Nate Silver - Chill out, y'all!
by the mollusk, Wed Feb 11, 2009 at 08:00:00 AM EST
Nate Silver, over at 538.com has a post up making a compelling case that we should essentially trust Obama and Geithner to get this thing right. The crux of his argument is that they have every incentive to fix the economy and no incentive to cave to Wall Street or some other fantastic notion of insider influence-peddling.
I generally agree with his assessment, although I think there are different ways of conceptualizing the current crisis. One concept is to get us back to where we were economically two years ago. This presumably presages another economic collapse in 2011. The other concept is to get us back to pre-Reagan economics both with its vicissitudes and its protections for the middle class. That, to me, is the real question about Summers & Geithner. Do they want late Bush II-era social and economic divides and credit-card living? Or do they want a solidly middle-class country? I'm not sure of the answer to this.
1. Nobody, absolutely nobody, has more incentive to get this right than the Obama Administration. If the economy collapses -- well, more than it already has -- then the Democrats get slaughtered in 2010, Obama is a one-termer, health care doesn't happen.
Point well taken. Geithner is trying. I will certainly give him that.
2. If the banks fail, then rich people lose a lot of money, and poor people lose a lot of jobs (and also much of what money they have). But I swear to God, there's a lunatic fringe out there that would take this trade and call it "progress".
Hmm. Losing me a little Nate. I think what he's missing is that the mask has been effectively pulled off of the banking industry. All of the brilliance and obscene salaries can now be seen for what they were: empty promises, bad decisions, and public bailouts. The banking industry has profited tremendously from changes in statutes and in the overall lifestyle of the average American. The financial services sector was on fire for the better part of the last two decades. Anyone lucky enough to be within two or three degrees of separation from Wall Street benefited tremendously. And for a while, it appeared that we were all benefiting. But now, we're looking at the colossal failures of the people who were supposed to be the modern-day Captains of Industry and our response is to give them huge chunks of public money and hope for a better outcome.
3. I'm sorry, but somewhere between 99.9% and 99.999999% of us are severely underqualified to be making policy recommendations on this particular issue. And I'm certainly in the majority on this one.
Couldn't agree more. Still, who are the experts? Paul Krugman? Greg Mankiw? David Axelrod? Paul Volcker? Jim DeMint? We still haven't figured that one out. Plus it isn't as if Tim Geithner has landed on this planet from Mars and is now going to save us all from ourselves. This guy was the head of the New York Reserve during the time that all of these crises developed. It is fair to ask how much control he had over the situation. Still, I don't recall his testimony to Congress last year warning that a collapse was imminent or that many of the large banks were in trouble but haven't realized it yet.
Actually, the person that I trust most on this (hold on while I get my kool-aid....there), is Obama. He stuck a very important note on ABC last night when he said (paraphrasing here) "Wall Street was hoping for an easy out and there isn't one." Well played, sir.
I had a strangely gratified feeling watching the stocks tumble yesterday. Call me a fringe radical, but I suspect that the insiders aren't so much concerned about the "lack of specificity" in Geithner's plan as they are concerned that they may actually pay for their mistakes. You have to imagine that the tone struck by Obama on ABC last night was echoed in many backroom discussions throughout the day yesterday.
To me, this isn't about retribution, it's about changing our concept of the U.S. economy. We'll make it through to the other side. The rich will still be rich. The poor will still be poor. But we will be less dependent on risky lines of credit and the poor decisions of multi-billionaires trying to meet this quarter's expectations.
Or something like that.