I’m not normally one to agree with McMeghan or Slate fraudster Henry Blodget and I don’t know enough to say that it’s time to start thinking about firing Tim Geithner. But everything I’ve read from Krugman and Atrios about Geithner’s (lack of a) plan for banks scares the hell out of me and Blodget puts together a pretty compelling indictment:
Then he took office. In the five weeks since, Tim Geithner has:
- Given a speech billed as the solution to the financial crisis in which he promised something vague, someday, that sounded an awful lot like the bad plan that didn’t work in the past administration (which really isn’t that surprising, given that Geithner was the one who came up with the earlier bad plan).
- Floated multiple versions of the same plan into the press hoping that one would be enthusiastically received by someone other than Wall Street (no dice.)
- Refused to seriously discuss the consensus opinion of most neutral economists and experts: That the banking system is insolvent and that the solution is pre-privatization.
- Given Congressional testimony in which his brusque, defensive manner and weak responses have inspired no confidence and served only to make people wonder again why Obama picked him for the job.
and, most importantly, Tim Geithner has:
Refused to revisit or defend his almost certainly inaccurate view that this crisis is merely a temporary price decline caused by a lack of liquidity, rather than a collapse of a debt-driven economy. You can’t cure the patient if you’re treating the wrong problem.
Again, I don’t know enough to say that Geithner should be fire. And I certainly am not ready to compare him Rumsfeld. But it should be noted that Bush’s refusal to fire people at the DoD contributed to the catastrophe in Iraq. And I hope that if something similar is brewing at Treasury, that Obama does make changes.
Update: Here’s a different perspective from the New Yorker. Either way, I’m all for Obama’s cabinet members taking a lot of heat. We’ve seen what happens with a cabinet that was completely insulated from reality.
Update #2. Dean Baker:
Finally, those who want a “risk regulator” to prevent future crises are covering up the problem. The more effective mechanisms would be to fire everyone at the Fed. Preventing a disaster like this was their job. If they can fail so enormously at such a basic task, with no job consequences, then there will never be any consequences for unthinkingly repeating the conventional wisdom.
El Cid
I have never understood the admiration for Geithner from some quarters — particularly given what I have seen over the past several decades of ‘third way’ style economic policies of the Clintonoids.
However, in the end, it is the President who sets the policy, and who decides to accept or not accept some Cabinet leader’s recommended plan of action.
gwangung
Like I said…let’s hope Geithner is a foul-up and a doofus.
‘Cause the alternative is…this really IS the best that can be done…
Ogden
Please fire geithner and summers and bring back Volcker.
jdw
here’s a different view:
"Who Will Take These Jobs?
Secretary of the Treasury Tim Geithner’s job is not getting any easier. Geithner has yet to have any of his seventeen deputies confirmed, and yesterday two expected nominees for Treasury positions withdrew themselves from consideration. The withdrawals seem to have been in part because of frustration with the elaborate vetting process that the Obama Administration has put in place, as well as concern over anticipated attacks from Congressional Republicans. But I have to wonder also whether the withdrawals, and the difficulty Obama is having filling these jobs, aren’t also the result of the endless and vituperative stream of attacks on Treasury in general and Geithner in particular, attacks that are coming from both the left and the right.
Geithner has been Treasury Secretary for little more than a month, yet the calls for his resignation are already coming fast and furious. More important, the attacks on him don’t, for the most part, take the form of reasoned disagreement. Instead, they assume, and assert, that if, say, Geithner is against nationalizing the banks, he is either stupid or corrupt, when it seems more likely that he’s just reached a different conclusion about the risks and rewards of nationalization. (Henry Blodget’s call, today, for Geithner’s resignation ultimately boils down to saying that Geithner should go because he doesn’t agree with Blodget about the virtues of nationalization.) Treating disagreements over policy issues as prima facie evidence of evil intentions, or as a reason for firing, creates an environment for policymaking that’s toxic, and makes it harder to get good people to work in the public sector. And at a time when we need government more than ever, that’s just not a good thing."
http://www.newyorker.com/online/blogs/jamessurowiecki/2009/03/simon-johnson-o.html
John Cole
There is a third option that no one wants to talk about because it is so unsettling.
There is nothing that can be done. Sure, we can quibble about nationalization versus just throwing money at zombie banks and stuff like that (and quibbling may be the wrong term), but it may simply just be that nothing can be done.
There may be so many bad mortgages, so many CDO’s, the market is so huge and so over-leveraged and the housing market so inflated that we simply have no good options but to sit and watch this mess unwind, housing prices drop within the realm of historical norms, the economy contracts, banks become deleveraged, etc. It will suck for quite a while, but there may be nothing we can really do other than spending/stimulus to ease the pain (and get us more in debt).
Sir Nose'D
I heard a guy (formerly with the IMF) last week on This American Life. He was saying if you covered up the name of the country and showed the data to people who understand this stuff, they would all say "nationalize." This has happened before (Indonesia, Korea, Argentina, etc.). Banks got nationalized and the problem got fixed. Geither’s unwillingness to even dare speak Its Name does not give me much confidence.
To poorly paraphrase Churchill–nationalization of the banks is the worst possible option, except it is better than all other options.
DougJ
Yup.
ethan salto
All of this has been a Kabuki dance to avoid signaling nationalization. It clearly hasn’t worked. But it’s almost certainly what Geithner should have been doing during that phase of the economic crisis. We can debate about how well he did it — I’d argue extremely poorly — but it’s entirely rational for Obama and Geithner, up until a certain point, to hope that their efforts at confidence-building in the financial sector would work and nationalization would not be required, as this step will be extremely politically fraught in the United States.
That phase is over, as the market shows us.
And the administration knows it.
It’ll take a not-insignificant amount of political courage to pull the trigger. But the longer Obama waits to nationalize the banks, the less chance there is he’ll be returned for a second term.
Bob In Pacifica
Time for the government to bypass the banks. Banks that are getting bailed out won’t sell mortgages? Set up an agency to sell mortgages. If the banks can’t do their job, then set up an agency to do it.
And let the banks die a natural death.
Walker
Geithner got his reputation as a wunderkind because of what he did with the IMF in the Asian crisis. Which is why this new analysis claiming that Geithner actually made things worse is so fascinating.
Karmakin
Collapse of a debt-driven economy? I don’t think that’s what he is "covering up". I don’t think you CAN cover that up at this point.
The real "cover up" is the fact that this isn’t a temporary price-decline. It’s a (should be) long expected market correction. The wider economic issues are a result of the (again, expected) tantrum that always happens when investment bubbles pop.
This isn’t a cover up, per se as much as it is someone in the status quo parroting the status quo. But I can’t blame Obama. When he was talking about change, he wasn’t really talking about tearing down the speculative investment culture.
osmond
I dont mind people saying Geithner should be fired, but no one has offered any candidates of who should replace him? So lets not just oppose someone and not offer an alternatives. I have yet to read anyone including Krugman offer up any other candidates who could do better right now. So i think critiscism is fair and fine but lets not look like the GOP and just say no to everyone and everything.
osmond
I dont mind people saying Geithner should be fired, but no one has offered any candidates of who should replace him? So lets not just oppose someone and not offer an alternatives. I have yet to read anyone including Krugman offer up any other candidates who could do better right now. So i think criticism is fair and fine but lets not look like the GOP and just say no to everyone and everything.
ethan salto
I think there’s a small, but important, body of historical evidence that shows that government action can mitigate the most severe recessions and depressions. Though the scale of this one is frightening, and I understand your defeatism (they don’t call it a depression for nothing, folks), inaction is unacceptable, and we do have the enormous power of having the world’s only (current) reserve currency.
Walker
Anyone with administrative experience during the S & L crisis. Because that is what it is going to take. The problem is that Geithner is an Asian crisis veteran treating this like another version of the Asian crisis.
Karmakin
Nationalization is a non-starter politically, unfortunately.
In fact, that people even dare speak its name shows how absolutly horrendous things are right now.
Lola
Geithner and Summers helped design the budget which progressives are loving right now, so I don’t think they are Paluson Redux but still the Treasury is the most frustrating part of Team Obama. Most everything else I am thrilled with. I think John Cole may be right that there is not much that can be done. We are well and truly f**ked.
Karmakin
@ethan salto: I don’t think Cole is talking about doing nothing. You can directly create jobs and redirect income to soften the blow to people, and that’s what is being done.
But the question here is can you do anything to fix the financial sector, from CDS’s to property values to stock values? The answer to that may very well be no.
Nationalization in some form or another may fix one issue, but it’ll probably make all the other issues that much worse.
Edit:What I mean is this. Lets say that you nationalize the defunct banks. One of the immediate results is that the stock value of pretty much everything in the financial sector bottoms out. Possibly the energy and health care sectors as well. Why? Because being 0’d out on your investment by the government is now a very real and legitimate concern.
El Cid
While I agree that within banking bounds it is possible that nothing could be done, and that no one else in Geithner’s position could do any better (though I doubt it, as I still see signs of ideological / class interest policies dominating real world limits), in the end, somehow, we must remind ourselves and the world that no matter how many imaginary dollars went missing from imaginary financial instruments backed by imagined collateral, the world is still here.
The resources are still here. The people are still here. The equipment is still here. The necessary raw material is still here. The energy is still here. Everything that could have been done before this recent crash could be done now.
I hate to sound all 19th century utopian socialist, but sometimes you really do have to recall that everything is not, in fact, built from the imaginary investments of manufactured and manipulative markets.
Walker
It is one thing to say that there is nothing to be done. However, the real crime of Geithner is that he is continuing to misdiagnose the problem. The very last paragraph that John quoted above is the most damning:
This is the killer argument against Geithner, and it is not addressed in the New Yorker rebuttal.
