No "Indispensable Men"

By Big Tent Democrat, Section Economy
Posted on Fri Mar 20, 2009 at 11:25:08 AM EST
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Kevin Drum quoting DeGaulle - "The cemeteries of the world are full of indispensable men." The point is getting through:

A substantial swathe of policy elites, starting with Hank Paulson and Ben Bernanke and George Bush and now evidently including Timothy Geithner and Larry Summers and Barack Obama really do seem to think that saving the firms is the key. That the world as it existed in the years 1996 to 2006 represents some kind of ideal of economic activity, and that the[ir] job is to put humpty-dumpty back together again. . . . [T]hat’s not what we ought to be trying to do . . .

Brian Buetler finds support from Paul Krugman:

I’ll leave to others the question of who knew or should have known that the bonus firestorm was coming; but it’s part of a pattern. At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis — that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that “governments do a bad job of running banks” (as opposed, presumably, to the wonderful job the private bankers have done), that financial bailouts and guarantees should come with no strings attached.

This was bad analysis, bad policy, and terrible politics. This administration, elected on the promise of change, has already managed, in an astonishingly short time, to create the impression that it’s owned by the wheeler-dealers. And that leaves it with no ability to counter crude populism.

Precisely.

Speaking for me only

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No "Indispensable Men" | 37 comments (37 topical)

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Couldn't agree more... (5.00 / 2) (#2)
by santarita on Fri Mar 20, 2009 at 11:42:05 AM EST

Let's see if Obama and Geithner are quick learners.

: I don't care whether Geithner is (5.00 / 2) (#3)
by scribe on Fri Mar 20, 2009 at 11:44:49 AM EST

but do care whether Obama is.

Does the title imply (5.00 / 1) (#10)
by Steve M on Fri Mar 20, 2009 at 12:45:24 PM EST

that there are indispensable women?

Personally I can think of at least two.

No making brownie points (5.00 / 4) (#11)
by Big Tent Democrat on Fri Mar 20, 2009 at 12:46:46 PM EST

with your wife and/or mom in the threads.


Maybe he is thinking of Jeralyn! (none / 0) (#21)
by ruffian on Fri Mar 20, 2009 at 02:36:24 PM EST

: I know I was! (none / 0) (#31)
by jeffinalabama on Fri Mar 20, 2009 at 06:00:05 PM EST

Really! and then Mom!
Really!
So do i win something, other than the most butt-kissing prize?

Geithner's "Blindness" (5.00 / 1) (#14)
by tokin librul on Fri Mar 20, 2009 at 01:00:15 PM EST

to the culpability for the current state of affairs of those to whom the Obamistas have (apparently irreversibly) entrusted the 'repair& rebuilding' of the economy was vividly and correctly explained by the American author and social critics, Upton Sinclair when, in the 'roaring 20s' he noted that "It is difficult to get a man to see that which keeping his job requires he remain blind."

The Humpty Dumpty metaphor ... (5.00 / 1) (#16)
by Robot Porter on Fri Mar 20, 2009 at 01:15:48 PM EST

is appropriate.

And they should remember how the nursery rhyme ends:

All the King's horses and all the King's men couldn't put Humpty together again.

: Humpty Dumpty metaphor (none / 0) (#36)
by Angelsa on Fri Mar 20, 2009 at 11:17:34 PM EST

If your a true American you would work hard towards getting Humpty Dumpty together again. America can't fail and won't fail, American should not let it fail. UNITED WE STAND DIVIDED WE FALL!

Crude populism (none / 0) (#1)
by TeresaInSnow2 on Fri Mar 20, 2009 at 11:40:43 AM EST

So I'm trying to resolve in my mind what exactly crude populism is.

It can't be that ever so special and completely idealistic populism that the blogs used to help elect Mr. Obama, but that left them hamstrung to criticize him.

So what is "crude populism" and who are the crude populists? And how do I sign up with them?

"Crude populism" is that (none / 0) (#5)
by scribe on Fri Mar 20, 2009 at 11:49:28 AM EST

variety of populism which does not serve, or is not designed, fomented and stoked to serve, the ultimate interests of the Republican party.

