Pleasing The Pessimist: Roubini On Obama’s Economic Team

President-elect Obama has acted swiftly in naming his economic team, and his selection of Tim Geithner as secretary of the Treasury; Larry Summers as director of the National Economic Council; Christina Romer (to be chair of the Council of Economic Advisers), and Melody Barnes (to be director of the Domestic Policy Council) were met with plaudits even from one of Wall Street’s biggest economic pessimists.

In a recent interview with Newsweek, Nouriel Roubini, professor of economics at New York University, spoke highly of Obama’s economic appointments. "The choices are excellent," Roubini said. "Tim Geithner is going to be a pragmatic, thoughtful and great leader for the Treasury. He has experience at the Treasury and the IMF [International Monetary Fund], then the New York Fed. I have great respect for both Geithner as well as Larry Summers. I think both of them in top roles in economics in the administration were good moves. I think very highly of them both."

Coming from a man who is famous for dispensing gloom and doom, this is a ray of light in an otherwise dark-clouded perspective.

And what are the first things that Obama and his new team need to tackle? According to Roubini, the "first one is the fiscal stimulus, because the troubled economy is in a freefall, so we really need to boost aggregate demand, and the sooner and larger the better. The second thing they should do is recapitalize the financial system. Most of the $700 billion is going to be used to recapitalize banks, broker dealers, finance companies and insurance companies. To do it aggressively and fast is going to be important."

As for Obama’s plan to spend more money on infrastructure and energy development, Roubini says, "We need to do it because demand and spending and housing are literally collapsing. That will get a boost from public-sector spending: [spending on] infrastructure, unemployment benefits, state and local government aid, more food stamps. We’re going to have to think larger, but I don’t think you can pass most of it until January when [Obama] comes to power. We’re going to have to wait, because nothing seems possible for the time being. But I expect most of his plans will pass once the new administration is in power."

Finally, in an unusually optimistic statement, Roubini closed the interview by saying, "Look, he [Obama] wants to get things done, so he’s choosing a really terrific team. To me, it says that he’s choosing people who have great experience. He’s choosing people who are pragmatic and who realize the severity of the national problem we’re facing. They’re knowledgeable about markets, about the economy and the political process in Washington. These are the very best people he could have chosen."

Hey, when even staunch pessimists become optimists, maybe the light at the end of the tunnel isn’t too far off.