El Cid
Can someone please update the spam filter so that "social*st" isn’t seen the same as cial*s?
4tehlulz
Stupid question time: Can the Treasury Department legally nationalize the big banks (i.e., BoA and Citi)? Nationalization seems to be a whole different animal than FDIC receivership, so I’m having a difficult time seeing how this can be done.
ethan salto
That may have been correct a month ago, but it almost certainly won’t be correct a month from now. As things get worse, and possibly much worse, political room for new action will emerge.
We’re in very interesting times, and economic and political realities are going to be changing at a pace with which we’re unaccustomed.
Karmakin
@El Cid: The moment that you can get the major news networks to take the Dow ticker off their screen during the mornings, is the exact moment where we can remind ourselves of that.
John Cole
@ethan salto: I pretty clearly said we should be doing some things to “ease the pain.” I would listen to Krugman on this.
They way I am starting to look at this is like a bad flu. There just is no penicillin, no shot, not magic cure that will fix you. You just have to ride it out. That doesn’t mean you do nothing- you can take some pain relief and suck on lozenges and use a vaporizer and eat chicken broth and take zinc and vitamin c, but you just have to ride it out.
We’re just so used to being able to “fix” things that this is hard for us to accept. Look how people react when they have the flu- “That sucks. Nothing you can do but sleep.” Now compare that to strep throat- ‘Go to the doctor and get penicillin immediately.”
That is what I think is going on. We keep trying to give flu patients penicillin and can’t figure out why they are not getting better. Long story short, they will get better when they get better and not a moment before then.
Karmakin
@ethan salto: I agree. And regardless of Geithner, I think that if Obama feels that particular door opens, he’ll walk through it. But not a moment before. He’s Superman. Not Nightcrawler.
Same thing with health care btw. He’ll walk through whatever doors open for him politically, and with that happy smile on his face. Actually, I suspect that’s the same for every issue going forward. He’s even gone as far as to challenge individual people to help open the doors for him.
Bill H
That’s what the CDF says when a wildfire has gone beyound the point where they can even attempt to control it. All they can do is run for their lives and let it burn.
It’s not Geithner, it’s the economy gone beyond redemption. There is not enough money in the country to throw at it that will restore it, the printing presses can’t print money fast enough.
John Cole
@Bill H: Exactly. I was a volunteer fireman, and at some point all you can do is hose down the houses next door and hope they don’t catch on fire and try to have a controlled burn.
ethan salto
Absolutely right, and I’d argue that this possibility is one reason the market is tanking.
But there is literally no alternative (that I can see) to temporary nationalization. Of course, it won’t be called that.
In fact, as this process moves forward, it’ll be interesting to watch the level of rhetorical compliance the right offers to whatever the administration calls it (temporary receivership, etc.). At some point, we may see the mainstream GOP, by which I mean elected officials, push back very hard against the wackaloon fringe using the "n" word. If this happens, know that our elected elites are absolutely scared to death.
Karmakin
@ethan salto: On the last point. Maybe.
Honestly, I highly doubt it. I think you’ll see a few float that (I think Grahmn has already done a bit of that) but for the most part they’ve raised the stakes for the wackaloon fringe so much that they can’t go back against them.
Michael
At the risk of screwing with something that tinfoil minds would go apeshit over, perhaps now would be a good time to consider a rebuild with something along the lines of the Amero.
*chuckle*
We’re rebuilding from scratch anyway, may as well look 50 years forward.
osmond
I think the criticism is fine, but this is a 30 year problem that will take longer than 45 days to unwind. From what ive read the problem is changing and evolving so quickly that as soon as a plan does come out theres new symptoms and problems. The problem we had in december is now compounded by job loss and health care costs. So if there are any names out there who we think can do better lets put them out there without just saying Geithner sucks fire him.
El Cid
@Karmakin: I don’t harbor any conceptions that such realism will become widespread. But there’s no reason that individual reasonable people cannot will themselves to recall what in fact is true about the relationship between ‘the economy’ and our real, material factors of existence.
Dave_No_Longer_Laughing
Volker: 81-year old Fed chair under Carter and Reagan.
Wouldn’t he be responsible for the current economic mess as it all goes back to the days of Reagan and de-regulation?
Maybe, maybe not. But we live in the age of "kids" running the school and I am not trusting anyone under 70 these days to run anything. Things were a hell of a lot different when I grew up in the 1970s, for starters, there were grown-ups. Everywhere, the grown-ups were running things, at the toy store, at the supermarket, and in the government. Some grown-ups weren’t good at what they did, but they still acted like grown-ups when they got caught (Nixon, maybe?). Not any more and we are in trouble.
So axe kids like Geithner and boost Volker, long may he live!
John Cole
You know what I would appreciate. I would like someone to go through the last fifteen years of Reason magazine’s cries for deregulation and then their whinging the past few months about socialism. I am so over those wankers. I can;t even read them anymore.
And now they have Michael Moynihan over there doing his best Weekly Standard impression. That rag is now worthless, and I have even removed them from the links. Why bother? I can get what they have to offer from Red State and the Weekly Standard. And for the issues they have not lost their mind over, I can read Radley Balko and get it firsthand from him.
PeakVT
@John Cole:
Correct. There is overcapacity in nearly every sector of the private economy – housing, retail space, office space, auto manufacturing, everything that supplies those industries, etc. Until wear and tear, obsolesce, and/or population growth reduce that extra capacity, or some important new innovation comes along, the economy is going to suck.
The action that everyone wants Geithner to take is to make sure the really big banks – the ones that have an overwhelming share of the deposits – are lending on the basis of the merits of loan applications, not the status of their own balance sheets. Having non-zombie banks will reduce the decline of the economy and enable it to grow faster once the extra capacity is gone.
Punchy
But how does Burkean Bells fit into this post?
Svensker
No idea whether Geithner’s actions are any good or not. His biggest problem, I think, is that he does not inspire confidence, and confidence is what we need a lot of right now. He’s making Obama look weak, as well, which adds to the lack of confidence feeling.
Brachiator
@Sir Nose’D:
Britain has all but nationalized Lloyds and the Royal Bank of Scotland. Hasn’t solved squat. The amount of bad assets, bad loans and dubious financial transactions is so huge that it defies any quick or easy solution.
People who want to criticize Obama’s efforts need to look at international news and see that various leaders are trying anything and everything to keep a global depression from engulfing financial markets.
By the way, I agree that it is premature to call for those who note that it is premature to call for Geithner’s firing when he has not even been able to get all his staff in place.
Also, by the way, I wonder if there is anyone who really qualifies as "people who understand this stuff."
Karmakin
The best solution, by the way, for the medium term would involve massive job sharing programs combined with government programs to lower cost of living expenses. (Health care, insurance, maybe energy via cheap mass transit)
mr. whipple
I’m not so sure. Latest Newsweek poll shows 56% of the public favors nationalization.
http://www.newsweek.com/id/188005
liberal
@John Cole:
Given the actual situation on the ground, it’s clear that, between the choices of (a) nationalization/receivership/preprivatization/whatever-you-want-to-call-it, (b) Treasury’s current strategy, and (c) doing nothing, (a) is best.
liberal
@Karmakin:
Utterly false. You apparently haven’t been seeing the news of people across the political spectrum calling for nationalization.
liberal
@Karmakin:
Bullsh*t.
It would just mean that a firm which is actually insolvent might have to go through a bankruptcy process, including perhaps liquidation.
Do you really think investors aren’t acquainted with that?
AhabTExpropriator
@El Cid: No.
SA2SQ.
Nancy Darling
I have tried to wrap my head around this and as near as I can figure out a credit default swap is basically the same as 200 of my neighbors taking out an insurance policy on my house betting that it will burn down. My policy was a legitimate, regulated transaction. Why don’t they spin off the legitimate, regulated part of AIG and then let the rest of participants have at it. The ones who bought the swaps are out their "premiums" and the money they are owed for their "losses" is funny money anyway that only exists in the ether somewhere. This would probably keep lawyers, accountants, and associated wunderkinds busy for decades and they wouldn’t have as much time to make mischief for the rest of us.
mr. whipple
Well, in the 70’s I was 10, so yeah, everyone was grown up by comparison.
The biggest ‘kids’ I’ve seen so far are the wall streeters and wall street media. They bitched because Geithner didn’t give them ‘confidence’. What a load of crap. What they needed was someone with a Fred Thompson voice and white hair to tell ’em all was gonna be well? BS.
This is gonna hurt and they want it to be painless and they want someone that will magically fix things with no pain to them. It’s all whining about their pain. F’em. Freaking babies.
Libby Spencer
I have to confess that I’ve had a few, "maybe Obama should fire him" moments myself. It seems he can’t detach from his emotional relationships inside the industry. Any sensible solution will hurt his buddies.
Also, in response to a comment above, I just read a new poll at Newsweek that says (56 percent) supports nationalizing large banks at risk of failing….
Seems the public understands insolvency better than Geithner and Bernacke do.
AhabTExpropriator
Fixeteth.
liberal
@osmond:
That’s just a stupid argument.
We’re objecting to Geithner’s policy approach. The point here is to appoint someone who will adopt what most astute observers agree is a better approach (nationalization/receivership of large insolvent institutions).
Pointing out that we can’t name names is a bizarre, childlike argument. There are probably hundreds of people who are qualified for the job.
liberal
@Dave_No_Longer_Laughing:
No. IIRC, there was some recent article/blog post somewhere pointing out that Volcker killed the inflationary spiral we were in, but Reagan got rid of him when he wouldn’t accommodate Reagan’s demand for easy money.
