Although there perhaps was a departure from the conservative consensus in terms of the opinions of the public, the Obama administration did not represent a departure from the consensus. This is mainly because the Obama administration, instead of developing a new way for the American economy to work, mainly put forth changes to reinstate the markets as they had previously functioned under this consensus. For example, the American Recovery and Reinvestment Act mainly acted as a bandage over fiscally strapped states. It was able to help states that were struggling, but it only helped them so they could operate under the same system as before, not a new system (Levy 722). Another example is how the FDIC acquired Washington Mutual but soon after sold it to JP Morgan, interfering very minimally (Levy 714). This action follows the trend of deregulation and is consistent with the conservative consensus. Most notable of the examples, however, is when the Obama administration decided that the issue with the markets was illiquidity, not insolvency, meaning that the markets would best be able to function as-is, once market trading was able to return (Levy 726). In other words, they decided that the current economic system was fine, expressing a wish to continue with the tenants of the conservative consensus.
Although this could have been for a variety of reasons, Levy mainly points to Obama’s choice of economic policy-making team members. Many of these people were chosen from Clinton’s team who were specialized to operate under the existing finance-driven capitalism (Levy 718). As such they weren’t prepared to create a new economic framework and decided to put effort towards reviving the old one. For instance, the idea discussed earlier about the issues concerning the markets being due illiquidity came from one of these individuals, that being Geithner in this case (Levy 726). Levy also points out that Obama’s main goal in becoming president was far from economic in nature. Rather, he “intended to transcend racial disharmony and regional blue-state-red-state discord,” and most importantly work to reform the healthcare system (Levy 718, 728).
The authority of the Federal Reserve and the U.S. Treasury over economic policy-making, comes from a long trend of Congress delegating its authority to administrative agencies. In response to the Great Recession, the Federal Reserves most notably gained new powers during this time. In 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed. This gave the Fed more agency in overseeing “systemic risk” and resolving financial institutions when they have failed (Levy 728). This act, among other things, created the new Consumer Financial Protection Bureau, which was placed under the control of the Fed. In addition, the Fed’s balance sheet was also doubled after a proposal by Bernanke to the Federal Open Market Committee (Levy 729). This resulted in the “quantitative easing” policy, which consisted of purchasing billions of dollars in U.S. treasury bills and U.S. mortgage bonds, in an attempt to bring about more private investment and spending.
Will Wright 