I spent several years documenting the whittling-away of the economy in real time, but recently have found myself just observing. I have no interest in “I-told-you-so’s”. On the contrary, I seek action. As such, I have been keenly observing the responses of our new administration to the dirty diaper they were left. Of course, it’s going to take a lot of Clorox, and sometimes that much bleach can stink worse than the soiled mess itself.
If Henry Paulson was emblematic of the last big-swindle-before-we-go of the Bush administration, the TARP was the bank heist to end them all. The TARP can be seen as nothing else, as there has still been neither transparency nor results from the $350 billion distributed to Mr. Paulson’s Wall St. colleagues. One can hope that the forced opening of Swiss Banking’s books will shed some light on where some of that money ended up.
Since September 18, 2008, the day then-Secretary of the Treasury Henry Paulson called in the leaders of Congress and simply demanded $700 billion to fix something that had gone terribly wrong in the baking system, the mystery has been: “What did he tell them?”
Finally, this week, what he told them slipped out. There was an electronic run on the banks that morning, with over a trillion dollars having been withdrawn from money market accounts (until that day, non-FDIC insured) in just two hours. Of course, it is now clear why the story couldn’t be revealed at the time. If that information had leaked in September, every bank in the world would have been wiped out – and the townsfolk of the world would have been lined up with torches and pitchforks (only in the 21st Century, I shudder to think what tools might have replaced those Mary Shelley – era props).
It is doubtful that, had there been a physical run on the banks in October, John McCain, with economic advice coming from the likes of Phil and Wendy Gramm, could have received anywhere near the 47% he got in the election. The strangest irony of that election was that for all her bleating about Barack Obama being a Socialist and wealth redistributor, Gov. Palin, in fact, runs the most purely socialist state in the union, with energy wealth distributed to the citizenry in a manner Hugo Chavez no doubt envies! Perhaps, based on her use of the S-word as a pejorative, she simply doesn’t know the word for her own policies. But I digress.
Obama is not a Socialist, nor, thus far, has he proven to be much of a “wealth redistributor”. That said, I have been deeply concerned by the Obama economic team, the individuals selected have been troubling. Starting at the top, Timothy Geithner could not be a less confidence-imparting Treasury Secretary. Coming directly from his perch at the helm of the Federal Reserve Bank of New York, where he most certainly had not only insight into the frauds and felonies at the vortex of world banking (and did - what exactly? - to stop it), his first and most important public appearance last Tuesday could not possibly have created more anxiety (especially coming a day after the president so highly touted the Geithner speech).
At 47, Mr. Geithner, has a voice that cracks like a teenager, and exudes absolutely no impression of authority. This was the “only man for the job”? This is who had to be approved for the job in spite of his own fiduciary lapses? Perhaps he isn’t a strong public speaker (though as head of the NY Fed, surely he had to do his share of just that). Perhaps he is taking his time to craft a more careful policy for the second half of the TARP funds. With tens of trillions of uninsured and nearly valueless derivatives at stake, what exactly could be done with $350 billion, anyway? Will Secretary Geithner, defy the impression he gave the world last week and swing a pair of solid brass nun chucks at his old colleagues on “The Street”? Time will tell, but I remain skeptical.
If President Obama truly had a more progressive economic philosophy, he would have picked from the pool of economic minds who have not only been foretelling the collapse, but spoke against the instigating deregulation and legislation at the root of the problem. Robert Reich, Ravi Batra, Nuriel Roubini, Paul Krugman: surely the administration is reading their columns and hearing their warnings (particularly Krugman’s, as he has the most prominent perch, twice a week in the NY Times). It will require a great deal of academic humility to accept the input of these more progressive minds, combined with prosecutorial machismo to take down the ethically bankrupt titans who’ve enriched themselves while bankrupting their companies and everyone else they touch.
Which brings us to the next chapter: Whither goes the Swiss banking system, and who will go with it? UBS, the Swiss banking giant that has, since time immemorial, sheltered the anonymous ill-gotten and untaxed funds of the vulgarly rich, has agreed to open their books and name names. Of course, the friends of Messrs. Paulson and Geithner have known this was coming for some time (as the agreement comes as a result of a long-pending IRS lawsuit), and those in the know would surely have moved their numbered accounts to the Cayman Islands, Andorra, or any one of the other swanky locales that sponsor nameless accounts.
Watching and waiting....