The replacement? Greenspan…
liberal
@Brachiator:
The question isn’t whether nationalization is certain to work. The question is: is it really the best option out there currently, as regards insolvent banks? The answer to that question is "yes".
Nationalization might not be a sufficient measure to take, but it’s necessary.
kid bitzer
yeah, i do think you have to fire summers at the same time.
both because he will advocate to keep his buddy tim as long as he can, and because he is also responsible for the policy that tim is pursuing.
right now, two people seem to have obama’s ear: geithner and summers. and those two agree on what policy should be.
no point in firing only one of them.
El Cid
@AhabTExpropriator: No to what?
Joshua Norton
If nothing else, it will put the damper on phony stock options, billion dollar bonuses and a new company jet every year.
Right now they’re asking for handouts mainly to get their own personal lifestyles out of hock.
AhabTExpropriator
@El Cid: Fixing the am-spay ilter-fay. Given the way this blog works such an undertaking could employ thousands, but it risks the negation of existence.
Cat Lady
The debt economy financial collapse is of such a magnitude it has taken us beyond the event horizon, and we’re just not going back to the world we inhabited just a few short months ago. The administration knows it, but it’s politically impossible to articulate that yet, for all kinds of reasons, no less than the runs on the banks. There are so many dire consequences, domestically and globally, unintended and intended, for every action from here on, we need mentats and guild navigators. Thank god we have Obama and Geithner, as opposed to McCain and Gramm at least. But I’m still scared.
Napoleon
@liberal:
I actually think he got rid of Volker because he actually believed in regulating the markets, and, basically, Greenspan did not.
Jay S
@John Cole:
Flu befuddled loser defeatist! Settling for Theraflu when you could be using Tamiflu.
Obviously we need to develop Tamiflu for economic collapse. Where’s our can do spirit? Where’s our analogical reasoning?
More seriously, I’m not sure we can afford to just ride it out. We may stabilize at a point well below what is a best outcome. We will probably come out of this with a lower GDP, but there are probably multiple scenarios with better or worse results. Some of those results are likely to be quite bad.
valdivia
We are beyond the point of the magic bullet solution (maybe 2 years or 3 years ago). No Volcker or Krugman can fix this. And to compare this to the 80s and countries like Sweden is erroneous IMHO. The degree of connectivity in the world economy make it this situation much much different of the Reagan period or how the swedes salvaged their banks (they nationalized 2 of which they owned 80% to begin with, previous to nationalization). So calling for geithner’s head makes no sense to me. I would like to see someone else put in charge of crafting a new regulatory system once we land on safe shores though.
Indylib
@John Cole:
Here’s a comment from a Matt Y thread about that Cali Congresscritter reading Rand –
I love his description of libertarians.
Brachiator
@liberal:
No. It’s that YOU believe that the answer is "yes." You refer to supposedly astute observers who agree that nationalization is the answer. Who are these people, and how would their nationalized banks solve the current financial crisis?
Back in February, a Wharton School of Business story noted:
I know that economists such as Nouriel Roubini argue for nationalization, and that others point to the example of Sweden in the past as offering a model of nationalization and selling off "toxic assets" (leaving shareholders with nothing).
Still, the hard reality is countries which have nationalized their banks during the present crisis have not solved their financial problems.
Indylib
Here’s the link.
Leelee for Obama
Is anyone else here a fan of "Apollo 13"? For the last few days I’ve been hearing Kevin Bacon saying "they don’t know how to do it, that’s why we don’t have a plan!"
As terrifying as that has been, I also remember that Ken was working on it! Someone (several someones?) are working on it, and I have to hope they will get us all back alive. Here’s to "Failure is not and option.
I remember back in the 80s, hating St. Ronnie and his voodoo economics-I have to say I’ve been proven right, and how I wish I hadn’t been.
My children (2) and grandchildren (4) are going to suffer for this and I can’t help, which is killing me. The one comfort I have is that I’ve learned how to live on not much, so at least I’ll be a good example.
Damn the Randians all to Hell!
Sir Nose'D
I don’t think anyone is suggesting nationalization is a quick fix. Elsewhere the effects of nationalization takes a few years to fix economic crises. In those cases, though, the largest global banks were not the ones being nationalized.
I’m curious what others think–if several of the big banks (Citi, BoA, and let’s include AIG for good measure) are in fact zombies, and they are nationalized, how long would it take the economy to stabilize? I seriously have no clue.
Jay S
@Brachiator:
This is above my pay grade, but I think the people advocating nationalization see it as a necessary but not sufficient condition for resolving our financial problems, and that without nationalization the problems are either intractable or much less tractable.
Ella in NM
Does anyone think that this might be behind the resistance to nationalizing the banks:
http://www.funnyordie.com/videos/c130f64d6f/the-new-f-ing-citibank#player
Hyperion
@John Cole:
wow. this will make it harder for me to get my daily dose of libertarian BS from Hit and Run. whenever i commented there, it was usually along the lines of "you guys are so crazy. i’m glad you’re irrelevant."
Comrade Stuck
This was mine and some others initial reaction when this whole thing started and was summarily flamed for being irresponsible for even suggesting not trying to stop it. I wasn’t suggesting any such thing, but just supposing maybe it couldn’t be stopped and had to run it’s course. I subsequently supported trying to stop the bleeding because it’s better to try psychologically than do nothing, and it is possible something can be salvaged that wouldn’t be otherwise. And I was always for taking measures to lesson the pain on average people and meeting basic needs. And it is looking more like GM may be unsalvagable as well.
A Mom Anon
I barely understand any of this,but wouldn’t it be a good idea to separate investment banking totally away from just regular banking? Lose the shareholders and all that crap and just be a bank. It seems like it would simplify ALOT of things and keep people’s regular bank accounts insulated from failure. (I know about FDIC,but they don’t have enough money to cover everyone,right?)
From what I can tell,the small,sane,locally owned banks and credit unions that don’t do all this crazy ass bullshit (gambling with money that doesn’t exist)are doing ok. I thought I read somewhere that the wall between investment banking and regular banking(checking,savings,home loans,business loans,etc)was erased and that’s where alot of the problems started.
Anyone?
Ned R.
Here’s the thing about Geithner — the links could well prove me wrong, I seem to remember that when his name was first mentioned almost everybody who was financially-wonkish seemed to love him or at least be fully onboard with the choice of him as a steadying hand, and that included plenty of people who were calling for Paulson’s head on a platter. Some mentioned directly working with him, being impressed by him, and so forth. This pretty all-encompassing group included Krugman, Calculated Risk, Brad deLong, etc. I think even Roubini IIRC.
So how much of the dissatisfaction is projection? How much of it is driven by an implied belief that Geithner was going to do exactly what ‘they’ wanted — and keep in mind that ‘they’ refers to a wide range of political and financial opinion at this point, so clearly that was never going to happen even in the best of times? How much of the dissent now is driven by a combination of inflated expectations and a desire to hedge on their own bets? When people talk about market psychology, I think we have an example happening right here — as someone’s noted, we’re past the point of a magic bullet solution, so why should we act as if there is one and why be surprised when one is not presented?
Like John, I almost tend towards a belief that this requires a riding-out, and it’s not pleasant to think about on many levels. Numerous friends are in tough spots right now, far and near — quite obviously, I don’t want to join them either. What’s interesting to me about Geithner — and I don’t see this as contradicting Blodget’s angry assessment — is that he seems to be someone who is more content to be lost inside his work. Compare this to Paulson and how he pretty much became the public face for a lot of things over the past few months — every gyration, every change, every twist and turn. Did that make him more of a loved or trusted figure?
I could say more, but I think I would have little to constructively add. I have no reason to automatically love Geithner, I’m not excusing him, I’m all for pressure and constant review. But I’m also patient, for now.
mikkel
How is Blodget a Slate Fraudster? He seems pretty on the ball on Yahoo Tech Ticker and always has while I’ve watched.
As for Geithner, he’s driving Yves Smith crazy and that’s good enough for me. If she says that he is woefully addressing the situation and just enriching his buddies, then I believe it. Also she wasn’t that enamored with him in the first place think he was too beholden to The Street.
Ned R.
Unrelated perhaps but this interview with the NY Times with Obama from yesterday just went up and as was said above in a comment by Cat Lady, "Thank god we have Obama and Geithner, as opposed to McCain and Gramm at least." It may be an ‘at least’ but I’ll take that ‘at least,’ thanks.
jcricket
I think the body of evidence is pretty clear that the "do nothing and let it all unfold" school causes much more short-term pain (i.e. people who have no jobs, food, shelter) than is necessary. That’s the lesson from the Hoover v. FDR approach. The "government intervenes a lot" approach isn’t without its pitfalls and costs, but it helps people who need it, instead of forcing unemployment to 15-20% and wiping out another 90% of people’s portfolios along the way.
Nationalization will not solve everything, but it will bring a financial reckoning as fast as "doing nothing" while lessening the collateral damage.
Frankly, The world runs on credit, and there are good reasons to want responsible lending to continue. For solvent firms things like bridge loans, net-30 terms, loans for capital expenditures, all the kinds of basic things business’ need to pay their bills, make payroll, expand, etc. If the plan is to simply let the banking sector die and wait "a few years" for another one to takes it place, we’re headed straight into the second great depression, no doubt.
Ned R.
I mean, the opening alone:
—
Q. You said it’s going to take a long time to get out of this economic crisis. Can you assure the American people that the economy will be growing by the summer, the fall or the end of the year?
A. I don’t think that anybody has that kind of crystal ball. We are going through a wrenching process of de-leveraging in the financial sectors – not just here in the United States, but all around the world – that have profound consequences for Main Street. What started off as problems with the banks, led to a contraction of lending, which led in turn to both declining demand on the part of consumers, but also declining demand on the part of business. So it is going to take some time to work itself through.
