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Why treat Big Auto differently from Big Money?

William Harrison at Yves place answers:

But, is [what's happening to the auto companies] not what should be happening with the big banks? Why the differential treatment here? Here's my take. I see two reasons.

First, the Obama Administration suffers from cognitive regulatory capture. [Ouch!] Former denizens of Wall Street are so ensconced in the Administration that they cannot but see events from a 'Wall Street perspective.' In effect, they operate like a horse with blinders. Their view takes as axiomatic the importance and needed continued existence of the big banks that they dismiss alternative workout solutions out of hand.

Second, the Obama Administration is well aware of rising populist sentiment. They understand that bailing out the big three automakers would weaken them politically as this would be seen as another outrageous subsidy to big business. However, Obama errs politically because the juxtaposition between his treatment of the big three and his treatment of the banks is obvious to everyone. the big three are seen as representing ordinary blue collar Americans. While the big banks are seen as Gordon Gekko-like rapers and pillagers of the robber baron class. This alone increases populist outrage at the administration. Effectively, Obama's unwillingness to deal with the banks in the same fashion earlier has put him in a lose-lose situation.

Politico, no doubt unwittingly, gives a fine example of cognitive regulatory capture in action:

The official added: “They have more confidence in the leadership on the banking side – that there are people in place who understand what went wrong and the steps necessary to deal with this disaster. They have no sense of confidence that the auto industry has the capacity or plans to structure a workout.”

Which is amazing, when you come to think about it, since last I checked, the automobile manufacturers haven't sucked up trillions of dollars in government money, but the banksters did. And the automobile manufacturers haven't ruined your 401(k) or devalued your house, but the banksters did. And the automobile manufacturers didn't crash the world economy, but the banksters did. So why in the name of sweet suffering Jeebus would anybody have an iota of confidence in the bankster leadership at all?

From a discourse perspective, this is nothing but a win, however: At last we're moving beyond CEOs, and their bonuses and personal quirks, and looking at systems, and so all the good work that Congress and the administration did in deflecting outrage onto a few whipping boys has been undone. What a shame.
NOTE Politico via Talk Left.

UPDATE On "cognitive regulatory capture," see Buiter (2008-05), and Krugman agreeing.a

UPDATE Today's OFB line, signalled by Obama himself, is that since some of the CEOs are gone in both industries, then there's no differential treatement. That's a ludicrously bad argument, and if that's all they've got, we're in trouble. As industries, as systems, the two are being treated completely differently.

It's as if two repairmen came to fix your house: The plumber was late, and did a poor job, so there's a leak under the sink. The electrician burned your house down. What Obama's saying is that since you fired them both, they're the same. However, you're only going to sue the electrician. The Obama administration is suing the plumber.

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Submitted by lambert on

... when managed by banksters (as it has been since, I would guess, the 1870s).

We've had globalization for as long as we've had transcontinental and trans-oceanic trade routes, which has been the case well before the invention of writing.

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Submitted by Mandos on

...I mean what it meant before 9/11---the political tendency to undermine economic sovereignty and thus the prospect of economic democracy, by building systems designed to prevent governments from protecting local industries, workers, and wages.

Banksters were less central actors at that point. It was these longstanding political tendencies that created the pressure to generate serial asset bubbles, which then enabled banksters to capture power over and above the rest of the corporate sector, particularly auto industries.

You want to be where the puck is going to be? That's where the puck is going to be. Economic sovereignty has always been where the puck is going to be. At some point, the USA will make nothing at all, and then it will be allowed to become a slightly tidier India. A global underclass that is slightly better off than the poor have been in the past, with an absurdly wealthy military elite. Oh, wait...

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Submitted by Mandos on

I never mentioned him. He was another in a long line of presidential subscribers to a relatively steady governing ideology to which, by the way, BHO surely also subscribes in the agency of the person of Summers. Why would you make globalization and the undermining of economic democracy about Clinton?

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Submitted by Mandos on

...I don't get the Clenis reference.