Hank Paulson And His Buddies Partied Like It Was 1929 While Destroying Our Banking System And An Update On The Bailout
It might have sounded a bit extreme when I called for Hank Paulson to resign last Friday. Not so much any more as I hear rumblings in mainstream circles calling for his resignation. Those rumblings will likely grow if an agreed to plan cannot be reached soon. Or even if the market rejects his concept all together. Of course, his resignation is not going to happen. We are literally weeks away from his departure. I find it almost hilarious that at one time he was asked if he would stay to serve a new administration. We don't need any more Hank Paulsons in a representative government.
It's amazing to see the repeated gaffes of politicians. Their handlers have a very altered view of reality. What is so amazing is that needed action to deal with this crisis could have been packaged and presented in such a way that the majority of the population would have easily supported it from day one. All they needed to do is what they are doing now in a public forum as a pro-active measure. The people of this country would not have panicked. Transparency is the cure for most every ill. That includes the ills of government. But, the good news is this has engaged the sovereign in a much more transparent process of making sausage. Most around the globe are probably aghast at this uniquely American process of public bickering, attacking and carping. Many will incorrectly view this as more signs of the inevitable implosion of America. But, that would be exactly the opposite of the reality we see in this amazingly constructive process. As I wrote in my initial thoughts last week, this plan needed peer review and intellectual discourse to hone the blade.
If I were to purely speculate, I would guess we are about half way to a compromise. I realize the general consensus is that we are minutes away from an agreement but I am dubious of this position. The "half way" is that we have opened the problem to public dialog. The bureaucrats have agreed in principle to a bureaucratic solution of their favor. Those who believed in more transparency, disclosure and market involvement in any plan were shoved to the side early in the process. That is for obvious reasons. One, the bureaucrats are more likely to believe a government solution is the best solution. Two, both parties in our government are big spenders and Paulson needs an education and introduction to representative government. Three, panic was a driving force in crafting a solution - ie we don't have time to adopt any market-based solutions as part of this plan. Four, the status quo is trying to keep their game going. Transparency, disclosure and market forces would upset their ability to do so.
In order to get to closure and put pen to paper, the current discourse needs to be subjected to market-based solutions. An honest discourse as to how a plan would work considering government, and market-based solutions or a combination of the two would increase the probability of the outcome being what is in the best interests of the sovereign and the economy. The real sticking point to market-based components is lack of confidence in markets as we speak and that market-based solutions would require great disclosure that banks, regulators and government surely all fear. But, we need not fear the state of fear. What we should fear is power grabs by the state. Or, as Franklin Roosevelt told us, the only thing we have to fear is fear itself.
In closing, here's some irony to think about. As the entire world jabs their sticks into our solar plexus, prodding us to fix our mess, wouldn't it be ironic if an ultimate solution to the U.S. crisis required full transparency? All the while the global markets ridiculing the U.S. generally have similar or worse issues of transparency. So, were we to adopt a solution requiring transparency, would the world follow suit or would they keep their own problems behind an opaque wall as they do today? Suffer the economic and social consequences rather than allow full transparency? This isn't just a statement of the crisis we see before us. This is a statement of the global crises we will see develop in the coming economic environment.
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