Regulating the regulators: the continuing Geithner problem
Reading a recent New York Times article on Treasury Secretary Tim Geithner’s relationship with the “finance club” he is charged with rescuing and regulating, Baseline Scenario blogger James Kwak makes a point many people have missed.
The NYT piece uncovers no smoking gun — no bribes, no quid pro quos, etc, linking Geithner to the failing high-rollers — but it is utterly damning in its portrayal of Geithner as a full-on member of the club, restricted in his understanding of the economic crisis and of government and society by the same training in the high art of American finance capital as are his Wall Street peers. Geithner sees the world through the same lens as they do. He has been fed from the same steaming bowl of Four-Seasons bouillebasse! Is it any wonder his bold plan for economic recovery is to save the banks at all cost?
Kwak says our governance has suffered perhaps less from the direct corruption of cash than from the pernicious effects of “cultural capital,” where a certain kind of sophistication is passed down from parents to children, like a prep-school blazer, as a means of “perpetuating class dominance,” as they say in France.
Upper-class parents take their children to fine art museums and teach them how to talk about Rembrandt, Monet, and Picasso; later in college, job interviews, and cocktail parties, the ability to talk about Rembrandt, Monet, and Picasso is one of the markers that people use, consciously or unconsciously, to identify people as being from their own tribe.
…[O]ne of the primary means by which Wall Street got its way in Washington was by creating and propagating the understanding — among sophisticated, educated, cultured people, as opposed to “populists” or the “rabble” that showed up at anti-globalization protests — that what was good for Wall Street was good for the country as a whole.
I don’t know Tim Geithner. I have no reason to believe he is corrupt. [But]… he has internalized a worldview in which Wall Street is the central pillar of the American economy, the health of the economy depends on the health of a few major Wall Street banks, the importance of those banks justifies virtually any measures to protect them in their current form, large taxpayer subsidies to banks (and to bankers) are a necessary cost of those measures – and anyone who doesn’t understand these principles is a simple populist who just doesn’t understand the way the world really works.
Getting beyond the parameters of debate established by the members of the finance elite is difficult. Our attempts to do so — ratcheted up by the now-pressing need for people outside the world of finance to try to make sense of what has happened to the economy — throw this dramatic cultural distinction of our national life into relief. The results can be heartbreaking and comic.
A good but not perfect example is the interview Terry Gross of NPR conducted with former International Monetary Fund economist and Baseline Scenario blogger Simon Johnson.
Johnson is not one of the country’s hedge fund buffoons. But he shares the culture. He can talk the talk. Terry Gross, on the other hand, is an outsider. She plays the part of everyman (everywoman) in the interview. She grapples with the ideas and with the language of contemporary finance. She is frustrated and a little angry. She wants someone to be responsible. You can tell what she’s thinking the whole time, something like: Errgh. But this incomprehensible financial Frankenstein stuff has deeply affected people’s lives!
Johnson, on the other hand, has dealt with the monster alreadyl. He has seen the destruction brought by financial elites and crony politicians in countries around the world. He is not glib or condescending, but he is just… inside and Gross is outside, like most of the rest of us — the uninitiated now forced to pick up the tab for the initiated and mad about it.
Listen if you have the time and imagine: Wouldn’t it have been so much better if CNBC had hired Terry Gross to do 24-hour coverage of the markets for the last ten years instead of the insider doofuses still on the air over there?
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