You know, populism that really demands (and means it) that average working people actually get a fair shake and a fair share from government and business.

The kind of populism which drives idiots to listen to Rushbo and vote Republican (Reagan was a paragon of pitching this type) is eminently acceptable and to be encouraged.

Meanwhile, I see where someone says Home Depot intends to help with economic stimulus: there's supposedly a sale on pitchforks, torches and clubs at their Connecticut stores this weekend. For the mobs that will be visiting AIG executives' houses. (One place I and anyone else sane will not be...). (/snark)


But Rush (none / 0) (#17)
by TeresaInSnow2 on Fri Mar 20, 2009 at 01:36:04 PM EST

is pro-bonus. He wouldn't be the crude populist in this case.


: Actually anyone focusing solely (5.00 / 1) (#18)
by inclusiveheart on Fri Mar 20, 2009 at 02:11:33 PM EST

on the bonuses either pro or con is sort of engaging in crude populism in this case. The bonuses are merely symbolic of a much more complicated systemic problem which requires a response that is more sophisticated than tracking down a few hundred individuals and taking their bonuses away from them.
Basically, Obama's economic team could harness the "crude populist" sentiments about the bonuses and use them to their advantage in pushing through legislative changes that could fix the systemic problems. The problem is that they don't seem to have any desire to address the systemic problems and they seem to think that these things will work themselves out within the current structure - with some bailout help from them of course.
What is happening now is that the Obama people's desire to protect the status quo - or their desire not to upset it - however you look at it - is gradually opening up a rift between them the public. As unpredictable as the "unwashed masses" can be, I personally would be more inclined to trust them than I would be to trust the "Masters of the Universe". But the Obama people are not me...
More and more, it seems that the Obama economic team have thrown their fate into the hands of the MotU crowd rather than enlisting the "unwashed masses" in an effort to bring the MotU crowd under control. At a certain point, the Obama folks will probably find themselves hung out to dry by the MotU crowd and without safe haven or support from those of us in the "unwashed masses" crowd. Of course, they are counting on the Masters of the Universe delivering a rebounded and revitalized economy - figuring that all will be forgiven by the crude populists when we get jobs and new credit card offers - but it is hard for me to see how these Masters of the Universe are going to deliver that dream given the fact that they have not changed their business models. Further it is hard for me to believe that they are even remotely interested in doing anything more than helping themselves to whatever is left. Which won't make much of a positive impact on the unwashed masses or restore the damage between them and the Obama Administration - because trickle down economics never does more than trickle down in the end.

Plenty of people here aren't "hamstrung" (none / 0) (#12)
by jondee on Fri Mar 20, 2009 at 12:49:00 PM EST

and weren't even as they side-stepped the abyss that was the other candidate and voted for him.


This could, and perhaps should, (none / 0) (#4)
by sarcastic unnamed one on Fri Mar 20, 2009 at 11:46:43 AM EST

be taken to the next step:

"History is replete with the obituaries of indispensable businesses."

I think this analysis is too facile. (none / 0) (#6)
by LarryInNYC on Fri Mar 20, 2009 at 12:11:07 PM EST

While it's obviously true that none of the people mentioned envision the kind of major change hoped for by some people (not, I think, BTD) away from market capitalism, I think the actions of last year show that the "people in charge" are willing to see some companies fail. Bear Stearns failed in a more-or-less orderly fashion, Lehman in a disorderly fashion.

I think the experience of letting those companies, especially Lehman, fail ought to convince all of us that these companies need at the very least to be unwound in an orderly fashion. When Lehman went it took the commercial paper market with it -- that failure in particular resulted in the credit crunch and a lot of unemployment.

One only has to read slightly between the lines to get the impression that AIG FS, at the center of the now-obviously-insane Credit Default Swap market, could possibly bring down the entire world banking system overnight. If so, the "people in charge" are genuinely in a bind. "Rescuing" AIG may be distasteful, but the results of not doing so could possibly be much worse.

In other words, I do believe that some institutions may be too critical to fail, at least in a disorderly fashion.

