Many will claim that Obama was stymied by a Republican Congress. But the
primary policy framework Obama put in place – the bailouts, took place
during the transition and the immediate months after the election, when
Obama had enormous leverage over the Bush administration and then a
dominant Democratic Party in Congress. In fact, during the transition
itself, Bush’s Treasury Secretary Hank Paulson offered a deal to Barney
Frank, to force banks to write down mortgages and stem foreclosures if
Barney would speed up the release of TARP money. Paulson demanded, as a
condition of the deal, that Obama sign off on it. Barney said fine, but
to his surprise, the incoming president vetoed the deal.
Yup, you heard that right — the Bush administration was willing to
write down mortgages in response to Democratic pressure, but it was
Obama who said no, we want a foreclosure crisis. And with Neil
Barofsky’s book ”Bailout,” we see why. Tim Geithner said, in private
meetings, that the foreclosure mitigation programs were not meant to
mitigate foreclosures, but to spread out pain for the banks, the famous
“foam the runway” comment. This central lie is key to the entire Obama
economic strategy. It is not that Obama was stymied by Congress, or was
up against a system, or faced a massive crisis, which led to the shape
of the economy we see today. Rather, Obama had a handshake deal to help
the middle class offered to him by Paulson, and Obama said no. He was
not constrained by anything but his own policy instincts. And the
reflation of corporate profits and financial assets and death of the
middle class were the predictable results.
-- Matt Stoller, "The Progressive Case Against Obama" (Salon).