In early February I suggested there was a showdown underway between the US Treasury and the country's largest banks. Treasury (with the Fed and other regulators) is responsible for the safety and soundness of the financial system, the banks are mostly looking out for their own executives, and the tension between these goals is - by now - quite evident. As we've been arguing since the beginning of the year, saving the banking system - at reasonable cost to the taxpayer - implies standing up to the bankers. You can do this in various ways, through recapitalization if you are willing to commit
Back in October, not long after Lehman Brothers collapsed and triggered a meltdown on Wall Street, one of the hottest e-mail forwards making the rounds among finance types was a letter by Andrew Lahde, a hedge-fund manager who had posted eye-popping 866 percent returns in 2008 by betting on increases in U.S. subprime mortgage defaults.
Simon Johnson is a professor at MIT Sloan School of Management and a senior fellow at the Peterson Institute for International Economics. He is co-founder of the global economy website, BaselineScenario.com. The administration’s media rollout of the Geithner Plan was as meticulously coordinated as a Super Bowl Sunday. In future courses for doctors of spin, there will be a special session on the administration's dogged attempt to get everyone together and work every segment of its increasingly fragmented viewership.
The Forgotten Man: A New History of the Great Depression By Amity Shlaes (HarperCollins, 464 pp., $26.95) Herbert Hoover By William E. Leuchtenburg (Times Books, 208 pp., $22) Nothing to Fear: FDR's Inner Circle and the Hundred Days that Created Modern America By Adam Cohen (Penguin Press, 372 pp., $29.95) A generation ago, the total dismissal of the New Deal remained a marginal sentiment in American politics. Ronald Reagan boasted of having voted for Franklin Roosevelt. Neoconservatives long maintained that American liberalism had gone wrong only in the 1960s.
Republicans like to accuse Democrats of wasting taxpayer dollars and being condescending eggheads. But if President Obama's economic stimulus fails to prevent a depression--and I'm not saying it will--it will be because he didn't waste enough money, and didn't spend enough time being a condescending egghead. Let's start with the egghead part. The stimulus bill is based on Keynesian theory, which I'll briefly explain in the condescending manner we liberals so enjoy using. When we're in a severe recession, good productive capacity goes to waste.
It's been more than a month since the auto industry came to Washington, begging for a rescue. And, since that time, it's become clear just how dry Detroit's reservoir of goodwill has run. For conservative opponents of bailout legislation, like Alabama Senator Richard Shelby, the U.S. auto industry is an object of scorn—"dinosaurs," he has called them. For the liberals who support a rescue, like Connecticut Senator Christopher Dodd, Detroit remains an embarrassment.
It's been a month since Democrats swept the elections, right about the normal time for internecine warfare to break out. Last time the party won power, moderate deficit hawks and liberal neo-Keynesians immediately set out to wage a War for the Soul of the Clinton Presidency. Things got pretty vicious.
Earlier this summer, when the Obama campaign announced that Jason Furman was joining its staff as director of economic policy, the storyline seemed to write itself: Centrist adviser will pull Obama to the right. Furman had first made a name for himself as a wonky twentysomething wunderkind in the later years of the Clinton administration--a period when, to the consternation of many liberals, Clinton emphasized balanced budgets, free trade, and welfare reform.
Let's say you want to criticize Nancy Pelosi from the left. That's right, the left--call her cohorts a bunch of squishy moderates; implore them not to be so damn timid. Where would you start? Iraq? Some antiwar types have attacked the Democrats for refusing to grow a pair and end the fiasco once and for all. But that's a tad unfair--congressional Dems are doing just about everything they can to wind down the war. What about impeachment? Pelosi has taken that off the table.