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My brother, who has been working at a DC think-tank, has just started a job in the Obama administration, in the Treasury department. He now reports to someone who reports to Geitner who reports to the President. He is one of only several thousand people with that close a connection to the president. How's that for bragging rights?
I am glad he is working there, as I see my brother as just about the smartest, most competent and hardest working person I know, with integrity for three, and we need the Treasury Department (central to efforts to fix the economy) to have people like him. On the other hand, I know that my brother will take this opportunity to work even harder than he usually does, and we may not see him for the next few years.
Awesome. Congratulate him for me, and express my condolences. Going to live in the belly of the beast like that is a true warrior's sacrifice.
I would be very very interested to know his opinion of this article
. I'm unclear about the appropriateness of the details, but I think that the author gets the major points dead right:
1) Too big to fail == too big to exist
2) A system made up of fewer, smaller players would be more resilient, but would naturally be opposed by the status quo players
3) The financial sector leadership still seems to be living in a fantasyland where they get to call the shots
4) Worse, the political leadership is also living in that fantasy land, and failing to call the financial leadership to account
5) Nevertheless, any real, long-term solution will have to start with with the oligarchs taking a hit, either voluntarily or involuntarily.
I'm really hoping that he will be able to get some insight into what is currently the most worrisome aspect of the country's situation: Why the hell are the people who blew a huge hole in financial reality, still being allowed to call the shots. Is it because (as the Atlantic article suggests) it's all an old boys club network? Is it because the Obama Administration doesn't understand that the problems of the existing system are deep and fundamental, and that the best case outcome of their current efforts to prop up the existing system would simply be to delay the Great Recession for a few years? Is it because Obama etc, understand what needs to be done (break the oligarchs) and they simply can't, despite the overwhelming degree of public support for this administration?
I've been waiting for Obama to take an aggressive stance with these people and institutions, and I haven't seen it happen yet. It may be that he is stymied politically by Congress, though Congress doesn't seem too happy with the situation either. But Obama has enough public support that he could literally go on national television and ask the American people to call their representative in Congress and tell them to support thing Q. He hasn't done this yet, and his window of opportunity (and his political credibility) is rapidly eroding, and I would like to understand why.
Relatedly, I am as you know a big believer in the resilience and flexibility of distributed systems -- that's how nature manages crisis containment. This article
does a good job of putting that in the financial context, so I'd be curious about your brother's reactions to it as well.
|Date:||April 10th, 2009 06:02 pm (UTC)|| |
Without having even talked to him about it, I am sure my brother would say that it would be inappropriate to publicize his personal opinions on topics he will be working on at Treasury. The last thing Obama needs is for everyone at Treasury to be announcing their own opinion on what the administration should be doing and why they aren't doing it.
My own opinion, which I think is similar to my brother's in most respects (again without having had the chance to talk to him at length in some months) is that Obama sees panic as the biggest danger at this point, and believes that if he can get the ball rolling on change while simultaneously calming everyone (including the financial bigwigs) down, he can get the economy swinging up again. That will provide both the stability and the renewed political capital needed for more substantial restructuring.
I agree that we should not allow for profit organizations to get too big to fail, and I was very surprised to hear Geitner say something similar in recent congressional testimony. I do see both Geitner and Summers as more stability oriented than transformational change oriented. The difficulty is finding economic advisers who are simultaneously really expert in how the current system works, are a calming force on the people running that system and are very interested in doing some pretty major surgery on the system. Obama for now has chosen calming the system over threatening to slice it up.
Let's say he nominated anyone Wall Streets sees anti-Wall Street to either of those post at 9PM one evening. The Asian Markets crash, then the European markets crash, then the Dow opens the next morning at 3000. Companies whose remaining value is in the stock they own in other companies cease to exist, and AIG has to pay hundreds of billions of dollars it doesn't have to honor its credit default swaps. The global financial system is so incestuous that this would bring down most every bank and insurer in the world. That same week several million layoff notices are distributed in the US.
The problem as I see it is that the financial oligarchs do have power, even if they are broke and discredited, because they have the ultimate hostage. They can take the global economy down with them in a matter of days. They are constantly pointing this out, if you listen. They have built the structure so that it can't survive without them. They are the cancerous lungs we can't live with or without. The only way I can see out of this is to slowly and calmly build a new structure, while gradually severing the connections of the old system. Change the rules gradually so that the AIGs of the world deflate rather than popping. Don't break the banks up so much as change the incentive structure to encourage small instead of big.
I don't know if this is the way people in the Obama administration see it, but I hope this is how they see it.
OK, but he is still presumably free to offer his own opinion on the publicly expressed opinions of others outside the Administration. Though if he doesn't want to post them publicly, I certainly understand that.
At any rate, the thing I'm really looking for is some evidence, any evidence, that the Administration understands that their actions are at best short-term measures.
I understand that the financial oligarchs are holding us hostage, and that mass panic is our greatest danger. But panic is bred by uncertainty, and the federal government could alleviate the uncertainty without totally rolling over. For example, they could agree to pay those CDS papers at $0.25 on the dollar, or some similar ratio. The holders will take a haircut, yes, but they will know exactly how much of a haircut they're going to take. Unless they are losing so much that they literally, individually and collectively, want to jump out a window, they have an incentive to keep the system ticking.
Total capitulation or total revolution are not the only options available, which is what makes me wonder why total capitulation is the order of the day.
That said, on a completely separate note, I'm disappointed in the American public. Where's the bloody outrage? Tar and feathers is the traditional remedy for scoundrels of these sorts. Mass protests might or might not be constructive, but it would at least give an indication that the American people have not been completely neutered.
|Date:||April 10th, 2009 06:46 pm (UTC)|| |
I'm sure that any opinion attributed to any official at Treasury would be treated either as a statement of what Treasury really thinks, or as leak revealing that Treasury has no plan at all. That's how our politics work.
I think the lack of pitchforks on the street comes from two major sources. First, it feels pretty silly threatening the global economic system with a gardening tool. People instinctively need a bad guy to hate, not a system of bad institutional actors. Second, people have no idea what they want to happen. This crisis is too big and complex for most people to grasp. I certainly don't feel like I know what policies are wise.
In college my friends and I one afternoon decided to march up and down in front of the college president's office shouting,
"What do we want?
We can't remember!
When do we want it?
What do we want?
We can't remember!
When do we want it?
It got old fast. I think most people know they are very unhappy, but basically have no idea what needs to be done to make it better.
Well, I guess I should get his opinion before he joins the Treasury, then...
I agree that the problem is too complex for popular protests to actually call for anything meaningfully useful. But a target for the anger should not be hard to find. I've heard that there have been protests outside of AIG's headquarters, but they've been pretty halfhearted. Given what those crooks have done, it would not be unreasonable to see a mob storm the building and throw a few people out of high windows. Pitchforks would be quite useful in that context. Hell, they'd have a better than usual chance (for a mob) of actually getting some of the guilty parties.
Not that I think this would be directly constructive. But it would be a sign that Americans still have some fight left in them, which I am coming rapidly to doubt. And it might very well embolden the politicians in their handling of the oligarchs.
Another article in a similar vein, to which I would be curious to get an insider's perspective: The Big Takeover
This originally appeared in Rolling Stone, but their currently-available online version is very abbreviated. The link above is the full article.
|Date:||April 11th, 2009 06:45 am (UTC)|| |
Apparently the bankers are not getting their way on everything:http://www.nytimes.com/2009/04/11/business/economy/11bank.html?hp
Granted they are basically whining about the fact that Obama is making them stick to the very generous terms of the bailout contract, but they are clearly not used to even that level of accountability.