—
I’ll take that over a frickin’ happy talk "Of course I can assure them!" answer.
Mike SSS
Geithner has obviously "blown" it. It is possible that firing him would be right, but how about this:
Immediately, or sooner, Geithner announces the framework of his bank rescue plan, with specifics, and declares that he is putting Volcker in charge of running the program, effective RIGHT NOW.
No one would reasonably expect the Treasury Secretary to manage the program anyway. Volker has more credibility than anyone else.
Putting Volcker in charge would immediately restore confidence, and Geithner’s shortcomings would at least temporarily be forgotten.
slaney black
I commented "Dump Geithner Now" about a day or two after he got confirmed, right here on this very blog. Got called a troll at the time, but glad to see y’all are coming around…
slaney black
Geithner got his reputation as a wunderkind because of what he did with the IMF in the Asian crisis. Which is why this new analysis claiming that Geithner actually made things worse is so fascinating.
Actually that’s not so much "new" analysis as "the unanimous opinion of anyone who paid any f’ing attention to the Asian crisis at all outside the captive US press."
Geithner helped double the suicide rate in most countries he was "helping". IMHO him and Summers are as deserving of a Hague trial as Rumsfeld is.
jdw
I think a lot of it could be ego, also.
The funny thing is how much this has increased within just a week, simply because the market went down and there were bad employment numbers…things that were widely predicted well ahead of time. It’s like no one believed what Obama et al were telling them.
So, now there’s panic and a generally feeling that something’s gotta be done RIGHT NOW and it’s gotta be done my way because Geithner has had all of 7 weeks and things are getting as bad as he said they would.
passerby
Standardizing risk, as I understand, is the key to preventing future chicanery (fraud, that is). One of the major aspects of Basel II and now Basel III is that more transparency in risk assessment and valuation is called for.
I just read that the major US banks will be meeting in London with Brit banks ahead of the G 20 summit some time in April.
Since the USA is the only major country that has not agreed to the Basel II and III banking system, they’re probably going to hammer out the last few details in London (purely my guess) prior to the G20 where they could finally sign off on it thereby creating a global bank system with the transparency and standards that are needed for a modern economy.
Napoleon
@mikkel:
I forget the particulars but he has a shady background and was nailed for something in the securities industry and now is out of the industry, but personally I think he is insightful.
Comrade Stuck
Seems to me at this point and probably from the beginning, that nationalization is the only option that might save the financial industry in this country, and because the world depends on it one way or another, the world economy.
Even to an idiot like me, the problem obviously is structural and systemic and hoping these fools that led us here will be willing, or able, to reform themselves has always been a pipe dream imo, and an ever more expensive one.
The Wall Street jackals likely see this writing on the wall (no pun intended) and are not going to start trading again until this dread step is taken. Of course, they and other wingnuts are currently spending their days pointing fingers at Obama for doing what they had wanted, giving them mo money they can squander, and hollering socialist and failure when anyone considers the step they likely know is the only one left. This is one reason making an insider to this house of cards the top man is unhelpful imo, and Geithner needs to go.
mikkel
@Napoleon: Yeah he literally is a fraudster I guess.
"In 2002, then New York State Attorney General Eliot Spitzer, published Merrill Lynch e-mails in which Blodget gave assessments about stocks which conflicted with what was publicly published.[5] In 2003, he was charged with civil securities fraud by the U.S. Securities and Exchange Commission.[6] He settled without admitting or denying the allegations and was subsequently barred from the securities industry for life."
He must have been chastened because he is the most intellectually honest fraud I’ve ever seen…or else he’s still scum but just happens to have guessed right this time.
passerby
I cannot imagine that Obama, who’s demonstrated that he’s is not only smart but wise, would entrust the Treasury to someone he wasn’t sure would be able to accomplish what needs to be done. The only other reason I can see him going with Geithner is as a "fall guy" where in the process of failure, all deeds are laid bare and Giethner is the dope-to-rope.
Or maybe Obama and Geither are finding that prying power from the money hogs’ cold dead hands isn’t as easy as first thought.
…or maybe it is, it’s just taking longer than we want.
We feel the urgency because we live the effects and results can’t happen fast enough for us. The administration has only been in power a month and a half.
If the solution to the fraudulent banking practices happens to come even 2 months from now, it will be quite a feat given they are going up against a global faction that’s been doing it "their way" for over a century. Obama said this in the waning days of his campaign: " Power does not give up easily".
georgia pig
I find it implausible that Geithner is an idiot or part of some wicked Wall St. conspiracy. I could be proven wrong, but I think that’s just paranoia. Obama is a smart guy, right? Obama no doubt knows all of the arguments pro and con nationalization, because he is surrounded by a variety of different economists. He’s net literate and sure as hell has as much or more information than any of us or, for that matter, Krugman, Roubini, etc. Above all, Obama is probably one of the most astute politicians of the last 50 years. So, Obama knows that allowing Geithner to forward some kind of conspiracy to line the pockets of his colleagues on Wall St. would kill his presidency. I can’t believe he’s naive or stupid.
Someone on Ritholtz’ blog made a plausible case, which is that essentially everything is FUBAR and this is the only way we can hope to deal with it. We’ll be lucky if we’re Japan, and there may have been very good reasons why the Japanese did what they did. I sure hear a lot of glib pundits that seem to think that nationalization is a snap and cure to everything. Their arguments often have the quality of something pulled out of your ass.
I wonder if the feds have the personnel or mechanisms to deal with this. FDIC has never done anything of this scale and probably can’t. They’re being used to mop up little guys. Geithner is basically telling Wall St "this is your fucking mess, you clean it up." They’re being subcontracted. The billions being forked over are simply how much this is going to cost, no matter what is done. Bonuses and shit like that are unfortunate, but essentially chicken feed when you’re talking about trillions. Perhaps there will be tax changes down the road to recoup some of the losses. Maybe some prosecutions, too. We can only hope. I’d love to see Thain and those other fuckers at Merrill take it up the ass.
The little guy has not been directly affected by the drop in the stock market, because he never had enough income to put money into a 401K. He just got a tax cut, and there may be payroll tax relief coming along in the future. The stimulus (and others coming along in the future) can give jobs to working stiffs, tough shit for bankers, attorneys, etc., e.g., the pukes who benefitted the most from the bubble. Who gives a shit if the stock market tanks, it needs to. People need to quit obsessing about short term investments. Kill off the day traders and assorted other parasites.
Geithner is there because he has a very thick skin, knows where the bodies are buried and is determined to move forward no matter what flak he takes. He’s not there to make people happy. I wouldn’t want to be him, because the financial world is full of armchair quarterbacks with pet theories and operators with questionable motives. Perhaps Geithner is being enigmatic about his plans because he doesn’t want to give certain assholes a clear shot at gaming the strategy. Maybe I’m all wet, but Obama seems to have confidence in him, and I’m reluctant to think a guy with as much political game as Obama would suffer Geithner if he was a fuckup or self-dealer. Look who’s screaming about Geithner, guys like that tool Cramer — question their motives. Do you trust them more than Obama?
For those that think that this is just some fantasy that Obama is some kind of Jedi warrior, I can understand your skepticism. However, Obama has many times shown an uncanny ability to outflank his adversaries, and he certainly has plenty of them. That might be luck, but maybe it isn’t.
bago
I think it’s finally beginning to sink in. We are f-d. It’s like seeing lady liberty at the end of planet of the apes. I just spent a week at whistler getting laid and still I’m rather despondent. Anyone with any sense of shame needs pitch in. There needs to be some legal mechanism to go after these terrorists who evaporated billions upon billions of dollars. In a networked society, perjury should only be eclipsed by rape and murder. People who poison the body politic with deception need to be seen as toxic, and hurting more people than drunk drivers.
Comrade Stuck
Interesting poll today from Newsweek.
11. Temporary nationalization is another way for the federal government to deal with large banks in danger of failing. This is where the government takes over a failing bank, cleans its balance sheets, and then quickly sells it off. In general, which do YOU think is the better way to deal with failing banks…
29 Government financial aid WITHOUT any government control of the bank, OR
56 Nationalization, where the government takes temporary control?
11 Neither/Other (VOL.)
4 (DO NOT READ) Don’t know
Elie
This from a comment yesterday on Brad DeLong’s blog. Seems pretty good to me:
"by: jh | March 06, 2009 at 01:46 PM
Just a note. As asset backed financial instruments one can say that these assets have some nonzero value which is what Giethner is saying. Furthermore they continue to be valued at way above market rate on various banks books because they have not been brought to the market. The real problem is that without something like the Resolution Trust Solution this can’t be done. With the FDIC the government steps in pays of the depositers (who are like investors) siezes that banks assets (loans) and sells them off thereby also placing a value on them. The problem is that Gietner can’t seem to come up with more that half a solution, partly too because the amounts are so large AIG has "insured" these at something like 2 trillion and and the banks means of stacking debt on debt have multiplied the orginal debt beyond what could reasonably be paid off. There is no clever half measure that doesn’t collapse this portion of the banking industry. And four banks right know have some ungodly portion of all these assets. Nationalization is not a panacea, it has to be structured in such a way that it works. Geithner’s solutions won’t work but niether will waving a magic wand called nationalization. People have to DO something."
Now I don’t pretend to be fully knowledgeable in any way about this, but speaking from only a human knowledge basis, I am confident that Geithner knows that he is fully accountable for success or failure. I feel "good" (if such can be said about this situation) that UNLIKE any time or any appointee in the Bush administration, Geithners skin (and may I add his blood, skin and bones) are on the outcome of this. He knows that in some way, this quiet, kind of nebishy guy has the future of our financial system in his hand. Both he and his boss Obama’s heads are on the block.
