Emily Dickinson once advised: “Tell all the Truth but tell it slant.” Evidently the New York Times‘ headline writers are taking advice from the enigmatic poet. The headline on the story on how the Obama administration will be going easy on banks and bankers getting bailout money blamed it all on the Treasury Secretary: “Geithner Said to Have Prevailed on the Bailout.” In internal administration battles, Geithner “successfully fought against” stricter rules on executive pay, and beat back the attempts to replace top management.
Of course, to say that Geithner won these battles is to say that Obama agreed with him. Once again, the embodiment of hope and change went with the status quo when he didn’t really have to. There would have been little political price to pay for putting the screws to the banksters.
And it looks like the Treasury and the Fed will pump up some $250-500 billion to help hedge funds buy bad assets — with the FDIC guaranteeing the buyers against losses.
At this point, the only thing that makes any sense is to nationalize the weakest banks, kick out management, wipe out the shareholders, clear the decks, and start over with a tightly regulated system. This isn’t even all that radical a position anymore — and it may be inevitable, if these sick and devious “public-private partnership” schemes don’t work out, which seems likely. There is a radical nationalization position – take the banks over and convert them to public institutions — but I know that’s completely out of the question with this gang. But they’re doing absolutely everything they can to avoid even an orthodox nationalization. This is looking more and more like Japan’s disastrous indulgence of their “zombie banks” in the 1990s than Sweden’s successful bailout, the model for the “nationalize them and clear the decks” approach. Instead of a few rough years, we’re likely to get a miserable decade.
They’ve botched the stimulus, and they’re botching the financial rescue. They’re worse than I expected, and I wasn’t expecting much in the first place (see: Obamamania, a febrile disease).
Doug Henwood, the publisher of Left Business Observer, is the author of Wall Street: How It Works and for Whom and After the New Economy. This note first appeared in his blog LBO News from Doug Henwood on 10 February 2009 under a Creative Commons 3.0 US license.