Hope and Trust
Seeing as most of us are not economists, it's worrisome to see so many experts (even on the liberal side) who have problems with the faith President Obama has in Treasury Secretary Timothy Geithner and his plan to sell off all the troubled assets Wall Street has bequeathed the nation--assets aptly nicknamed "Big Shitpile" by blogger Duncan "Atrios" Black. Black, economist James Galbraith, and New York Times columnist Paul Krugman all find major problems with the plan, and all of their objections seem to hinge on "if he's wrong, we're completely screwed." Mother Jones blogger and economist Kevin Drum tends to agree with Atrios, saying "it's worth noting that taxpayers are going to eat almost all of this shit no matter what happens. If Geithner's plan fails, we eat it. If we nationalize the banks and become owners of all the toxic waste, we eat it. This financial crisis is going to cost the government a ton of money no matter what we do at this point."
Krugman argues that the government should just go about like they did with the S&Ls in the 1980s and put the bad banks in receivership ("nationalizing," in the current speak). But Geithner seems to think that isn't something we do, because we are apparently "not Sweden." The administration is calling the toxic assets "legacy loans" as if they're something handed down from a kindly uncle who passed away, not from a bunch of greedy Wall Street bankers who made their dough while pushing the government to lower their taxes even further.
What it comes down to is that we are put in the position of having to trust. Not Geithner (although we must), but Obama. And there's the rub.
Right now, as a nation, we're not long on trust. For the last eight years, we tortured while we were told we don't torture. We were told to support the troops while the people telling us to do so were letting Walter Reed decline into a rat-infested embarrassment. We were told "the fundamentals of our economy are strong" while a real-estate house of cards was manifestly beginning to crash. Both our government and our mainstream media colluded to railroad us into a war built on a tissue of transparent lies. Both the leaders and the watchdogs failed us, leaving us ready for a change of massive proportions. Thus: President Obama.
But now we are forced to trust, because we really don't have much choice.
It should be no secret to any reader of this column that the author hopes Obama succeeds; indeed the consequences of his failure aren't anything anyone wants to contemplate. But Obama's faith in Geithner, who comes from the very culture that spent so much time looking the other way when the real-estate bubble was beginning to pop, isn't helping as a confidence builder.
What's worse, the AIG bonus fiasco only opens up a few more worrisome avenues. We have to trust that the bad assets the government is buying from these banks are at the right price. What's to say that they are? It's not as if the people who turned Big Shitpile to shit haven't worked against the common interest to maximize their own profit at everyone else's expense before. It's sort of like the AIG people who arranged their massive payoffs right at the time the government was dumping money into their company only to bail out, leaving the government-recruited front guy, Edward Liddy, to take the heat in front of an angry Congress.
Now, what may be happening is that Geithner is playing the banks holding Big Shitpile off against the Congress, who right now wouldn't be ready to go and nationalize a bunch of banks, no matter how worthless they may happen to be. If Geithner's plan works, he's a genius and smarter than all of his carping naysayers. If he's wrong, then it would be the final action that could galvanize a skittish Congress into doing the right thing, seeing as what can appear to be a united Democratic Congress can metastasize into a massive herd of cats in the blink of an eye.
All we can do is trust that the president's preternatural calmness is based in a firm understanding of the political and financial situation, and not the front of a naïf. Blogger economist Brad deLong, a rare liberal believer in Geithner's plan, says that if the treasury secretary is wrong, and if the government loses out on the deal, we are in far worse straits than this; as he puts it, "We are then in a world in which the only things that have value are bottled water, sewing needles, and ammunition."
So we wait, and hope and trust. Which is cold comfort for those who've trusted Wall Street before, and all while the economy sheds jobs at a horrific rate every month. Hope, they say, is not a plan. But right now for the rest of us, it seems to be the only plan we've got.
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