. In 2006, the US Department of Defense inspector general determined Blair had violated IDA's Conflict of Interest regulations by recommending the US government purchase production contracts for F22 Raptors. Blair served as the president of the IDA, which made the recommendation, and on the board of directors for EDO Corporation, which did subcontracting work on the F22. He received only a slap on the wrist, and there is no congressional opposition to his appointment.
Janet Napolitano, secretary of Homeland Security
The two-term governor of Arizona, Napolitano has built a reputation for being "pro-business" and a proponent of increased militarization of the US border with Mexico, much of which lies in her state. In state politics, Napolitano supported Arizona's ban on same-sex marriages, opposed restrictions on gun ownership, and supported the death penalty. Her nomination has been warmly received by the Republican Party, with Arizona's two Republican senators, Jon Kyl and John McCain, lobbying on her behalf.
Napolitano has criticized the "Federal government's failure to fulfill its responsibilities in securing our border," and it is her supposed expertise on immigration that was her prime qualification for the Department of Homeland Security. Napolitano made her political name in Arizona through her opposition to immigration, signing into law reactionary legislation that made possible the prosecution of illegal immigrants as felons. She also deployed the Arizona National Guard along the border with Mexico, winning praise from anti-immigration zealots.
In questioning during Congressional hearings related to her nomination, Napolitano spoke in favor of the militarization of the Mexican border, saying that border fences should be used to separate urban areas from Mexico, but that higher technology should be used in the more remote expanses of the border area. She did not oppose the "Real ID program," which would create an internal passport system in the US, saying only that the financial burden it will impose on states needs to be lessened.
Napolitano leaves Arizona just as the state budget has been plunged into crisis by the economic slump, and in particular the housing crisis. The state faces a current deficit of $1.25 billion and a deficit of $2.65 billion for 2010. Napolitano has proposed major cuts to higher education to lessen the deficits. As part of proposed spending cuts of $975 million, $100 million would be cut from the state's university system and $40 million from community colleges. Also, $145 million will be slashed from the state highway fund.