Impossible Things
by digby
Michael Hirsh has written a useful article in Newsweek, which drills down to the essence of what divides the Treasury and its critics. Considering that most of the critics are liberal, it’s an interesting question:
On one side are those who want to fix the financial house we have; on the other are those who think we should knock it down so we can build a brand-new one—a new Wall Street, in other words. The keep-the-house-intact crowd includes Geithner and Bernanke, as well as Obama-appointed regulators like Mary Schapiro of the SEC. They want serious fixes to the Wall Street system—new rules and regulations to repair the old house and ensure that it doesn’t burn down again in the future—but they don’t much want to change its structure. Having giants like Citigroup and Bank of America dominating the landscape is OK with them, as long as those giants follow the new rules. On the other side of the debate are critics such as Paul Krugman and possibly Paul Volcker and Sheila Bair, chairwoman of the Federal Deposit Insurance Corp., who think the old house is structurally unsound. They believe that not only can’t we solve the present crisis by merely tinkering with the old house, but that we’ll assuredly find ourselves in another crisis down the line if we don’t dismantle it entirely. It’s a debate that encompasses all the back-and-forth over Geithner’s and Bernanke’s careful, intricate plan to fix the big Wall Street banks instead of nationalizing and dismantling them, as well as the cautious regulatory scheme they laid out last week. And it’s a debate that must be settled now.
It seems to have been pretty much settled already. The administration has cast its lot with those who don’t believe fundamental change in the financial sector is necessary or desirable. Perhaps some tinkering around the regulatory edges and keeping a sharper eye on things will prevent some of this from happening in the future. But the critics think something much more fundamental is needed to fix the current economic problems and prevent this from happening again.
There is a lot of speculation about why the Obama administration is unwilling or unable to fulfill the promise of fundamental change on this particular issue, ranging from thinking that he and his crew are Wall Street lackeys to the belief that the lack of 60 Senators makes anything else impossible to the idea that the problem is simply too big and systemic to do anything more than fiddle a bit without triggering a cataclysmic meltdown.
Perhaps it’s a little bit of all of those, or something else entirely. But whatever the motives, it’s clear that Obama sees himself at best as an intermediary between the people and the bankers rather than an strict advocate for reform on behalf of the citizens.
He has said explicitly that the bankers have an IED straped to their chests and are threatening to blow themselves up if they don’t get their way, so maybe this is the only way he can manage this situation. I can sympathize with that. But there is something even more unnerving about the president telling the bankers that the administration is the only thing that stands between them and the pitchforks. I don’t think the wielders of the pitchforks are nearly as dangerous as the guys with the IEDs strapped to their chests. Indeed, at this point I don’t even see any pitchforks at all, but rather citizens being justifiably annoyed by millionaires whining about their bonuses and simply asking their government to step in and fix these problems the bankers have caused. It appeared that he was putting himself out there as the protectors of the elites against the people and no matter whether he truly believes that or if he’s just acknowledging the Big Money Boyz’s threats, that’s not a place any of us should want him to be.
Hirsh’s piece, by the way, is actually about the fact that the Geithner plan appears to be based upon a plan set forth by Warren Buffet. Buffet is a very smart investor and by most accounts a fairly liberal guy when it comes to politics. But this is way beyond partisan politics. Hirsch writes:
My point in raising this episode, which has not been reported until now, is not to fault Buffett, Gross or Blankfein—or even Geithner. Indeed, it appears that Buffett, the Berkshire Hathaway chairman (who, full disclosure, is a director of The Washington Post Co., which owns NEWSWEEK), was genuinely trying to help Paulson find a way out of the bank collapse. But the genesis of the PPIP plan does resurrect questions about who’s really running the show here, and how incestuous the relationship between Washington and Wall Street has become.
That’s the problem that everyone’s trying to grapple with and it looks incresingly as if the administration is throwing in his lot with the “best and the brightest.” That didn’t work out too well the last time a young, charismatic Democrats did it and it’s not likely to be any better this time.
Obama, April 3, 2008
We know that transformational change is possible. We know this because of three reasons. First, because, for all our differences, there are certain values that bind us together and reveal our common humanity: the universal longing to live a life free from fear and free from want, a life marked by dignity and respect and simple justice. Our two republics were founded in service of these ideals. In America it is written into our founding documents as life, liberty and the pursuit of happiness. In France, liberte — AUDIENCE MEMBER: Egalite. PRESIDENT OBAMA: Absolutely — (laughter, cheers, applause) — egalite, fraternite. Our moral authority is derived from the fact that generations of our citizens have fought and bled to uphold these values in our nations and others. And that’s why we can never sacrifice them for expedience’s sake.
Hear, hear. Economic justice is one of those values as well.