Top US Economic Adviser To Obama Tells Europe To Recapitalize Banks

Der Spiegel interviewed Austen Goolsbee who was a top economic adviser in the Obama administration. Goolsbee expressed the concern that Europe must restore confidence in the banking system or there may be a run of the banks that could lead to global economic problems. He said that believable stress tests and a means for recapitalizing troubled banks are needed to restore confidence. The interviewer responded by pointing out that the US caused the 2008 financial crisis and that it was not in a good position to make recommendations to Europe. Goolsbee argued that the US government took very unpopular steps to recapitalize banks in the US and that this restored confidence in the banking system. He was reminded that recapitalization of foreign banks would be very unpopular in Germany. Goolsbee told him that the US made good on AIG's credit default swaps that were sold to foreign banks. That was also unpopular in the US. If the US had a parliamentary system the government would have failed in 2008 and in 2010 because of the actions that it took to fix the banks in the US and in Europe.

This interview indicates how critical the situation in the European banking system is to the global economy. It also shows how difficult it will be for European leaders to take the unpopular actions that may be necessary to deal with the problem. Moreover, it illustrates how difficult it has become for the US to provide leadership to others who blame the US for the financial crisis and who perceive a lack of political leadership in the US.