Lately, it has been as if every lesson from a first-year graduate seminar in public policy is being played out on the national stage.
Let's underscore one point: the nation appears to be nearing a policy to deal with the financial crisis. Investors should try to keep that at the forefront. Or maybe paste it on to their computer screens at work or in their home offices, so that they can maintain a sense of perspective. Yes, it's about a year late, but there was another U.S. president in charge then: the new guy's just arrived. Moreover, if calm prevails, the nation is going to get through this difficult period, this aftermath of the decade of policy errors, the decade of descent.
But there have been hail storms on this journey. The latest disturbance: a CNBC bond market reporter, choosing, for reasons known only to him, to enter the political arena now, to advocate what he believes is populism. He doesn't want the Obama administration to help at-risk homeowners refinance their mortgages so that more people can stay in their homes, a program that would help end the toxic asset expressway, which is paved by foreclosures.
Turbulence over Chicago
The CNBC reporter is Rick Santelli, an accurate, experienced, diligent, professional who has provided laser-like observations and insights on the bond, futures, and currency markets for many years. An accomplished reporter, he is. A voice representing the people, he is not. Is what he advocates populism? No, it's closer to nihilism or chaos theory.
The CNBC episode also displayed a characteristic Americans frequently exhibit when large, public financial costs are involved to recover from a mess, one first brought to my attention by my grad school adviser: "It's not just important that I succeed; others have to fail." And that's precisely the wrong stance for Americans to take now.
That's because, as New York Times business journalist Floyd Norris has incisively observed, "Justice and success don't come together in the solution for the financial crisis." In other words, the American people must pick one.
Justice assumes the U.S. can resolve the financial crisis with: 1) all of the perpetrators being punished, 2) none of the perpetrators gaining financially from the crisis' resolution, and 3) the government's cost being born largely by those who caused it, or at minimum, the costs will being born equally by all U.S. citizens. The American people can have justice, if they choose, and you can toss the homeowner refinance plan out, too. But then the financial crisis rescue plan won't succeed.
If, on the other hand, the American people want success, they have to implement the home mortgage refinance program, and as "Dr. Doom," NYU Economics Professor Nouriel Roubini has said for years, also undertake three other measures: pass another, large fiscal stimulus package; have the Fed continue a near-zero, short-term interest rate policy; and temporarily nationalize major banks that are insolvent to rid the system of toxic assets.
So there you have it: justice, in the form of not going forward with the home mortgage refinance program, and success by undertaking Roubini's actions.
And here's another point to ponder: two years ago, the little-known Roubini was considered a "fringe" academic -- way, way out there as they say -- with few taking his forecasts seriously. This past Sunday, Roubini was a member of the round-table discussion on ABC's Sunday talk show, This Week with George Stephanopolis.
The view for here still argues that, despite some unexpected Chicago turbulence, the resources of the United States, the knowledge amassed about economics and monetary policy over the decades, and calm, candid analysis, will enable the nation to arrive at its destination called Economic Health.
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Financial Editor Joseph Lazzaro is writing a book on the U.S. presidency and the U.S. economy.
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Reader Comments (Page 1 of 1)
3-04-2009 @ 2:39PM
Seerak said...
As soon as I saw the "thinking" in this article, I realized it was another Lazarro piece before I checked the byline.
"Success" depends on what you are after. Lazarro characteristically does not admit what he's after, but it's clear from his applause of Roubini's horrid ideas what that is: the permanent expansion of government power as an end in itself.
We already know that Lazarro is *at best* economically illiterate from his earlier article pimping the US Dollar; that article was full of magical thinking and assumptions even a fifth-grader wouldn't make.
Here we see it again; Lazarro accuses Santelli of nihilism and inserting his own arbitrary characterization of Santelli "wanting others to fail". Again, all arbitrary claims without substantiation. So once again, Lazarro is making things up.
Santelli said nothing of the sort Lazarro imputes to him. He said simply that it is unjust for the prudent to bear the costs of someone else's failure. He is saying that the failure of others should be irrelevant to his own success.
And that's the meaning of "justice" that Lazarro is rebelling against. Justice is simply the idea of causality applied to morality -- i.e. everybody reaps the full consequences of their actions. Economic success requires that someone who creates wealth has the right to keep and dispose of the results -- while those who fail in that regard pay the price.
Justice and success are corollaries -- IF your goals are moral.
But if they aren't -- if one's goal was to expand government power permanently, as Roubini's ideas would do -- then yes, justice and success would be at odds.