This is why I am starting to feel a little pissed off at the calls for premature replacement (with WHOM pray tell?) and to do WHAT exactly? That piss ant Krugman would rather die than accept REAL responsibility for this – nor would his psychic twin Rubini. They really aren’t helping (although I value their informed opinions — not their destructive and non helpful judgements without the same knowledge hard won from actually BEING in Geithner’s position. No, I don’t think either one has that perspective so I wish that they would leaven their comments with some sense of that.)
Am I scared? Hell Yes. We should all be. But how does kicking this guy who Lord knows probably wished he kept his mouth shut when he said yes to do this, help him figure out how to frickin work this out? Unless Krugman or Rubini or others of the peanut gallery are willing to step in and take his place, they should be mindful that they are like the demented people in the lifeboat who want to make the rowers row in the right direction but can’t really give the details on whether their direction will for sure result in a safe outcome. Ya see, Mr Geithner knows that he really has that responsibility – not to get his f——g column in by the deadline.
mikkel
@georgia pig:
The idea that it’s a conspiracy is far fetched but the idea that they are wasting resources to give to the Wall Street people because without that the whole thing collapses and they don’t know what else to do is realistic.
On a personal level, I’ve seen all this coming for two years. When Obama threw his hat into the ring I thought "now there is a great politician that will become the next President and maybe one of the best ever. Too bad he is an incrementalist instead of a radical, because things are so fucked that there is no way to save the system and we need to start working on how to cushion the collapse and then rebuild."
I completely trust Obama to do what he can but think he’s powerless. I think it’s in his nature to try and save what we have even if it means throwing hundreds of billions down the drain helplessly, but at a critical point he’s going to wake up and say enough. That will be an interesting day. That’s why he has an entire parallel economic advisory board setup. I encourage you to listen to Volcker speak about the crisis sometime and then remember that he is the head of the advisory board that personally brainstorms with Obama.
If you want to get into crazy talk, I think there’s a good chance that Geithner is a sacrificial lamb. Obama is praying that he can get us out of things, but is worried that he won’t. Vockler and others talk a lot about the complete fundamental restructuring of the entire financial industry in a way that isn’t feasible until everything breaks. I think the nationalization question should be seen in that context: it won’t be a panacea but it will enable the create of a new system that will last for decades. FDR floundered with most of his policies in the beginning too…
Joshua Norton
Typical comparative/dismissive stance for anyone trying to justify the status quo. "Oh, this is all just little bits of money. What’s the problem with the people who made the mess pocketing a few hundred more million? They’ve earned it." Bullshit! As someone once said, a Billion here and a Billion there…pretty soon you’re talking about serious money. Things won’t start to straighten out until a goodly part the crooks who are currently gobbling up all the "chicken feed" do a perp walk.
There’s no confidence built by pouring money into a bottomless hole that only rewards the shady dealers who dug it.
Chuck Butcher
I’m real curious what outcome people expect of naionalizing the investment banks. It’s better isn’t an answer. They would be exactly the piece of shit they are now. New management? The is a reflection of the deification of CEOs, somebody else does all the work and Mr Megabucks, CEO signs it. The stupid that led here is scarcely top down.
What do you do with the shareholders? If I own Citi right now at $1.00+ as a long term, the only prayer I have is if it can recover somewhat, I don’t want the Govt’s $1.00 offer (or whatever). How does the debt change?
AIG would sell parts of itself, profitable ones, nobody can finance the deals. The stuff is already on the market for sale. Once the profitable stuff is sold, you’re still left with what? A piece of shit that is globally fatal in failure.
Whatever the stock market is getting up to this week means what in relation to Geitner? The market suddenly knows what the f**k it’s doing? Why is it that now something that hasn’t dealt with rationality for decades is supposed to be an indicator of any goddam thing- except how fucked your stock is? If you have money in stocks, exactly what was it you thought you were buying? By what rational measure of what a stock is, did you buy it? Now, by what rational measure of what a stock is do you sell it?
Geitner has had a little over a month to get his head wrapped around a mess that spent 30yrs getting here and people expect what? The new miracle cold pill? Geitner is busy poking chewing gum into leaks and you want a new engine for the boat? Sure you need new regs and transparent vehicles, but right now you’d better bail water if you want a boat to put that engine in and you might note that bailing water is frustrating as hell as more leaks spring up. I’d really like to make it to the beach.
Laura W
Christ.
What a great comment thread this is. So much thoughtful, concentrated smart in one place.
And not one troll or spoof diluting it all.
Refreshing!
Cat Lady
@bago:
Agreed. I just wish this meme would catch on soon – it’s time for the beneficiaries of the largest upward concentration of wealth in our history, to be shamed into demonstrating patriotism by embracing the change in their tax rates IN THE FUTURE, for crissakes. I think Oliver Willis determined that for $300,000/yr, the marginal rate would require like an additional $4.10 a day. Shame is powerful, and perhaps Obama is the only one who has the pulpit to start the meme. It worked out pretty well when he mentioned Limbaugh.
Unabogie
Others have already said what I wanted to say, but I just keep recalling Krugman on TV back in 2005 telling all of us that when the housing bubble pops, it will take a while to recover from the shock as stocks plunge to what the true value of the stocks are.
So what changed? How has he gone from "this will take a while to unwind" to "hurry up and fix yourself!!!"?
I agree with John that it looks as if really all the government can do at this point is let the air out of the bubble as slowly as possible and give everyone pillows to cushion our asses when we hit the ground.
I will also say that the Republicans can go fuck themselves. Here we are, rowing the lifeboat, and they’ve stopped rowing to wrestle the captain’s hat away so when the rescue boat arrives they get all the credit.
If you stop rowing you should be tied to the anchor and thrown overboard.
Wankers.
mikkel
@Chuck Butcher:
It’s my understanding there are people using "nationalization" as a synonym for "magic" and then there are those using "nationalization" meaning "fundamentally restructure the entire financial system."
Some proposals of the second type that I’ve read are pretty much as follows:
1) Grab everything, wiping out shareholders.
2) Spend a few months examining all assets and honoring commitments
3) After the books have been examined, spin out the good assets and deposits into a number of "good banks" that will be the seeds for the new financial system. They will be highly regulated and act like old fashioned banks, meaning low leverage, carrying most loans on their books and not be into any investment bank type stuff. I’ve heard people referring to this as the "utilities" model type of banking since it’s providing a core good to the public and they get to profit in return for not ruining everything. The government would have a large stake that would decrease over time.
4) Cancel all the CDS contracts that are just speculative in nature and don’t represent an underlying bond.
5) Throw all the bad assets into a pool that is now kind of separated from the world at large. As money flow into the pool it is distributed to bondholders but losses are given partially to the government and partially to the bondholders. The bondholders would most likely end up with a 20-30% haircut.
6) Do something about the mortgages, either sell them to private investors in return for the principal being reduced, reduce the principal but carry it on government books or foreclose on bad mortgages but rent them out. Maybe a combination of all three.
7) Repeat as necessary because doing all that would start a chain reaction of failures.
Those proposals wouldn’t actually stop our downturn which is why they are so loathe to go down that road. However the argument is that it would reduce the amount of time it’d take to recover.
Elie
Chuck Butcher:
"Sure you need new regs and transparent vehicles, but right now you’d better bail water if you want a boat to put that engine in and you might note that bailing water is frustrating as hell as more leaks spring up. I’d really like to make it to the beach."
Also agree with Laura W — great comments from everyone – serious and informative —
Chuck, my back is aching but I’m good with the pail. We can do shifts. I also chew gum regularly…
SBW
Mikkel,
Thank you for your excellent comments — a good response to the asinine caricatures of nationalization put forth on this thread.
The role of finance in the American economy needs to fundamentally change, essentially shrink quite a bit, and that is going to be painful for the entire economy. Of course, the financial industry is going to fight losses all the way down — and if that means enormous taxpayer theft, so be it.
And President Obama seems to be going along just fine — more money seems to be proposed (based on the NY Times article). For those of you who claim it’s all so exhaustingly complicated: if anyone wants $750 billions dollars (more) for a bailout, he/she better damn well be transparent, and better damn well take the time to explain why. (Authoritarian, faith-based economics (or, crony capitalism) was supposed to be Bush’s schlick, not the current President’s.)
To the comment about President Obama warning us (Americans) about what was coming — Obama didn’t notify me of anything. Lots of well written financial weblogs did — and have been for years, long before the mainstream media, experts, or government officials of any party recognized, or at least admitted, there was a problem.
Which makes Obama’s comment about financial blogs simply idiotic. I would suggest he learn some humility.
Chuck Butcher
You’ve got the US bailing out banks from two direction, directly to banks and then again through AIG. Of course with AIG you’re also covering foreign banks. If the govt actually takes this kind of stuff, if you get the US actually owning this crap you do make the taxpayer responsible for the debts. The US govt cannot just junk this stuff or "write it down" or do anything other than pay the obligations in full. Not in the real world of politics and finance can the US use the private industries’ tools and get away with it. My uneducated guess is that this is what they’re trying to avoid laying on taxpayers.
Comrade Stuck
Of course they are. No one, and I mean no one in their right mind wants the government to take over operations of banks or any other private business. That is a strawman. The question is a choice between taking that odious step and having the entire financial system collapse under it’s own weight. I agree we need to try at least, to save the private nature of banking and other businesses, but it seems more and more like a hopelessly moribund entity that is unrestorable under prevailing conditions. In that case, do you continue an insane effort to hope the response will be different if only you keep shoveling cash, or do you take THE LAST RESORT option of nationalization to provide stability before an all out collapse and depression sets in.