While taking politically distasteful actions to avoid an economic Armageddon may be bad politics, I'm not convinced that doing is either bad analysis or bad policy.

I'm In Favor of ... (5.00 / 1) (#7)
by santarita on Fri Mar 20, 2009 at 12:28:56 PM EST

an orderly restructuring (which most probably requires significant sale of assets and business units).

The two problems in the Geithner/Paulson/Bernanke approach is that they seem to be allowing too much management independence in the institutions that they have invested our money in and they seem to favor a return to the way things were before the meltdown albeit with more governmental regulation. The first problem stems from the second.


who controls what (none / 0) (#19)
by christinep on Fri Mar 20, 2009 at 02:21:41 PM EST

I also like "orderly restructuring." But, mostly, whatever restructuring/management realignment/re-priority setting we arrive at as a country, I hope that it incorporates a reality of justice. The idea of anger or genuine outrage about what AIG has been and what it represents and symbolizes does not trouble me. When the disparities between haves & have nots or between those in on the game and the rest of the country reach a certain level (as seems to be the case), the populace might naturally reach a turning point. We were angry at Enron, we were upset by Kozlowski, we almost gasped at Madoff. Frankly, in a rational way, it makes more sense to be angry about the pattern and what it says about the direction in which the country has been moving since the "Reagan revolution (?) than it does to deny that feeling and retrench to sophistic support of what is as what must be. By the way, I am every bit a pragmatist by temperament and by experience. What I find interesting here, tho, is that those who have created the banking problems with their misguided "brilliant" derivatives and unsecured credit swaps now rush to denounce people who are justifiably angry as pitchfork wielders with its imagery of uneducated peasants. It is a formidable tactic--partially akin to times past when women were derided as hysterical or moody or too ruled by the moon. As we move to the next steps of rebuilding, I do hope that we are not too imprisoned by the past or by fear of being termed emotional or peasant-like. You see, this isn't really about revenge and pitchforks; it is about justice in the American system. It is about the justice that should be at the heart of the American system that the 18th century populists railed about and acted on as they formed this country. A passion for justice is a good thing; it runs throughout our history. (Yes, I realize that I'm on a bit of a tangent. Bottom line for me: T. Geithner is not a good messenger for President Obama because the Treasury Secretary's past & present are too close to and intertwined with the very problem he is charged with addressing. And, moving on to someone more trustworthy will not cause the collapse of the world or the monsters-in-the-closet to jump us; rather, the acknowledgment of adjusting and forming a more representative & JUST regulated financial panoply might garner both more support and more timely recovery.) Oh, and a special raise of the glass in recognition of my peasant Slovenian and Polish grandparents who always believed in all or our America.


Hopefully there will be a rebalancing... (5.00 / 1) (#28)
by santarita on Fri Mar 20, 2009 at 03:52:28 PM EST

that comes out of all this. The notion that employees get huge compensation for short term profits but seem not to suffer any adverse consequences (other than less huge compensation) in the event of long term losses should change. These huge compensation arrangements have made it so the corporation is being run for the benefit of a select number of highly paid employees to the detriment of the shareholders and creditors of the company (and us taxpayers).

I'm still waiting for the lawsuits and criminal prosecutions for false financial certifications.


: Long term bonuses (none / 0) (#37)
by blogtopus on Sat Mar 21, 2009 at 07:25:20 AM EST

I like the idea that they have a bonus similar to (or based on) stocks; they get paid in portions over time, which are increased or decreased depending on performance of the company. Half of the bonus would be dependent on what happens to the company AFTER they leave, so that would make sure they don't make any firebombing decisions and then run. Sounds a little unfair, but what the hell I'm in a generous mood.

So why are Geithner et al allowing (5.00 / 2) (#20)
by inclusiveheart on Fri Mar 20, 2009 at 02:24:37 PM EST

the credit default swap business to continue on as if nothing ever happened? See, I'd be right there with you if they had done something to start winding the Financial Products division at AIG down, but they haven't. The "insane", as you put it, CDS market is still open for business. Until it is either seriously regulated or shut down altogether, I don't think the approach Geithner et al are taking is defensible. As far as I can tell all Geithner et al are doing is pouring water into a bucket with a gaping hole in the bottom of it.


