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On Tuesday the Washington Post reported on an effort by the Obama administration to get some new powers from Congress: the ability to seize control of certain non-financial entities like insurance companies and hedge funds. Coming a day after Tim Geithner's poorly received plan for Bailout II the timing could not have been much worse. Many economics and finance experts - those who have credibility by virtue of having sounded the alarm when the party was in full swing - such as Duncan Black and Paul Krugman have emphatically rejected the plan. Yves Smith wrote "Given the lack of any mention of a special resolution regime, or intent to develop one, the point of this bill is...to get broader authority to bail [firms] out." Joseph Stiglitz called it outright theft. (Very important exception: Nouriel Roubini has given his qualified approval.)

Yet the president wants the author of this plan to have a wealth of new powers, and exuberantly claims "I think [he] is doing an outstanding job" (which has unnerving echoes of Brownie's heck of a job). Geithner does not need votes of confidence at this point. He needs instead to find a monastery in some distant and isolated land, go to an empty room in a quiet and remote part of it, unroll a somewhat comfortable rug, sit on it and meditate until he is able to envision a world without Goldman Sachs. More bluntly, he comes across as someone narrowly locked into one specific way of seeing the world, and this poverty of imagination is forcing him to offer the same solution over and over.

It may not be a coincidence that the inability to think creatively is so proximate to the claimed need for more power. Perhaps Obama's economic team is crippled by the same sclerotic thinking that infected the Bush administration's national security team, which seemed to manifest itself in a never ending list of demands for more power. It leads to the following proposition: The amount of authority an individual claims to need to do a job is inversely proportional to his or her competence. Extravagant requests are more likely to be born out of insecurity (beforehand) or guilt (afterwards). While not strictly true, it may be a good rule of thumb. The good ones pay attention even when not under scrutiny and make do with what is at hand.

Should we be worried that Dodd wants the Treasury Department to loan it to the Federal Deposit Insurance Corporation when they usually have only a 30 Billion line of credit?

[update] In a banking version of an Imelda Marcos like closet explosion, BILLIONS of other shoes drop...