Elie
SBW —
I don’t think maybe its so "damned complex" as you put it. It may, however be pretty damned hard to do.
See Comrade Stuck’s comment at #100
"I mean no one in their right mind wants the government to take over operations of banks or any other private business. That is a strawman. The question is a choice between taking that odious step and having the entire financial system collapse under it’s own weight. I agree we need to try at least, to save the private nature of banking and other businesses, but it seems more and more like a hopelessly moribund entity that is unrestorable under prevailing conditions. In that case, do you continue an insane effort to hope the response will be different if only you keep shoveling cash, or do you take THE LAST RESORT option of nationalization to provide stability before an all out collapse and depression sets in.
Setting up a shiny slick new economic system can’t be done without some transition from the old one — even if moribund. How and when you release the tourniquets and take off the respirator sounds boringly processy — but we would all like to arrive on shore at least able to heal and grow new tissue to replace what has died. How do we respect that? Seriously, there is a valid school of thought that says we should just do it and get it over with (eat it since the tax payer is going to get screwed anyway). This position was put out on an NPR broadcast on notes from a DeutchBanke analyst. I think Obama is not yet ready to do that — rightly or wrongly — but its a choice — a HARD, Valid, important choice…
Kirk Spencer
@Comrade Stuck:
erm… I do.
You see, I happen to think government works – or at least it CAN work if allowed to do so. And I also happen to believe that some things are done better when profit is not the first priority.
Banks are a peculiar institution. They create and hold money; the lifeblood of nations. They receive both special license and extra scrutiny for just this reason. In the past when the scrutiny is removed, banks have forgone their peculiar responsibilities in favor of more profit at increased risk. Eventually risk does what odds say risk will do and bites back. The banks that have maintained faith and minimized or counterbalanced risk keep the money safe. The ones that chased the profit get burned.
There is no special virtue in private business, save only the profits and penalties are at least nominally the due of the owners. Banks, having impact on the nation as a whole, cannot claim the virtue of wholly absorbing the penalties. Granting them the privilege of profit is barely acceptable, and only if other bounds are kept.
As the banks have failed to maintain their part of the deal, let us who have to pay the penalties also be granted right to the profits.
mikkel
@Chuck Butcher:
"The US govt cannot just junk this stuff or "write it down" or do anything other than pay the obligations in full."
Why? Sure they can, they just have to have legislation in place before they do it so everyone knows what’s going on. Heck the recipients should be thankful…the other option that is getting a bit of play is that the government should just capitalize new banks and create a parallel banking system. The we’d just allow the old one to operate on its own strength and Chapter 7 them if need be.
The government could have spent a mere $400 billion or so to do that, the banks would attract a lot of depositors and then could buy the choicest parts of the failed banks for 30-40 cents on the dollar. That’d be the cheapest option for the taxpayers.
As Yves Smith keeps pointing out, most of the radical things that we "can’t do" are less intrusive than what was done during the Great Depression. Heck, the UK renegotiated (i.e. wrote down) its sovereign debt back then.
When the entire world has seen its wealth "disappear" by about 40% in the last couple of years and we’re not even half way through, then what can and can’t be done changes quite a bit.
Chuck Butcher
@mikkel:
Sure, they can write whatever legislation will get past the SC, that’s hardly the point, when a govt starts doing that, its financial credibility goes to zero and paper is all we’ve got. The old saying "your word is your bond" is especially true of govts in finance.
I have no idea where the edge is on paying or taking over. I’m sure they have an idea and don’t want to get to it.
Comrade Stuck
@Kirk Spencer:
Didn’t say government can’t work, at least to temporarily fix something broken, that is, or was private, then returning it to it’s rightful owners. A permanent state run financial system is usually called Communism. No to that, but thanks for asking.
mikkel
@Elie:
@SBW:
I’m going for a twofer reply. SBW thanks. Also, to me the worst part of Obama’s reaction hasn’t actually been his shoveling of some more money to the banks or feeble attempts to prop up the system because the country isn’t ready to give up yet. Elie is right about how tough it is. I’ve been trying to convince friends and family for years and have all the evidence to support it and while I convinced them enough to get out of the market, etc. they still can’t get over the inevitability of collapse on an emotional level — on an intellectual level they say they agree fully but then say that they hope otherwise.
So I try and crush their hope; arguing about it from a humanitarian perspective, i.e. that if we accept that things are probably not salvageable then we can start to put in the social and material systems to distribute basic goods when needed. We can also start diverting resources (money, time, intellect, muscle) to projects that will become the bedrock of our new economy. I point out that if we mobilized the economy for a decade to get new energy, transportation, and construction infrastructure — especially if we started over with a new financial system — then we’d be able to support a new industrial revolution.
Anyway, so what I think his worst part has been is talking about the need to "get lending going" again like that is a solution. We are more indebted than any time in history and make the last 20s levels look tame. Our banks are still way over-leveraged. Our growth rates the past 30 years have been illusionary and built on massive debt accumulation, yet Obama’s budget seems to act like we can get back there. So I think that Obama’s biggest problem isn’t giving money banks, it’s not being honest that if we’re to avoid collapse, it just means that we need one, two, maybe three decades to work off the binge. Heck before everyone said that Japan was a target for muddle through (I never believed we could achieve it even if we wanted to) and yet they are now experiencing a greater downturn than they did in the initial bubble collapse! That is insane, and it’ll be a total of 30 years at least before they have had real growth.
Kirk Spencer
@Comrade Stuck:
No, it isn’t. I highly recommend you check on the history of (among other central banks) the Riksbank (Sweden) and Commonwealth Bank of Australia (privatised in 1990, but prior to that owned and operated by Australia).
I’d also recommend a dictionary, and perhaps a basic textbook on political structures. Communisms will usually have their financial systems run by the state, but not only are they the only government type to do so but that is not the defining characteristic of such a government.
Comrade Stuck
I admit I’m not an expert on finance, but I believe a lot of democracies have central banks, and many consider the Federal Reserve system as such. My reading of what you previously said about state ownership referred to the private section of our banking system. And of course there are other aspects of communism, but a state run financial and banking system is at the top of the list of those. But to be clear, I will call it communistic, and it is still a no to that.
pattonbt
This may sound odd, but Im not too worried that Geithner isnt reassuring or excudes confidence. Id be worried if he sounded like he knew exactly what we had to do.
He and Obama are leading this as well as could be expected. Anyone thinking in the short term right now is going to have a lot of sleepless nights. There is no quick fix.
No one really knows what to do or what will work best. And anyone who says they ‘know’ what to do, I immediately ‘know’ they are full of shit. I love how people here ‘know’ nationalization is right (just as much as I love those who ‘know’ the exact opposite). You dont because we simply do not know the entire picture yet.
The best course is to try and figure out the way through this with as little short term pain as possible (soft landing), fullest course of deflation (detoxification), shortest window for recovery (short duration) and solid footing forward (re-regulation). Problem is, what may be good for one of those four items right now may exacerbate the other three. Sounds like to me the Obama team is trying to get as good a handle on the totality before taking measures which cant be undone. I can live with that.
OT – I still havent seen one humble ‘thank you’ from these banks for bailing their ass out. Not one public mea culpa. Not one honest contrite statement for their compicity in this destruction. Just whining about how if we dont save them they will shoot us all in the head. Keep digging your own graves assholes.
mikkel
@Chuck Butcher:
Again I fail to see why. If you’re talking about government treasury bonds then yes, I agree. If you’re talking about the government setting up a program where it is taking failed institutions and effectively doing a massive prepackaged bankruptcy then that’s completely different. Heck they should rewrite bankruptcy laws to be more applicable to financial institutions and start calling it that. So many people were clamoring for GM to go into bankruptcy so they could cram down the bond holders and union contracts.
Comrade Stuck
Thank you Ellie for continuing my medical metaphor to an accurate conclusion.:)
Kirk Spencer
@Comrade Stuck: OK, not to insult but to explain, your objection makes as much sense to me as objecting to trains running on time because that’s fascistic. Yes, I see the point you’re making, but it’s (from my point of view) literally that much of a non sequitor.
Part of it is that you (as you stated) don’t realize what a central bank is. As you note, a lot of democracies have central banks. That is basically my point. Central banks (in most nations) are how the nations control their financial institutions. Some – including some democracies – do this so strictly that all the "banks" in the nation are for all intents and purposes subsidiary branches. (Functionally in this case, all the banks are ‘nationalized’.) Some – including some dictatorships and "communistic societies" – have as little power as the Fed has in the US. (Yes, the Federal Reserve is the central bank of the United States. Just as a point of reference.)
I will point out that my largest frustration with your position is that you seem to be saying, "It’s like that scary word, and I don’t like that scary word, so no." There was no explanation of why you think the dangers of a state bank (and there are dangers – I do not want to imply all good is one way and all ill the other because it’s not so) – why you think these dangers outweigh the good. Just "It’s scary word." If you could expand that it might be an argument I can understand and respect – perhaps even change my mind. But I have spent a great deal of my life learning that ‘scary words’ are more often smoke than fire.
Comrade Stuck
@Kirk Spencer:
Not trying to change your mind and don’t care if you respect my argument. It’s not about a "scary word". I think what you propose is unnecessary and unwanted in this society. More regulation and less destructive types of greed yes. What you want, no. No more need be said.
SBW
Where is this quick-fix idea coming from? Who is claiming receivership would be a quick fix and make the pain go away?
Nationalization of failed financial institutions is a necessary first step to reforming the financial industry. I have yet to see anyone claim that nationalization will somehow ‘magically’ solve all our problems, make everyone whole, drop unemployment down to 3%, etc. That is a strawman argument to attempt to portray the ineffectual — and taxpayer damaging — status quo as a more mature, reasoned approach. It’s not.
