Monday, March 23, 2009

“I Must Have Somebody,”

Both Frank Rich and Arianna Huffington seem to be developing a case of the vapors. Both cite Geithner as the problem in the administration’s efforts to respond to the unraveling economy. Huffington wants him fired. He is, these and others say, too close to Wall Street. Too invested in the culture of corporate greed. Too close to the problem as NY Fed President. Too…something. The idea seems to be to get someone who is outside the system, someone who is not invested in the banks’ survival to Do the Right Thing. (Maybe Spike Lee is available?) It almost seems that the chorus of would-be Simon Cowell’s are crying for anybody to replace Mr. Geithner.

First, the evidence that Geithner is not succeeding is thin to non-existent. Other than picking off elements of his plans that seem ill-advised, the main thrust of the criticism is that his thinking is too conventional, too wedded with restoring the status quo ante. But the technical measures of the performance of the markets aren’t so clear that Timmeh must go.

Boys and girls, ladies and gentlemen, this is no time to panic. Let’s remember we’re 10 weeks into this thing. Whether Geithner’s plan is smart or dumb should be judged at least in some measure by how well it works.

We need to remember that the criteria for judging his work is not comparison to a perfect person or an ideal Treasury Secretary. A rigorous standard of judgment would suggest a reasonable, successful Treasury Secretary as the baseline for comparison. (A fair standard of comparison would be to compare Geithner to a hypothetical Secretary Phil Gramm, since that’s who we would likely have if we didn’t have Obama making the call.)

Pundits and voters have a hard time imagining the challenges Geithner faces. My guess is that the level of reliable information is appallingly thin. But does it make sense to share that with the public? Is knowing that our regulatory apparatus is dangerously broken something that will help or harm our situation?

We don’t know, by definition, what we don’t know. When Al Gore was asked a few years ago how accurate was the press’ coverage of the Clinton administration in terms of correctly divining what was really going on, he answered (paraphrasing here) “about 5%,” meaning that 95% of what was important was simply missing from the press. Geithner and Obama have a good deal more information than we do, and if their actions seem curious or ill-advised in light of what we know, the likeliest explanation is that they know things we don’t, and in light of what they know, they are acting reasonably and responsibly.

An example. People like to agitate for ending “zombie banks,” those institutions that are dead but haven’t been buried. But which ones, exactly are dead? While we as savvy consumers of news may feel confident saying, “why Citibank and BoA, silly,” that may not be so clear once one starts digging in a little. If the Obama administration seems to be proceeding more slowly than we would like, it may be because caution really is the best strategy in light of all the circumstances. After all, what are the chances, really, that the steady-eddie Obama who we all watched in the election and the transition, who carefully weighed his options and then took decisive action, is suddenly flummoxed, or suddenly under the spell of the Wall St. elite? To me, that seems rather far-fetched.

(I do think Obama has made a communications error in not having Democratic surrogates get off of the “bail-out” terminology. It has allowed a straight rhetorical line to be drawn from the excessive lavishness of the lifestyles of the rich and powerful to the doling out of trillions to try to steady the markets and stop the downward spiral of the economy. We are not bailing out banks; nor are we bailing out counter-parties; we are bailing out creditors and shareholders, and ultimately the borrowers, of these institutions. Some of these folks are rich, and a means test to ensure we are not using taxpayer dollars to pay for luxury is warranted (and I suspect in the works). But a lot of these folks are 401(k) plans, teacher retirement plans, local governments, and others who have seen their means melt away.)

It’s easy to take pot-shots at the plans that are being developed urgently to respond to an unprecedented crisis. One thing that’s little discussed is that whatever steps the US may take could be easily rendered futile if other governments don’t act in harmony with us and each other. Building a coalition of numerous independent governments is going to take a little time.

It’s always easy to criticize, and as voters and readers and pundits that’s something we all know. During the Civil War (another unprecedented crisis forced on an incoming administration), Lincoln was bedeviled by the appaling lack of generalship available to the Union forces (especially compared to those of the confederacy.) Senators (who then as now are basically nothing more than extra-pompous pundits) were crying for the head of McClellan, Lincoln’s top general. Lincoln had no great love of McClellan, but a Congressional Committee on the Conduct of the War demanded his resignation. According to Doris Kearns Goodwin’s account in Team of Rivals (p. 428),

“When Lincoln asked who they proposed to replace McClellan, one the committee members growled, “Anybody.” Lincoln’s reply was swift. “Anybody will do for you, but not for me. I must have somebody.”

Geithner may well not be perfect. (Fairly clearly, Obama isn’t perfect either. Just ask parents of kids trying to qualify for the Special Olympics.) But for Obama, he must have somebody. Who, exactly, does Ms. Huffington propose as an upgrade to Geithner?