Long Ball

Today’s Day 100, so here’s lots of words and links for you political junkies.  Today I touch on the GOP’s collapse, but focus on the  administration’s banking strategy. Still to come: torture, foreign policy, energy, climate change, and some more party politics.
In his ‘100 Days‘ column, Andrew Sullivan notes:
We have an adult in charge. … Because Obama’s game is always a long one, a hundred days seems too soon to judge. But the ground has been laid. For what? We’ll find out.
Obama’s maturity is an important reason to be optimistic in obviously troubled times. His steady demeanor stands in particularly stark contrast to the incoherent mass that calls itself the Republican Party today — if you can call 21% of the population a ‘party’ in a two-party system. Only 1 in 5 Americans will associate their name with the Republican brand. Where is an enterprising cabal of  intelligent conservative moderates with an incisive and reasoned political platform to found a Grand New Party when you need one?
Alas, a new party would be far too radical for a moderate conservative temperament, so the demented elephant will keep stirring up trouble, probably for years. Meanwhile, back in reality (with its well-known liberal bias), the NYT released this graph in a batch of poll results.

"Probably not, but we're cool with it."

Combine these numbers with Obama’s 60% and above approval ratings, and as Matt Yglesias remarks:

…[I]t suggests that Obama can take advantage of a period of low expectations for his actual performance. And that might be all for the best, since I’m frankly not that optimistic that the banking strategy they’re pursuing is going to bring about good results.

Yes, the banking strategy is by far the weakest link in the administration’s coat of policy arms. I refer you to Paul Krugman’s column of a month ago. Money quote:

The underlying vision remains that of a financial system more or less the same as it was two years ago, albeit somewhat tamed by new rules. … As you can guess, I don’t share that vision. I don’t think this is just a financial panic; I believe that it represents the failure of a whole model of banking, of an overgrown financial sector that did more harm than good. I don’t think the Obama administration can bring securitization back to life, and I don’t believe it should try.

This cuts to the core problem that the administration’s cautious approach fails to address: banks that are “too big to fail” are too big to exist! The handful of mega-banks that hold two-thirds of the assets are the ‘patients zero’ of this credit pandemic, insolvent and overleveraged and in some cases guilty of fraud (AIGFP, I’m looking at you). They are, in effect, tumors that have metastasized on the American body politic, malignantly weighing down our economy and our legislative process.

Now, financial elites are rabid fans of Ayn Rand’s Atlas Shrugged, in which noble, hardworking captains of industry are the engines of prosperity and progress on which everybody else relies. This mindset is integral to understanding Wall Street’s attitude towards government intervention in its bonus pay and operations, and its apparent willful ignorance of the fact that the Street’s institutions only remain standing thanks to taxpayer money and in spite of the crisis-causing lack of merit to financial business practices.

The financiers picture themselves as Dagny Taggart and Hank Rearden, protagonists in a Randian universe.  But in Atlas Shrugged, the cascade of industry takeovers and disastrous regulations that bring down the economy takes root thanks to a cabal of corporate lobbyists and government apparatchiks who use public money to prop up pet zombie companies to meet the ‘needs’ of failing businessmen, forcing the non-zombie companies that thrive on merit to compete in a dysfunctional market. These corrupt elites of Rand’s world, the Orren Boyles, Wesley Mouches, and James Taggarts, are a better generalized reflection of the class of banking executives today and the revolving door between their offices and the government bodies meant to regulate them.

Rand fails to capitalize on such nuances in her sociopolitical schema, touching on corporate corruption superficially and outright ignoring the possibility of integrity in public service (both roads would alter her political agenda). This myopia extends to Wall Street acolytes and fans of “Going Galt” today.

Meanwhile, the moochers and looters in our financial oligarchy and federal bureaucracy have essentially cornered the American policy market, effectively bringing to life the same state-supported zombie economy that they say horrifies them (this combination of willful denial and self-defeating behavior finds Randian parallel in primary antagonist James Taggart). The state, on the condition it is led with integrity (and I know how rare that is), is really the only institution with enough size and power to break the perverse grip of mega-bank elites on the global economic future. And so temporary government receivership is likely necessary to address the unhealthy balance of power.

In January, this option was labeled “nationalization” by people terrified America was being turned into a socialist economic dictatorship, a la Atlas Shrugged. As vague and paranoid as the Tea Parties were, I do have a lot of concerns about counterproductive expansions of economic authority, what with auto bailouts and now Sen. Kerry proposing newspaper bailouts.  As a young American two years into the workforce, I don’t want the country’s jobs to evaporate, but I do want to see failed behemoths of the 20th century wither away, to open the market space for this generation to create new institutions for the next century. I know this decay and rebirth will be painful, but these companies FAILED through POOR CHOICES. It’s the circle of life, people.

If we let the market do its work, these companies would die, so it is somewhat ironic that in regards to the mega-banks, a structured ‘mega-bankruptcy’ procedure is probably the only solution to Atlas-like zombie institutions and a return to functional markets.  The administration opted not to pursue this right away, choosing Tim Geithner’s road instead, which Krugman accurately describes as “a market in which buyers have to be bribed to participate” in the column I linked to above.

So while I believe the banking strategy is largely a stalling tactic, it may be a necessary step in the process.  It’s possible that forcing more radical action through the political system so early into the term would have provoked further panic and crisis, or been too hasty a move considering the size of the task. To liquidate broken institutions this large efficiently is a Herculean undertaking, and taking 2009 just to lay groundwork is likely wise, even if the effect is pursuing a flawed policy today. After all, one reason Obama was elected was because he isn’t into Big Game-Changers like invading Iraq or nominating Sarah Palin, since such choices so often turn out to be mega-retarded.

In the new president’s first week in office, Andrew Sullivan (again) wrote a post calling him “The Presider,” in contrast to Bush’s ‘decider’ and in sync with the actual title of President. This hit me with that struck-by-the-obvious sort of epiphany.  Obama really embodies this prima facie definition of the office of the presidency, willing to meet circumstances as they arrive, then guide and facilitate process. This hands-off, conciliatory approach is a huge benefit in almost every sphere, so even though when it comes to the banks it concerns me, I appreciate that it’s a function of an overwhelmingly positive trait. Really, Obama’s style is itself one of the constitutional tonics he brings to our violated system of government to help it heal — another important reason for his election, and a topic for tomorrow’s entry on torture.


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