James Kwak at Baseline Scenario provides strong evidence that Wall Street CEOs are nuts, but in reading the piece and John Heileman's New York Magazine article, Obama is from Mars, Wall Street is from Venus, it's hard not to conclude that Obama-Geithner don't have a real firm grip on reality either. Evidence of CEO nuttiness abounds. Kwak quotes from John Heileman's article:
One night not long ago, over dinner with ten executives in the finance industry, I heard the president described as ‘hostile to business,’ ‘anti-wealth,’ and ‘anti-capitalism’; as a ‘redistributionist,’ a ‘vilifier,’ and a ‘thug.’...I’d been told that one of the most prominent megabank chiefs, who once boasted to friends of voting for Obama, now refers to him privately as a ‘Chicago mob guy.’
Somebody has been reading too much Ayn Rand (and rather uncritically and self-servingly, I might add). I'm no Rand fan, but I frankly don't see Dagny, Hank, or Francisco incompetently running their companies into a ditch because they couldn't be bothered to understand risk or the models they were using to manage it and then taking a government handout (loan or otherwise). I would expect all to have enough respect for reality (if they did do such a thing and then compromised their unfaltering commitment to themselves and their values by taking a government handout) to realize who the "thug" is in this scenario.(I know. I know. Wesley Mouch made them do it. If it hadn't been for Wesley forcing them to lend to poor people, none of this would have happened. It's only right that we slackers now bail them out and take further hits on employment and income. Except...it wasn't "guvmint forced lending to poor people" or too much guvmint regulation that enabled investment banker incompetence.)
"Chicago mob guy?"
How about Chicago School guy? The efforts of the Obama administration to water down financial reform legislation seem to reflect a remarkable confidence that laissez-faire can be relied upon to produce the best outcome, in terms of risk management, in terms of resource allocation, and in terms of the public interest. Too bad about that pesky unemployment rate, the underwater mortgages, and the opportunity costs to all of us of the bailout and the continuing recession. Not to mention the recent track record of laissez-faire investment banking (and laissez-faire offshore oil drilling).
I think there's probably only one thing that would have humbled Wall Street and that was to let it (them) fail. Maybe Andrew Mellon was right about liquidation, but for the wrong reasons. It isn't the economy that has to be liquidated, it's the arrogance and the nuttiness. We left them standing and on top. What else could they conclude? The irony is that the world was and is supporting a very deluded group who fancy themselves to be Atlas supporting the world.
How do we "shrug" without inflicting substantial and long-lasting pain on the rest of us? How do we liquidate banker arrogance and entitlement and the trickle down of eroded moral sentiments that seems to accompany it? And how to we prevent it happening again? This is what Obama, Geithner, and the congress should be figuring out and enacting.
Obama-Geithner-Congress all know what must be done. They just won't do it. That is what I meant above when I said that Obama-Geithner don't seem to have a firm grip on reality either. Or perhaps they do grasp reality. One advantage FDR had was that he did not need to worry about income when he left office.
Anyone who truly believes that capitalism has value as a means of organizing an economy must, must, must recognize it's limits and take steps to deal with them. Primary among the limits of capitalism is and always has been the concentration of capital and power and the resulting (inefficient and often unjust) distortions on both the economy and the political process. Smith wrote about it. JS Mill wrote about it. Keynes wrote about it. As have many others. Add in arrogance and entitlement among those who hold concentrated capital and power and we are all well on the road to serfdom.
Read Kwak's article. It's better than anything I could say.