Regardless of how much money President Obama wastes propping up failed institutions — we disagree there mikkel — the enormous oversupply in retail services, commercial building stocks, and residential housing stocks isn’t going to disappear. Those sectors will be stagnant for quite a while — perhaps even a decade or more. Throwing money at trash financial assets is not going to help individuals in those sectors. It will help the worthy owners of those assets, though….
However — this is not Obama’s recession, depression, stock market, or credit crunch. The structure and ideology (almost entirely right-wing) that allowed such debt expansion and damaging financial irresponsibility to occur are decades old. So a lot of the economic criticism against the President is invalid.
But not all. Summers and Geithner played a big role in helping to corrupt our financial system (I’m talking systemic corruption, not personal) — and wouldn’t you know, both are serving at the President’s request. And I can’t think of anything that has changed less between the Bush administration and the Obama administration than the relationship with, and handling of, the finance industry.
I get the sense many commentators here think President Obama has some master financial plan. I don’t. I hope you’re right, but I wouldn’t be writing this unless I thought the President’s actions (hopefully only for the time being) incorrect. To me, he seems to believe that if he throws enough taxpayer money at banks he can reinflate a debt-fueled growth machine that has failed, and he picked financial advisers who were, and are, part of that system.
Blindly going along, hoping for reforms that aren’t materializing, isn’t a solution.
georgia pig
@SBW:
I don’t think he believes for a moment he can reinflate the debt-fueled growth machine. That’s a strawman. Obama’s trying to prevent a total unraveling, many more millions unemployed and civil unrest. You think the taxpayer (who the fuck is that, anyway?) is damaged by the present course, what about if trillions of obligations go in default? Yes, the system is deflating, but that doesn’t mean there isn’t something of value to be salvaged. You can’t create a new economy out of thin air. I don’t know if he can succeed, but he’s the only game in town right now, and a lot of this second guessing amounts to ill-informed speculation. We don’t know a fraction of what he knows. This is the bitter legacy of Bush, how he fucked the concept of the presidency. Just because Bush failed doesn’t mean there isn’t a time for a different president to act without checking with you. Financial advisors who are not compromised do not exist.
mikkel
@SBW:
I’m not saying I agree with Obama (or what Bush did) I’m saying I understand, there’s a difference. I have long thought they should just raise unemployment and state benefits to like $200 billion a year, and then set aside $500 billion for a new financial system, regulate it right and call it a day. But I’m under no pretenses what will happen if they don’t prop it up, by definition there will be massive deflation and huge pain for everyone involved, but I think set the stage for longer term prosperity.
If you’re curious in my reasoning I wrote about it in the fall.
I’m not sure if Obama actually has a master plan at all. I am curious to see what will happen when he realizes that things have passed the point of no return…but I still have confidence he’ll act OK once we get there. The problem is getting enough people to realize that everyone is going to get a lot poorer no matter what. The two paths are to get poor fast (and relatively equally) or to drag things out a really long time and keep supporting wealth inequality.
SBW
"Civil unrest" !
Echos of martial law, anyone? So you are caricaturing the Bush administration’s threat to get TARP I passed.
Do you have any idea how you pathetic you sound? Do you?
Financial policy under Bush: bad.
Same policy under Obama: good.
No accountability and transparency under Bush:bad.
No accountability and transparency under Obama:okay.
I am not a fan of the concept of the imperial presidency, regardless of party affiliation.
Elie
SBW —
"Civil unrest" !
Echos of martial law, anyone?"
In all honesty, do you think that isnt a possibility in some horrible worst case scenario?
..And most of this conversation we have been talking about approx 60-70% of this country who are educated and actually have some sort of account with a bank or investment firm beyond basic checking and savings.
We have a full fucking blown up mythological, never was "American Dream" unravelling at the same time that includes us but fully brings down the house on the other 30%. People living paycheck to paycheck and major debt. They are not going away people and their relative wellbeing during this long (I think we all agree on this) deflation back to some realistic baseline…may be something that ultimately defines this nation more than this financial crisis by itself.
Its not effing Obama…this shit is US — it belongs to us…we own it…it will be OUR lives written in history.
I am not against criticizing Geithner or Obama or anyone. I think that what we do here on the Baloon is great. I love reading, learning, conversing and posting but I know its like nervous people sitting in the waiting room waiting for some procedure where they hear groans of discomfort somewhere in the distant back room. Some of us analyze, some intellectualize, make emotional statements and yet others withdraw. We are in for a long, long hard one and while we pass the time…I plan to:
1. Find a soup kitchen or other food distribution volunteer organization
2. Help an elderly person or person who is alone to do something — not just once in a while but regularly as much as I can.
3. Pray like hell that I can keep my job and my health
4. Pray that all of you do too
5. Make time to enjoy small things, the sun, the moon and stars and the mystery of seeing things like Trumpeter swans migrating north again, followed soon by Snow Geese
Good night my friends and thank you —
Mako
Geithner is the idiot who totally misread the Asian crisis for the IMF.
Mako
@jdw:
Or, perhaps people don’t want to work with him because they know he is the idiot who misread the Asian crisis for the IMF. The international economist group is a small an incestuous unit.
No, there is something that can be done but it requires actually recognizing the problem. The old consumer driven, cheap-fuel paradigm is done.
Instead of trying to prop up fail we need to look to a future without cheap energy, without cheap agriculture and with too many fucking people.
Put money into trains, local agriculture and small towns.
Mako
@Libby Spencer:
Something like 51% of registered voters releected GW Bush. Twice.
Mako
@John Cole:
Someday soon we’ll name a hobo village in Anacostia after you.
Your analogy is flawed. Its not that we don’t know what to do, its that we refuse to see what to do. We’re all delusional, believing the good times will come back in a couple of years if we just prop up the old institutions. Even tho contrary evidence surrounds us, in our pet food, our peanut butter, our banks, we still cling to the ‘Free market good’, ‘suburban lifestyle wonderful’, ‘a salad should be iceberg lettuce/green tomato/transfatdressing’, ‘petrol will always cost less than 3bucks a gallon’ paradigm.
That shit is done. We need to step into the future.
Invest in trains, local agriculture and small towns.
Mako
@Chuck Butcher:
Oh please, just because this economic mess snuck up on you yesterday and you don’t understand and are getting hosed on stocks, that, quite frankly, if you’d been paying attention, you wouldn’t be in, doesn’t mean a guy like Geithner, who has been in the international economics biz for years, was just suddenly thrust into things he doesn’t understand.
jeebus christ stop with the hero worship already.
Mako
@Kirk Spencer:
WHS. and health insurance companies too.
Mako
@mikkel:
You had me in agreement till the last paragraph.
You still have that delusion, that there will be ‘growth’ again someday.
Mako
@SBW:
Those last 2 paragraphs win.
Mako
@Elie:
heh, even in the ugly times mercins think they own it all.
You probably haven’t been paying attention to the rest of the world, but hey American Idol is on the tv.
Mako
@jdw:
The New Yorker Magazine whatever, I have another take on this-
Perhaps the reason he cant find help is because everyone knows he is the idiot who misread the Asian crisis for the IMF and they don’t want the taint? The international economist group is a small an incestuous unit.
No, there is something that can be done but it requires actually recognizing the problem. The old consumer driven, cheap-fuel paradigm is done.
Instead of trying to prop up fail we need to look to a future without cheap energy, without cheap agriculture and with too many fucking people.
Put money into trains, local agriculture and small towns.
Mako
Thank you and goodnight. Off to read this new and hilarious blog i just found-
http://newmajority.com/
liberal
@Brachiator:
Actually, it’s not at all clear that the UK has truly nationalized those banks. Meaning, taken them over, separated good assets from bad assets, given bondholders haircuts, etc. See this post.
dave katz
And here’s a commenter over at Kos, in a TocqueDeville diary, on how Tim Geithner actually functioned at his job, while also letting Wall Street get away with murder:
"In a speech to a closed gathering at the Lowy Institute in Sydney on Thursday, Paul Keating gave a starkly different account of Geithner’s record in handling the Asian crisis: "Tim Geithner was the Treasury line officer who wrote the IMF [International Monetary Fund] program for Indonesia in 1997-98, which was to apply current account solutions to a capital account crisis."
"In other words, Geithner fundamentally misdiagnosed the problem. And his misdiagnosis led to a dreadfully wrong prescription.
"Geithner thought Asia’s problem was the same as the ones that had shattered Latin America in the 1980s and Mexico in 1994, a classic current account crisis. In this kind of crisis, the central cause is that the government has run impossibly big debts.
"The solution? The IMF, the Washington-based emergency lender of last resort, will make loans to keep the country solvent, but on condition the government hacks back its spending. The cure addresses the ailment.
"But the Asian crisis was completely different. The Asian governments that went to the IMF for emergency loans – Thailand, South Korea and Indonesia – all had sound public finances.
"The problem was not government debt. It was great tsunamis of hot money in the private capital markets. When the wave rushed out, it left a credit drought behind.
"But Geithner, through his influence on the IMF, imposed the same cure the IMF had imposed on Latin America and Mexico. It was the wrong cure. Indeed, it only aggravated the problem.
"Keating continued: "Soeharto’s government delivered 21 years of 7 per cent compound growth. It takes a gigantic fool to mess that up. But the IMF messed it up. The end result was the biggest fall in GDP in the 20th century. That dubious distinction went to Indonesia. And, of course, Soeharto lost power."
"Exactly who was the "gigantic fool"? It was, obviously, the man who wrote the program, Geithner, although Keating is prepared to put the then managing director of the IMF, the Frenchman Michel Camdessus, in the same category.
