The Chronicler and I have been debating the merits of Tim Geithner and Larry Summers, and whether or not Obama made a mistake in choosing this centrist, bank-insider group for his economic team. The Chronicler's main argument, to me at least, is that one is either on the side of the bankers or on the side of the American people as a whole. That Geithner and Summers are too cozy with the banks to defend the people.
10 years ago, 5 years ago, even 2 years ago, this way of thinking was true. We should have clamped down on the financial industry, and the people would be better off for it. One or two years in the future, it will also be true. We must regulate the industry to be sure this economic imbalance and concentration of power never happens again. But in the current state of economic emergency, as sickening as it is, there is a strong possibility that what hurts the banks may actually hurt us more.
I came up with an analogy for this situation. Say you and your family (America's economy) decide to take an oceanic voyage. You choose a ship with a fancy new navigation system and a high-tech new motor that is the fastest ever. Everyone says its failproof (this is the financial industry).
The captain of the ship (Geithner, Rubin, Summers, etc) knows this ship and its system inside and out. He says that you'll be in good hands. But the first night out to sea, you awake in the middle of the night to find the ship taking on water. The navigation system has malfunctioned and led you into a storm. You rush into the captain's quarters and find him asleep at his duty. He tries to turn on the engine and it won't start.
This is basically where we as a nation are right now. In an emergency and out to sea on a poorly-built ship. We have put our retirements, our life savings into a financial system that never should have gotten so big, and so vital to our survival at the expense of the real economy.
But that doesn't change the reality of where we are--in the middle of a stormy sea. So how do you get your family safely back to dry land? If you were really on that ship in a storm, would you throw the captain, the one person who understands the complicated workings of the ship, overboard and try to get the engine started yourself? Would you let the ship sink and take your chances swimming? No. You'd hope that no matter how much he screwed up in the past, the captain could get the engine running and get your ship back home. You'd have no other choice.
The time to make the right decision was before you ever took the ship out to sea. And once you make it back to port, you will of course never take that ship again. But in this moment of emergency, no matter how angry it makes us, our fates are unfortunately tied to the banks. We must avoid a global economic meltdown. How we do that is the question Obama and his team are asking themselves. At this time of crisis we should be asking "how do we get back to dry land?" not "How do we punish the shipbuilder?" There will be time for that later.
As I always say, if Geithner and Summers screw things up I will admit it. If we do not impose the correct financial regulation going forward, it will mean Obama is in thrall to the Rubinites. But it is far too early in the game to know. And sometimes, having the people who know the machinery inside and out can be an advantage in getting back to dry land.