For Obama, No Time to Wait on the Economy

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It’s possible that further dramatic efforts won’t be necessary in the next 11 weeks simply because, with all the bailouts, there’s nobody left to fail. But plenty of other things could go wrong. We’ve given the Treasury secretary unprecedented powersto make life-or-death decisions about large financial institutions and to enter into financial arrangements that will last for several years. Given that Obama’s team will be dealing with the decisions Paulson made in August and that they’ll have to deal with the decisions Paulson makes in November and December, it’s imperative for them to get into the rooms where those decisions are being made — now. Think of it this way: If you’re slated to assume control of a mutual fund — say, one that has a concentrated portfolio in large financial companies — in January, and if you’re going to be held accountable for its performance, wouldn’t you want to sit in on the investment committee meetings right now?

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This year’s election coincided with an important moment in the financial crisis. The credit markets have stabilized in the last few weeks and even improved a bit. But the rest of the economy is deteriorating fairly rapidly. It’s now in danger of falling into a vicious spiral, in which spending cuts by consumers and businesses lead to further layoffs and then more spending cuts.

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To prevent that from happening, the Obama administration will need to move quickly — before it takes office — to put together some emergency plans for the financial markets and the broader economy.