On the Financial Crisis -- Can Obama & His Team Play This Game?

Despite over a year of discussion and debate, we seem no closer to resolving the defacto insolvency of some of our largest banks due to their mortgage-backed securities of dubious and questionable value. This seems to be the root of the financial crisis. Obama and his team have had more than sufficient time to design a plan of attack, but now that the time for action has arrived they have no clear plan, and the markets have tanked. If this were the Bush team, the press would be merciless; instead, most of them have switched sides and are now cheerleaders.

The recently passed "stimulus" spending bill is still generating heat. But it's the third "leg" of the Obama solution that went white-hot late this week. Obama's just-announced plan to give free money to people unable to meet their mortgage payments has caused a ruckus. The Obama plan takes money from the everyone responsibly paying their mortgages and other debts and gives it to the 5-7% of people living in homes they cannot afford. What's so bad if those people need to move to houses they can afford?

CNBC's Chicago-based bond market reporter Rick Santelli has become an overnight hero for his impassioned critique of the mortgage plan (link; link), calling for a Chicago Tea Party. Quickly someone started a Chicago Tea Party blog (link). Then yesterday, Obama's press secretary Gibbs, who makes GW Bush's Scott McClellan look like a bright bulb, decided to respond to this specific criticism and said Santelli "doesn't know what he's talking about." If Gibbs were a Republican some Democrats would call him a moron, a favorite word for politicians they dislike.

Obama continues to talk down the economy and the stock market, partly to bring things very low very fast so that for the rest of his term there's no place to go but up, and partly because he only knows campaigning, not governing. His spending plan is a reckless abomination, designed to bring the US closer to European-style democratic socialism. His mortgage plan penalizes responsible financial behavior and, if anything, will serve to partly re-inflate the housing bubble that needs to stay deflated. And on the most important issue of all, the banking crisis caused by toxic mortgage-backed securities, he and his team are lost in the woods.

UPDATE: January 23, 2009

The Editorial Board of the Wall Street Journal (link) and I have been reminded of the same team of years past: "[A]fter five weeks of watching the repeated muffs of the Obama financial team, we're inclined to recall Casey Stengel's famous crack about the 1962 New York Mets: "Can't anyone here play this game?"

John M Greco