Politics and Money: Axelrod’s Book Dissects Bailouts, Obama

by February 23, 2015

David Axelrod Book David Axelrod is primarily known for constructing the smart political campaign that catapulted Barack Obama, a freshman U.S. senator from Illinois, into the White House in 2008.

But after the election, Axelrod didn’t move on to another candidate and  another campaign.

He remained in the White House for nearly four more years, advising the president as Obama moved from the promise of “Hope and Change,” a slogan Axelrod developed for the campaign, to the sober reality of  governing.

That reality was particularly grim as Obama took office in January of 2009. The nation was deep in the grips of the Great Recession. And the administration was locked in a debate about whether to bail out the failing financial and auto industries, and if so, how to do it.

Politics and Money logoAxelrod describes the tensions among Obama’s economic advisers in his new memoir, “Believer: My Forty Years in Politics,” a 528-page recounting of a career that started with Axelrod becoming a reporter at the Chicago Tribune and culminated in him playing at the highest level of American politics.

In a chapter titled “Nothing but Bad Choices,” Axelrod writes that Obama’s team came into office knowing that the threat of terrorism, and wars in the Iraq and Afghanistan would immediately challenge the administration.

We expected that. Now we faced a once-in-century economic disaster that would hover over us for years, through long, grinding days and short, sleepless nights. Obama had inspired a battered and disillusioned nation to believe that there were better days ahead. Yet their was no magic wand to wave to deal with this calamity; no easy or painless answers–just a series of necessary but unpopular choices.

According to his book, the Obama team began plotting a huge economic stimulus package the month before taking office. Aides quietly urged the administration of outgoing President George W. Bush to provide enough loan money to keep General Motors and Chrysler alive until the presidents advisers could get a look under the hoods of these ailing automakers.

Axelrod outlines the economic and political risks of bailing out the banks and auto companies, whose managements were largely responsible for their financial crises.

I knew that each of these decisions would rankle millions of Americans, neither rich nor poor, who already were deeply deeply alienated in the modern-day economy. . . . Americans were working harder to meet their responsibilities, and falling further behind. Now they watched in dismay as, all around them, the people and institutions that had failed to meet their responsibilities were being extended lifelines by the government.

Obama’s team, led by chief economic adviser Lawrence Summers and Treasury Secretary Tim Geithner, was split on how to deal with the failing banks.

Even more interesting was the dynamic between Summers and and Geithner, his one-time protégé. For the most part, they agreed on policy matters and worked together effectively, but there was no consensus between them on one of the most vital and vexing questions we faced: how to stabilize the banks so they would start lending again.

Summers argued for buying the toxic assets and taking over the worst of the failing megabanks. Geithner was against nationalization of the banks and pushed for a recapitalization plan to get them lending again, a plan that ultimately prevailed.

Bailing out the auto companies also proved highly unpopular with Republicans and an electorate that viewed Detroit auto executives as dinosaurs who were out of touch with customers, Axelrod writes.

The Detroit executives evoked about as much sympathy as their counterparts on Wall Street–particularly after traveling to Washington on private jets in the winter of 2008 to ask Congress to bail out their mismanaged companies. . . .

Even Michigan appeared to have given up on what had long been its economic underpinning. Fresh polling data showed that a majority of voters there opposed any federal aid for the auto companies.

The economic stimulus plan, the Wall Street rescue and the auto company bailouts proved largely successful. Axelrod credits the often unpopular decision making of his boss for saving the economy, of course.

But some of those decisions are still being second-guessed today.

Massachusetts Sen. Elizabeth Warren is wildly popular among progressives for her withering criticisms of Wall Street.

The auto company bailouts are still being questioned by potential presidential candidates on the campaign trail.

And the Obama administration’s spending on the bailouts, the stimulus plan and health care  continue to fuel a hot debate in Washington about the impact of government debt on the nation’s future.

STORY IDEAS

David Axelrod

Wall Street regulation

Obama economic record