"It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."-- Henry Ford
Simon Johnson has been getting a lot of exposure lately. In addition to the TPM blog posts from which I quote in and Update to my last post, he was also interviewed on TPM and then last night on Moyers.
The Moyers interview is particularly strong in confirming my pessimism about the the bank bailout and the stimulus plan:
SIMON JOHNSON: What I read from that is that there is an unnecessary and excessive deference to the experts, or the supposed experts.
And I think the view that a lot of people have in Washington - I live in Washington, I follow this very closely - the view is that you need to rely on the technocrats. And the technocrats are saying, "This is the way to go, and you mustn't be too tough on because banks, because that will have adverse consequences for credits, and for the economy, and for unemployment," and so on and so forth. Those technocrats, if that's what they're saying, are wrong. That is not the right way to deal with this crisis.
There are many fine professionals at Treasury with great experience, who have spent their lives working on important issues related to the United States. What we face right now is not a typical U.S. issue. We face a crisis, and the president said this on Monday night, the president said, President Obama said, "We've never seen anything like this since the Great Depression."
Therefore, nobody working now, you know, has any firsthand experience. And he also said, "We may face what we call a lost decade." We've never seen that anywhere other than Japan in the 1990s, right?
And something for Treasury officials to really understand, and to really understand the alternatives - they're not, I mean, with all due respect to them, they're not the ultimate authority. I don't think they're the right people.
The correct people you should be asking this question to are people at the IMF. And I can tell you what they're saying is the policy that we seem to be perusing, of being nice to the banks, is a mistake. The powerful people are the insiders. They're the CEOs of these banks. They're the people who run these banks. They're the people who pay themselves the massive bonuses at the end of the last year. Now, those bonuses are not the essence of the problem, but they are a symptom of an arrogance, and a feeling of invincibility, that tells you a lot about the culture of those organizations, and the attitudes of the people who lead them.
BILL MOYERS: Geithner has hired as his chief-of-staff, the lobbyist from Goldman Sachs. The new deputy secretary of state was, until last year, a CEO of Citigroup. Another CFO from Citigroup is now assistant to the president, and deputy national security advisor for International Economic Affairs. And one of his deputies also came from Citigroup. One new member of the president's Economic Recovery Advisory Board comes from UBS, which is being investigated for helping rich clients evade taxes.
You're probably too young to remember that old song, "Sounds like the Mack the Knife is back in town." I mean, is that what you're talking about with this web of relationships?
SIMON JOHNSON: Absolutely. I don't think you have enough time on your show to go through the full list of people and all the positions they've taken. I'm sure these are good people. Don't get me wrong. These are fine upstanding citizens who have a certain perspective, and a certain kind of interest, and they see the world a certain way.
And it's exactly a web of interest, I think, is what you said. And that's exactly the right way to think about it. That web of interest is not my interest, or your interest, or the interest of the taxpayer. It's the interest, first and foremost, of the financial industry in this country.
BILL MOYERS: Do you think that Obama understands how these guys play the game? Let me play you the recording of a conference call "Huffington Post" released this week. One of the top officials of Morgan Stanley is speaking to his colleagues. Here it is.
SIMON JOHNSON: What he's basically saying is business as usual. Go about your daily lives. Get the bonuses. Re-brand them as awards. But it really shows you the arrogance, and I think these people think that they've won. They think it's over. They think it's won. They think that we're going to pay out ten or 20 percent of GDP to basically make them whole. It's astonishing.
BILL MOYERS: Why wouldn't they believe that? I mean, when I watched the eight CEOs testify before Congress at the House Financial Services Committee earlier this week, I had just finished reading a report that almost every member of that Committee had received contributions from those banks last year. I mean in a way that's like paying the cop on the beat not to arrest you, right?
SIMON JOHNSON: I called up one of my friends on Capitol Hill after that testimony, and that session. I said, "What happened? This was your moment. Why did they pull their punches like that?" And my friend said, "They, the Committee members, know the bankers too well."
Geithner and his cronies are not going to fix the problem.They are too deeply soaked in a mentality that prevents them from seeing possibilities outside of the web of interest that structures the world in which they have built their careers and their reputation for success. They are not going to operate outside the world in which they feel comfortable. Even if you give them the benefit of the doubt and ascribe to them the best motivations, the real solution is beyond their imaginations and capabilities.
The most positive spin I can put on this is the one I put on it in my last post--it's part of the change curve. It's just part of the typical pattern in which things have to get worse before they get better. Even if he wants to do something radically different, it's politically impossible for Obama to do anything until the oligarchs are proved decisively wrong. You and I could argue that they have been proved wrong because they created the mess to begin with, but that's not how it works. If Joe Gibbs wants to coach the Washington Redskins, you give him the job because of his trackrecord and reputation. You don't fire him until it's proved that the game has passed him by.
I don't expect you'll see Johnson on CNN or the network news shows (but maybe on MSNBC ), but it's encouraging to know that his critique is out there on the mainstream blogs and on shows like Moyers.