I agree with Paul Volcker that the vacancies at the upper levels of the Treasury Department at a time of financial crisis are shameful. Indeed, I go further: it is a travesty. In a sign of the impending apocalypse, I also agree with Krugman on one thing; a sense of despair over the failure to deal with the banking situation in a serious, hair-on-fire way.
This raises the obvious question: Why? One possibility is that this reflects an ongoing battle within the administration over the form of bank restructuring. Perhaps between more Bolshi types who want to nationalize (with some viewing this as a way of seizing the commanding heights of the economy to fund lefty policy objectives) and those who want to take a more British approach and rely on guarantees extended to still-private banks. (Is death an option? Both alternatives are bad, as I’ve written before, and as Willem Buiter concurs.) A failure to come to a decision as to the fundamental strategic direction that the administration will pursue could explain the failure to name the staff to implement it.
But there is a more disturbing possibility: that addressing the banking crisis simply is not an Obama priority. I would have not thought this possible, until I read the transcript of an Obama interview with Jim Lehrer (H/T Mrs. SWP, who also gets credit for the title.) In the interview, Obama said:
Let’s – you know, we’ll take, you know, the economy first and then we’ll take Afghanistan after that and then Iraq after that and Iran after that and, you know, the banking system somewhere out there, autos, you know. It would be wonderful if we didn’t have all the planes in the air at the same time. (Emphasis mine.)
“After that . . . and after that . . . and after that . . .the banking system somewhere out there.” [BTW. I counted five "you knows" in one paragraph. Get the guy away from a teleprompter . . . .]
Somewhere out there.
Roll that around in your mind several times. Manana. When we get around to it.
Obama says that he wants to “take the economy first.” But the first, most essential step to address the current economic difficulties is to address the banking system’s pressing problems. Indeed, addressing banking problems is the first, second, third, . . . essential step to laying the foundation for restored economic health. Yet Obama puts that way down the priority list. Which is quite consistent with leisurely pace of staffing the upper ranks of Treasury. And with the complete absence of any concrete conceptual approach, let alone plan.
This blase attitude raises the specter of Obama fiddling while the banks–and the economy–burn because he is more focused on exploiting the current economic panic to reshape the economic and political landscape. (Much as Nero supposedly welcomed, and perhaps started, the great fire in Rome because it cleared the way for him to build a grandiose new palace. A fire, by the way, that Nero exploited to justify persecution of the Christians.)
This alternative is so disturbing that I cannot accept it–yet–as the explanation for Obama’s otherwise inexplicably relaxed approach to the central economic difficulty the nation and the world face.
But even if there is a more benign explanation for inaction, that is no excuse. It also goes against the Roosevelt II meme, for the first thing FDR did on taking office was to tackle the nation’s acute banking crisis by declaring a bank holiday. Obama could take that page from the FDR book–and throw out the rest. Instead, he’s disregarding one of the few arguably reasonable steps taken in the New Deal period, and embracing all of the big government nostrums that prolonged the Great Depression.
Pace Adam Smith, just how much ruin is there in a country?