Wednesday, March 11, 2009

Smart. Articulate. But Still Blind

Tim Geithner gives an hour-long interview with Charlie Rose here. It's a good chance to hear him articulate his views on the current crisis. It's hard to evaluate what he says, frankly. One wants to give him the benefit of the doubt and assume he knows what he doing, in my case, solely because Obama picked him, and I trust Obama's instincts and views. Geithner clearly is very smart and very articulate (to the point of being glib and slick at some points, I have to say).

He is strongly committed to not letting any of the top 20 banks go down. That is a pretty amazing commitment, when you think how many of them are close to insolvent. One has to wonder what that says about his kind of capitalism--why shouldn't banks be subject to bankruptcy, if they have totally botched it? Doesn't saving them no matter what only encourage them to take the same risks again?

To his credit, Geithner said that capitalism as we have known it, no longer exists, and is being thoroughly changed, if not by the experience of the past year, then by the oversight regulations to come. If that is true, then that speaks in favor of the Caretaker's argument that Obama is using insiders to change the system from the inside.

Charlie Rose asked him toward the end if he had seen this crisis coming. He was head of the New York Fed, in charge of all the banks in the City, including Citibank. No, he said, almost no one saw this coming.

Right. That really gives me confidence that he'll be able to analyze the problems and create the solutions we need. I would be a lot more confident if there were someone in Treasury now who had been clear-sighted enough to foresee this crisis then.

Me, for example. Yes, I foresaw the crisis coming, at least in its broad outline, some years ago. Without any formal economics training. Just using common sense and looking at the situation with an open mind, along with reading the contrarian, bear economists who were predicting a big crisis. I couldn't understand why others didn't see it. I kept harping on it to my family and friends. It just seemed so obvious to me. And when the time came, I took what money I could out of the stockmarket and moved to higher ground before the big wave hit.

Now, that may sound like a prideful thing to say, but I don't mean it that way. What I mean is, if little old me, with no economics or business background and just a distant observer, could sense this financial tsunami coming, why couldn't the big boys?

I think there are several reasons. One, the Wall Street boys are too ideologically engrossed in the whole financial system and its awesome power and status to be objective about it. Two, they all benefit from it financially. Three, they have a nice cozy club, that is very enjoyable relationally. And four, it is very difficult to dissent from the herd mentality. That takes a contrarian mentality, which very few of them have.

Which just goes to show that you can be smart as heck, like Tim Geithner, and have all the data at your disposal, and still not necessarily get it. I will remain skeptical that this group in charge will do the things that really reform the system, as well as get it up and running. I will be happy to be proved wrong, believe me.

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