"The greatest danger in times of turbulence is not the turbulence; it is to act with yesterday’s logic."
I would of course add 'with self-serving dishonesty' to Mr. Drucker's prescription. But I think in a better age that sort of thing was understood.
The manner in which the financial crisis was handled, and is still being managed, is a policy error that will be studied by history, and hopefully the next school of Economics that will rise out of the ashes of their failure to provide meaningful reform for what really went wrong.
The worst of the economists and politicians have been acting as hacks in support of a massive fraud for the usual benefits. And some of what we might have hoped would be the better ones have been mindlessly applying old remedies, or at least a portion of them without understanding and admitting the underlying problems, caught up in a credibility trap of dull atavism and careerism.
The intellectual and political leadership of this generation has been weighed and found wanting. A great generation often produces one that lapses into crisis, before the next rises to the challenge of the occasion.
So I have some hope that a new school of Economics and policy making will rise out of the abject failure of the old. Not a school that has better and more intricate tools, broader power, and flashier gimmicks, but one that aspires to wisdom and virtue, especially the value of open honesty.
"The best lack all conviction, while the worst are filled with passionate intensity."This crisis has been all about the failure of the best to uphold their oaths, and to let justice be done, at the urging of the worst. And now they compound their errors and dissemble in their embarrassment and shame. Or at least those who are still capable of feeling such emotions.
There will be no real and sustainable recovery without reform.
Wall Street thanks you for your service, Tim Geithner
By Dean Baker
11 January 2013
Treasury Secretary Timothy Geithner's departure from the Obama administration invites comparisons with Klemens von Metternich. Metternich was the foreign minister of the Austrian empire who engineered the restoration of the old order and the suppression of democracy across Europe after the defeat of Napoleon.
This was an impressive diplomatic feat – given the widespread popular contempt for Europe's monarchical regimes. In the same vein, protecting Wall Street from the financial and economic havoc they brought upon themselves and the country was an enormous accomplishment.
During his tenure as head of the New York Fed and then as treasury secretary, most, if not all, of the major Wall Street banks would have collapsed if the government had not intervened to save them. This process began with the collapse of Bear Stearns, which was bought up by JP Morgan in a deal involving huge subsidies from the Fed.
The collapse of Lehman Brothers, a second major investment bank, started a run on the three remaining investment banks that would have led to the collapse of Merrill Lynch, Morgan Stanley, and Goldman Sachs if the Fed, FDIC, and treasury had not taken extraordinary measures to save them. Citigroup and Bank of America both needed emergency facilities established by the Fed and treasury explicitly for their support, in addition to all the below market-rate loans they received from the government at the time. Without this massive government support, there can be no doubt that both of them would currently be operating under the supervision of a bankruptcy judge.
Of the six banks that dominate the US banking system, only Wells Fargo and JP Morgan could conceivably have survived without hoards of cash rained down on them by the federal government. Even these two are questionmarks, since both helped themselves to trillions of dollars of below market-rate loans, in addition to indirectly benefiting from the bailout of the other banks that protected many of their assets.
Had it not been for Geithner and his sidekicks, therefore, we would have been permanently rid of an incredibly bloated financial sector that haunts the economy like a horrible albatross...
Read the entire article here.
12 January 2013
Baker: Wall Street Thanks You For Your Service, Mr. Geithner
Posted by Jesse at 1:11 PM