Well. . . (5.00 / 1) (#24)
by LarryInNYC on Fri Mar 20, 2009 at 03:05:13 PM EST

So why are Geithner et al allowing the credit default swap business to continue on as if nothing ever happened?

Unless you have some information that they're not doing what they say they're doing (and what it appears from the destination of the money AIG has gotten), then I can only assume that they're doing what they say they're doing.

And that is unwinding these complex CDS deals, paying cancellation fees or returning the original investment (or maybe even paying off the guaranteed amounts) to a bunch of companies that might well go under if they didn't. That is why money is flowing from AIG to the companies it was selling CDSs to.

I seriously doubt the CDS market is "open for business" and I'd be surprised if a single CDS deal has been consummated since the middle of last year.


: CDSs are still being traded. n/t (5.00 / 2) (#27)
by inclusiveheart on Fri Mar 20, 2009 at 03:49:32 PM EST

Wholly OT, but since there's no open thread (none / 0) (#8)
by scribe on Fri Mar 20, 2009 at 12:32:56 PM EST

we'll plunk this here and go forward. ESPN poll resoundingly wants the A-11 offense back, 75-25 percent. From the article:

The A-11 is a cross between the wildcat formation and Calvinball, in which punt formation rules are used to make six players eligible to catch a pass on any given play. The big problem for the defense is, they never know which six. The formation even employs two quarterbacks on some plays.
But now, on first, second and third downs, at least four players must wear numbers between 50 and 79, making them ineligible to catch a pass. Poor form, says America. An ESPN poll on the issue puts readers squarely in favor of the A-11, 75 percent to 25 percent.

Why can't football be more fun?

And, BTD, think of all the fun Tebow could have in an A-11 offense....

: Open Thread below (none / 0) (#9)
by Big Tent Democrat on Fri Mar 20, 2009 at 12:40:24 PM EST

But I will add a MArch MAdness thread.

: I'll Bet "Tebow" (none / 0) (#15)
by tokin librul on Fri Mar 20, 2009 at 01:03:09 PM EST

started out "Thibault."
Ya think?

isnt the upshot of krugman's (none / 0) (#13)
by sancho on Fri Mar 20, 2009 at 12:53:35 PM EST

criticism that obama and his people CANNOT DO and don't care to the job needed to be done? that he is presiding over a total disaster?

i understand, i think, that obama inherited this mess but i have zero confidence that he can see it as a mess or as something that concerns him or those whom he sees everyday.

i think he sees "the mess" as a set of circumstance that got him the best on Air Force One [!!!] and a new roosevelt "victory garden" (the organic one michelle is putting in for the kids and the white house photographers).

i'm not sure either that krugman can get how catastrophic the situation may turn out to be. but obama proves himself more of DLC dem everyday and less of a populist, possibly, than reagan (who betrayed the populace i know).

Did you read all of Krugman's (none / 0) (#22)
by me only on Fri Mar 20, 2009 at 02:37:40 PM EST

column. I mean it really is brilliant:

1. It's not the way you should make policy -- it's clumsy, and it will punish some innocent parties while letting the most guilty off scot-free

followed by:

At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis

So maybe the guilty (those at fault) are already gone and the innocent (those still there) are the ones that Geithner has faith in. I mean who should we have faith in? People who have never run a bank or insurance company?

If no one is indispensable that can we at least agree that not everyone is equally qualified? If not, I suggest the next time you need medical treatment, skip the doctor and get treated by some homeless guy who needs your money.

But you missed number 2 (none / 0) (#23)
by Militarytracy on Fri Mar 20, 2009 at 02:54:59 PM EST

2. But -- there wasn't much alternative at this point. And for that I blame the Obama people.

And as a someone who has a husband still in uniform even though there were no WMD's and somehow we must deal with this horrible tragic mess and work our way back to a functional policy, the big FAIR that everyone gets to go to is in the fall.