"Worse, Keating argued, Geithner’s misjudgment had done terminal damage to the credibility of the IMF, with seismic geoeconomic consequences: "The IMF is the gun that can’t shoot straight. They’ve been making a mess of things for the last 20-odd years, and the greatest mess they made was in east Asia in 1997-98, so much so that no east Asian state will put its head in the IMF noose."
"Is this some flight of Keatingesque fancy? The former deputy governor of the Reserve Bank of Australia, Stephen Grenville, doesn’t think so: "After the Asian crisis, the countries of east Asia decided that they would never go to the IMF again. The IMF is taboo in east Asia. Look at the evidence. The revealed preference of the region is that no one has gone to the IMF since, even when they needed the money."
So. Lousy, beyond bad, even epic fail, track record for our boy Timmy.
The nagging question is, Why Geithner, Mr. Obama?
Whose pound of flesh does his appointment really represent? The installation of Goldman assclowns like Geithner and Summers point to a fundamental invisible gravitational force at work on this administration, the nature of which dares not speak its name.
Gordon Brown visits and preaches globalized one-worldism, while reports reveal the AIG bailout money is going in no small part to Eurobanks.
Is this the Showdown At The OK Corral for sovereign government vs global corporate capital? If so, then your government’s authority as a representative of the people’s will is evidently dwindling like the dot on an old TV.
Money for recovery stimulus: $787 billion. Money for bank bailouts: $4.76 trillion.
Maybe Obama figures he needs this bunch of jetsetting internationalist thieves to fund his reconstruction program. If so, he’s offered his throat to exactly the wrong crowd, I’m afraid.
Kirk Spencer
@Comrade Stuck:
Need, possibly. But I would like to be convinced – I’m generally a capitalist. Nonetheless, I would like an explanation of why it is bad – why you would expect it to be worse than what happens when they’re unfettered.
I will scoff at "most people don’t want it." Go check the polls – the majority (at this time) are in favor of nationalization.
So perhaps you don’t want to say more, but your argument that it’s communistic and therefore bad is flawed and unconvincing. You have declined to explain what you mean by communistic and why it’s bad. Instead you are arguing from authority (Because I said so) which is only sufficient when you are the parent. If you don’t want to say more, so be it. But you haven’t convinced me, and I daresay there are others who are like me.
Comrade Stuck
@Comrade Stuck: @Comrade Stuck: @Comrade Stuck:
Kirk Spencer,
Man, I hate it when people debate with bait and switch. I am not against temporary nationalization of large failing banks as my previous comments clearly state. You were arguing for a permanent state run banking system, which is what I’m against as unnecessary and I would bet unwanted by most Americans.
If you can’t keep your arguments consistent, please don’t make them to me.
Kirk Spencer
Comrade stuck – I still am arguing for a permanent state-run banking system.
Further, the polls ask nothing of "permanent" or "temporary". An assumption that either applies is equally legitimate unless and until the question is asked.
I’m actually prepared to defend the argument, but to do so I need to digress. I need to demonstrate that permanent government control of some things has been the best solution. Then I need to demonstrate that banking is similar to those things. I’ve summarized that by noting that the dominant cause of private banking’s negative impacts on the citizens is due to the pursuit of profit, AND that banks are innately and inevitably tied to societal benefit and performance. Stock brokerage can be separated, as can real estate investment and construction. But banking itself – the CORE business of banking (protecting our earnings, providing a source of ‘safe’ loans) is a societal good. Again I’m being simplistic but that’s the reason I’m willing to accept full time permanent control of the banking industry by government.
Oh, one more thing. Where it’s done, it tends to work.
mikkel
@Kirk Spencer:
What would the advantage of having it run by the government instead of having larger credit unions?
Mako
@dave katz:
Yeah that’s that whiney Keating baby from oz and some nitwit at atrios. They are not the only one thinks that stuff tho.
Elie
Kirk:
To me its not whether or not polls show that Americans want or don’t want nationalization or state owned banks. That is an outcome after some transition…its a technique for running the system once we have transitioned from the old broken one, right?
The biggest problem that I have with some of the opinions posted supporting Krugman or others who advocate for the end point of "nationalization" is that they define the problem we have as largely a technical solution without the political considerations. Up and down not just this thread but many like it, I don’t see the realpolitik of it discussed — rather some numbered set of bulleted steps that discount the politics of getting this change done. Half a solution with no real means articulated to get to that point or acknowledgement that the oponents to this aren’t just going to vaporize overnight is a huge drawback to your arguments.
HOW do you get from here to there — realistically more or less intact? Unless you just say f—k it to whatever happens, and even then, do we have the military means to just enforce that decision? Really?
It does no good to advocate for even the most desirable outcome without undertaking a realistic assessment on the strategy of how to get there. Talk to me about that strategy in real terms and then you have got my attention. Without it, well — its just Krugman writing another column about how "worried" he is that there is not plan he has been briefed on…
Kirk Spencer
@mikkel: First, I want to acknowledge that at present I prefer credit union rules and management to bank rules and management. Most of the negatives I’ve seen turn out to be propaganda from banks that are annoyed at the loss of a slice of business – with the business going to credit unions.
Mikkel, in many ways a fully government run bank would be a national credit union. Minor differences are based on the fact that every state has, well minor differences in law and regulation.
The greatest difference – which is both strength and weakness – is that if the bank is run by the government, your financial assets aren’t hidden from the government. There’s no barrier. (As I said to Comrade Stuck there are potential weaknesses.) There is no particular barrier protecting your cash wealth from the government if the government owns the bank. Cheating becomes a lot harder. Unfortunately, government pulling money from everyone becomes a lot easier.
The second greatest difference is that member selection of the executive board would be by proxy in a government run bank instead of by direct member vote. (Worth noting that some states allow credit unions to be run this way so it’s not an exclusive difference.) It might be an agency under Treasury or Commerce. More likely it would be another independent agency, joining the FCC, GSA, NARA, USPS, and SSA among several others.
Again, however, the two solutions are very similar. My opinion is that given the size and social/economic impact of the financial industry, banks (or bank equivalents) should be government run.
Kirk Spencer
@Elie: nod. Getting there is what separates all from the underpants gnome plans.
That said there’s actually a plan – or at least the template of a plan – for much of the problem. Its been done 17 times this year – we call it banks "failing". They’re identified by the appropriate agency as insolvent, at which time they’re turned over to the FDIC. The FDIC guarantees certain deposits and conducts a full audit, then makes a simple but painful decision – can this bank be saved. If yes, the bank is put under strict administration and supervision till it’s on its feet – the admin and super usually being the FDIC agents, but sometimes a ‘strong’ bank. If no, the viable and guaranteed assets are stripped and turned over to a viable bank and the doors are closed. Oh – in both cases, most of the senior staff has to hunt a new job.
In large scale, that’s what the RTC did as well during the recovery from the S&L scandal/failure. Once more, we have a plan that would work.
Now both of these have as end state a return of the surviving businesses to private control. I’m not averse to that provided decent controls are made, it’s just I’m also not averse to keeping control of the banks under government administration (probably through independent agency). Either way, however, your dominant concern – that there is no plan – is a bit misplaced. There is a plan, but it requires some pre-requisites.
Prerequisite one is a change in rules to allow taking something like Citibank under control. This happens to be my favorite example, as it APPEARS (full data not available) that Citibank ITSELF is fine, but CitiGROUP is insolvent. C is using CB to keep everything else afloat, and has no compunction about raiding bank assets to sustain hedge funds and investment subsidiaries and, well, that sort of thing. An analogy is one parent about whom the community cares a lot being wed to another who is scum – and any support you give one winds up in the other’s bottle. Yet if you let them go, you sink the one you care about. Yeah, the reality needs recognized and the rules tweaked to fix this.
Prerequisite two is to accept that we’re going to take a nasty economic hit given what a large proportion (in dollars) of the industry is messed up. In this case it’s the bandaid decision – rip it off fast or slow – with the addendum that till it’s off it’s going to continue getting a bit worse. Add to the bandaid, then, the "you can pay now or pay later – and later will cost more." Problem is it’s going to HURT, and we have to steel ourselves or otherwise recognize that now is better than later.
Once those are done the rest is largely in place. We’ll have to dump another trillion or so into the FDIC (or the RTC equivalent) – that’s a minimum, it might be as high as 6 trillion. We’ll have to suffer a lot of questions and resolutions regarding which loans are viable and which get adjusted – with the knowledge that every major shift is going to uncover MORE to clean up, some of it that would have made it if we hadn’t moved it.
It’s going to hurt. We have a plan, but can’t do it till enough of the people accept the hurt is necessary.
liberal
More evidence that the banks in Britain haven’t been nationalized (via Atrios):
Elie
Kirk @ 139 —
Thanks for that..that is a much better description of that transition to "nationalize" or restructure these entities. I understand however that just the size and amount of dollars involved makes this particularly tender politically and imbedded but not directly addressed in your thorough discussion is those damned devilish details on the reality of handling the politics — while we also deal with healthcare and education and global warming… add to it as well that those assets don’t just have national implications but indeed global stakes and investors.
We can do it…I don’t think its a rush job and that all of the parts of the plan (and I do think they have one) would be released right away. There is a certain value in letting the critics fume and sputter waiting rather than presenting all of your plan prematurely before events demand, allowing the magpies to tear it to pieces one part at a time. The strategy of the release of the plan and the speed of the release and key triggers are as important to manage as the actual plan itself, in my opinion.
I completely agree with you, nothing — nothing is going to prevent the hurt and even as we say it, we actually really have no idea of the reality of what that will be…