November 05, 2008

Opinion piece by John Cooney details necessity of president-elect moving quickly to address financial crisis

2 min

In an op-ed piece in the November fourth edition of the San Diego Union-Tribune and the November fifth edition of the Atlanta Journal Constitution, Venable partner John Cooney explains how and why president-elect Obama must move aggressively to formulate his strategy for dealing with the financial crisis and announce that plan shortly after taking office in January.

Cooney draws several parallels to Franklin Delano Roosevelt’s transition after the 1932 election. During the transition, Hoover tried repeatedly to persuade President-elect Roosevelt to support his plans for addressing the economic crisis. Roosevelt refused because he disagreed with Hoover’s policies and feared being trapped into commitments that would curb his freedom of action once in office. Instead, he used the time available to select his Cabinet and developed his own policies with a handful of aides.

On the morning after his inauguration, Roosevelt issued executive orders that closed all the nation’s banks and prohibited gold exports, and he called Congress into an emergency session. On the day Congress convened later that week, the administration submitted a bill to support the banking system, which passed the same day. The next day, Roosevelt submitted his first spending measures, which had been developed during the transition. Two days later, the president gave his first fireside chat to explain his policies on the banking crisis. The country’s principal banks reopened the next morning, and the stock market resumed trading with the largest percentage gain in history. According to Cooney, the most immediate demand on the president-elect’s time will be the necessity of taking control of the financial crisis management program on Jan. 20. His Treasury and economic policy teams will need to understand how the Bush administration is deploying the $700 billion authorized by Congress and how the Federal Reserve is using its lending authority, coordinating with central banks in other countries, and developing contingency plans. In addition, the president-elect will face a bewildering array of high priority financial issues such as recapitalizing the banking system, restructuring the mortgage finance system, whether to create a transparent market and regulatory mechanism for credit default swaps, and how to consolidate fragmented financial regulatory bodies into an effective system.

To help him address these problems before January 20, the president-elect will need to surround himself with a team of financial crisis managers, experts in monetary flows and officials with the vision to conceptualize a new financial regulatory regime and the political skills to sell that program to Congress and the public.