Technocracy: Missing the Forest for the Trees
by David Atkins (“thereisnospoon”)
There is one nagging question that arises when looking at the Administration’s somewhat surprising move to sue pretty much the entire financial sector: why sue the big banks on behalf of Fannie and Freddie, while at the same time sidelining Schneiderman to whitewash the robo-signing mess?
One potential answer, as Dave Dayen argues, would be that the FHFA is actingly independently of the Administration in a narrow capacity to protect the interest of taxpayers in getting money back for Fannie and Freddie. Rumors that Geither was looking to fire FHFA Director DeMarco won’t help to quell the theory that the FHFA is acting contrary to the overall desires of Obama and Geithner.
Still, it’s hard to believe that the Administration couldn’t have quelled this move if it really wanted to. At worst, Geithner and company have acquiesced to the move; at best, they’ve helped to push it through. So let’s give the Administration the benefit of the doubt.
The lawsuit is a big deal. The financial liability from the big banks arising from the suit is greater than the proposed robo-signing settlement. At best, the two actions send a contradictory message. Certainly, pursuing the legal action against the banks cuts strongly against the commonly held progressive theory of Barack Obama as corrupted pawn of the financial industry. But the desperate desire to let the banks off the hook makes a mockery of the view of the President as an even-handed defender of middle-class interests. So what’s going on?
The answer may lie in the Obama Administration’s “miss the forest for the trees” embrace of technocracy. In essence, its desire to discretely tackle policy problems one at a time leads to self-contradictory results that end up upsetting everyone while accomplishing none of the originally intended goals and vastly underestimating the scope of the problems as well as the resolve of the opposition.
When it comes to the robo-signing whitewash, the Administration’s perspective was already expressed by Tim Geithner way back in March:
A comprehensive settlement between U.S. authorities and banks over alleged mortgage servicing abuses needs to be reached quickly to help the housing market heal, Treasury Secretary Timothy Geithner said on Tuesday.
Geithner said such a settlement will help dispel legal uncertainty that has been plaguing mortgage lenders and clogging the foreclosure process.
“It is very important that we try to bring this to bed as quickly as we can,” Geithner told the Senate Banking Committee. “I think all parties, not just the servicers, but the state AGs and the federal agencies have a strong stake in doing that.”
As I have explained before, the Administration sees a discrete policy problem: the economy can’t get better until the housing market improves; the housing market can’t improve unless foreclosures are flushed out of the system; the foreclosures can’t be flushed out until the robo-signing problem is neatly tucked away. Ergo, the robo-signing problem needs to hushed up and made to go away quietly with as little damage to the banks as possible.
Per this view, the Obama Administration would simply be doing what they see as the best thing for everyone in the long run, even if it means letting Bank of America and friends essentially get away with the biggest crime of the century.
On the other hand, pursuing a legal case against Goldman and friends to reimburse Fannie Mae and Freddie Mac for close to $50 billion in losses is also a technocratic move to assist in housing market recovery, since funding Fannie and Freddie to make loans is clearly more useful to the mortgage market than is padding Goldman’s bottom line profit.
In that context, the Obama Administration’s contradictory decisions make sense in a bizarre sort of way. Each action is designed to solve a separate technocratic problem related to a (deeply misguided) attempt to reinflate the housing market.
What’s the problem with that? Well, it’s sort of obvious. While the Administration is tending to individual trees, the forest is burning down. Wall Street thinks the Administration is out to persecute them; the middle class and much of the Democratic Base think the Administration is a corrupted tool of Wall Street. The housing market isn’t getting better. If the neoliberals and conservatives are right that the market just needs “confidence,” the Administration certainly isn’t providing that, either. The politics of these decisions lack any sort of clarity from which to derive a narrative. The whole thing is a total mess.
Barack Obama was supposed to be the “big picture” candidate with “big picture” messages. What we have instead is muddled technocracy that pleases no one and accomplishes little, precisely because it lacks the guiding light of political narrative and the firm grounding of ideological clarity.
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