Will Obama ever stop speaking economic Mandarin?
If you believe, as I do, that we need a root-and-branch reorganization of the financial system, which must necessarily involve the dismemberment and intrusive restraint of deeply entrenched institutions, does that mean pain is the only way forward, "the worse the better" in the old revolutionary cliché? It need not mean that. But it does mean that palliative measures, like giving the banks money, would have to be attached to curative measures, like enacting capital requirements and imposing regulatory burdens that would force financial behemoths to break themselves up or become boring narrow banks. For almost two years, policymakers at the Fed and the Treasury, including Secretary Geithner, have offered bail-out after bail-out and asked for nothing serious in return.
Except for the famous stress tests, of course. But now the Fed says they're just "what if" exercises. Remember Pass/Fail classes in college? How easy they were? Well, Timmy's tests are Pass/Pass!
Oh, and the Mandarin part:
You may believe that we have learned our lesson, that if we can just get some stability and comfort for a while we are prepared to do what must be done. That's a respectable position. But I don't share it, and neither do the majority of Americans who are unwilling to allow their representatives to sign off on any more expensive aspirin. We want value for value, an ironclad commitment of root and branch reform in exchange for the unimaginable sums of money we are being asked to hand over.
Each latest plan from our incestuous cadre of economic Mandarins [Timmy, Larry] demands only symbolic concessions from the dysfunctional organizations we are asked to support. The "moderate" political class goes on and on about how Geithner and Bernanke have to go all Enron, funding the banks via off-balance-sheet guarantees and special purpose vehicles, because "populist, childish" Congress won't put up the money. Setting aside how audaciously corrosive that sentiment is to Constitutional democracy, it is simply wrong.
Congress would, because the public would, support large, explicit transfers, if they were attached to reforms sufficiently radical to prevent a recurrence, and suitably punitive towards the people who managed the system that brought us here. Value for value.
I am a true believer in American-style capitalism. So I would like to see people who earned profits lending to banks in good times bear the high costs of failing to monitor the organizations they funded. Investor fear is what is supposed to prevent the indiscriminate misuse of capital. To the degree that creditors have leaned upon "implicit" government guarantees, I think it would both be just and set a useful precedent if they were reminded that investors have to take responsibility for where they place the precious capital they steward.
So that's where we are with the Overton Window on finance these days.
If you believe that oligarchs should be able to loot the public purse with total impunity, you're standing smack dab on the yellow stripe running down the middle of the road of conventional wisdom. If you believe in capitalism instead of kleptocracy, you're a wild-eyed leftist, a hippie, and you never get to go on the teebee.
Plus ça "change," plus c'est la même chose...