Nice doctor analogy (none / 0) (#25)
by ricosuave on Fri Mar 20, 2009 at 03:32:53 PM EST

But by your own analogy, you are advocating that we continue going to the doctor who sewed us up with a rubber glove and six gauze pads inside of us. Who else knows better than him where to find the stuff he left in there?

Nobody is asking for a "Trading Places" type experiment (though it worked out pretty well for Eddie Murphy in the movie). But if they guys who made the bad investments which are killing the companies are still around, then giving them more cash seems like a bad idea.

But there is one faulty premise in all of this: the need to funnel AIG money is not so they can continue to do the things they have been doing, which are somehow so vital to our economy even though they have stopped doing them. The reason to funnel them money is because if they don't have enough cash, they will default on the loans given to them by the rest of the companies which were stupid enough to invest in AIG. Why, you may ask, don't we just give them money directly and let AIG die? A fine question.

AIG is just a huge middleman. Lets cut them out and directly help their creditors (or their creditors' creditors). And lets create a trust corporation to provide the interim services (such as business loans and reinsurance) that was being provided by AIG. Let's save the economy and let AIG's stockholders fend for themselves.


Agreed that AIGFP is... (none / 0) (#26)
by santarita on Fri Mar 20, 2009 at 03:45:43 PM EST

not too much more at this point than the conduit. But creating a new conduit would be costly. Keeping the conduit in place with the right people and supervised by the government makes more sense, I think.


AIG stockholders (none / 0) (#29)
by me only on Fri Mar 20, 2009 at 05:12:37 PM EST

have been wiped out. We aren't propping them up. We are propping the bondholders up.

I think they propped AIG up so that we could under the table stabilize the world banking system (it is incredibly interconnected). In the UK they went nuts when the Iceland banks were going down about making sure that any money that the UK government inject stay in the UK. That doesn't really help the world banking system. I think (this is obviously opinion) that Obama, Summers, Geither, etc understand is that it is politically unpalatable to send money to banks outside the US, so they basically hid it by propping up AIG. That makes AIG the political middleman.

And, no I am not advocating going to the same doctor. As Krugman admits (and why I copied point 1) those people are gone. We are now paying doctor number 2.

Lastly, the idea of a huge trust corporation working without paying huge salaries to people is silly. It does go back to the analogy of the doctor. My father-in-law charges a crapload of money. He doesn't take Medicare or Medicaid because they pay lousy. So the government can't get him. In a similar vein the government isn't going to get really good bankers for a pittance. They have plenty of other opportunities. So unless we want the system to fail we are going to have to pay these employees.

BTD's "no one is irreplacable" is a weak meme. There are individuals who were irreplacable (look what happened after Julius Caesar died or Alexander or Charlemagne. Hell looked what happened to the Bulls after Jordan retired. Maybe closer to BTD would be the unnables playing in the NCAA tourney. Looks like those guys weren't so easily replaced...


So how does your father-in-law feel about (5.00 / 1) (#32)
by sallywally on Fri Mar 20, 2009 at 07:14:19 PM EST

universal health care? Does he need the insurance companies and their 17% or whatever administrative costs to come out of his payment and our hides so he won't have to put up with the government?


: the poster's handle says it all, heh? (5.00 / 1) (#34)
by DFLer on Fri Mar 20, 2009 at 07:22:26 PM EST

: Admin cost only 17% ? (none / 0) (#33)
by DFLer on Fri Mar 20, 2009 at 07:21:45 PM EST

thought it was closer to 30 to 35 %

restructure (none / 0) (#30)
by souvarine on Fri Mar 20, 2009 at 05:20:11 PM EST

If these are new employees then how are they getting bonuses that guarantee their 2007 bonus? How can a new hire get a retention bonus?

These are the same people in AIGFP that have been there for years. Liddy kept them on, and argued that he had to pay these bonuses, because they are best positioned to undo what they did in previous years. They are the same people who got AIG into this, or they would not be receiving retention bonuses.


Indispensable Men (none / 0) (#35)
by Angelsa on Fri Mar 20, 2009 at 11:11:17 PM EST

WE ARE ALL DISPENSABLE EXCEPT FOR A FEW? The bottom line in getting the work done.