But that is Lazarro's problem, not Santelli's
3-04-2009 @ 8:09PM
Bill said...
Think of banks as a safe port for the meager incomes of our nation's workers. They offer checking accounts, savings accounts and credit cards; also, they lend money to those who are willing to take risks. Derivatives can be used by investors to increase the profit arising if the value of the underlying moves in the direction they expect. This activity is known as speculation. Do we want banks to speculate? Isn't speculation what has brought us "toxic debt?" It is great when you harvest a profit, but the taxpayers pay the bill when the banks make a bad investment. If the banks made their money by lending it to people and businesses with collateral, we would not have the credit problem that we have today. Without the big gamblers (speculators), energy (oil) costs would become more stable and financial institutions would not be paying their executives $100'sM bonuses/salaries!
3-05-2009 @ 3:12AM
BHarrison said...
Personally, I find the concept of "success versus 'justice'" to be intelectually insulting.
Why can we not have both . . . and isn't "justice" a critical part of achieving "success". It has become typical of the corrupt individuals, and those complicit with corruptions, that upon revelations of the corruptions and frauds, they clamor to say that "the past is the past" and that remedying the problems is more important than discerning how the problems and/or corruptions/crimes arose.
To achieve "success", we must ensure that the corruptions and crimes that undermine and pervert our economic systems are not capable of being repeated so easily. "Deterrrence" is the key factor in maintaining INTEGRITY to our business enterprises . . . without stern deterrences and punishments, there are those who will always attempt to "game" the system.
The seeking of "justice" enhances and enforces the INTEGRITY of our business enterprises; and it provides the only equity for those who have been defrauded. The lack of "seeking justice" undermines the INTEGRITY of our government and business enterprises. And without "INTEGRITY" in government and business, then none of the corrupt practices are truly resolved.
How can we as a nation have economic stability if we do not have INTEGRITY; and INTEGRITY requires that people be held personally responsible for their performances, especially in regard to corrupt and illegal matters . . . and ESPECIALLY when those people are being paid TENS and HUNDREDS of millions of dollars to manage our major business enterprises.
Personally, I do not buy into the flawed thesis that there can be "real success" without the INTEGRITY (and deterrence) of "justice" for those who have committed corrupt actions and FRAUDS . . . and who have betrayed the faith, trust, and confidence of the people.
Mr. Lazzaro, it appears that YOU are part of those responsible for perpetuating the problems and corruptions of the past. You don't want to REALLY solve the problems; you just want to put a bandage on it to hide it from the public view.
3-05-2009 @ 3:35AM
BHarrison said...
As an after thought, I would point out that basically the INEPT, INCOMPETENT abd/or CORRUPT CEOs and Congressmen, who allowed all of the FRAUDS to occur that wound up undermining our economy, are STILL running most of the FIs / corportations or are still in political office.
Now these SAME guess are trying to pass themselves off as the "leaders" fo the recovery efforts . . . for the disasters that they either orchestrated or were complicit in.
These Congressmen are using DEFICIT dollars (loans) to inject HUNDREDS of BILLIONS of dollars into these "failed financial institutions and corporations" WITHOUT requiring full accountability of how these monies are spent and who the "specific beneficiaries" really are.
The hard reality is that these CEOs are undoubtedly STILL GAMING the "recovery" efforts and the "bail out monies" with little if any accountability.
These CORRUPT Congressmen and CEOs simply do not want the public to REALLY KNOW what is going on . . . because the public would probably demand that the CEOs and Congressmen be "tarred and feathered" for the continued "corruption" of the bailout and STIMULUS plans / programs.
By "ignoring 'justice'", they have tacitly left the CORRUPT individuals in charge of the recovery efforts. The CORRUPT individuals want to convince everyone that it would be too much trouble and counterproductive to "discern the truths". This is a selffserving false claim by those guilty of these corruptions; and who profitted handsomely from those frauds . . . and who are CONTINUING to profit from manipulating the "recovery" efforts.
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3-05-2009 @ 3:56AM
BHarrison said...
The reality is that the corruption of the frauds of the past, that caused our economic debacles and demise, have, to a large extent, been replaced by the corruption of the "gaming" of the "recovery" programs.
Without the "seeking of justice", corruption continues to thrive in new formats and guises. How can true "success" arise out of that oondition?
The corrupt and guilty parties must be taken out of the equations for achieving real recovery. Otherwise they are merely "changing the economic (and political) games" to hide the corruptions that continue to exist.