Thursday, January 21, 2010

Scott Brown vs Timothy Geithner

Paul Volker has been passing his cup along for a long time now, and has been used for nothing more than window dressing in the Obama Administration. Volker isn't a PhD, and is thus free from a lot of nonsense that's being taught in Economics departments, but he isn't an accountant by training nor has he ever had an operational role in a bank. So he isn't good, he just isn't appallingly bad.

Volker's skills, though, are not what catapulted him from the periphery of the Obama administration to its political center. It was Scott Brown's win in Massachusetts, and the end of Obama's health care hopes.

Timothy Geither and Larry Summers, by transferring money from taxpayers to the banks, and telling Obama that "once that banks are healthy the economy will follow" have killed healthcare. Banks are pro-cyclical, and Geither and Summers' advice was wrong. Employment is at 10%, and banks are making record profits. Obama has lost Massachusetts, he's lost healthcare, and the midterm results are just going to make things worse. I wonder if he's mad at Geithner, Bernanke, and Summers.

The Volker proposal is a step in the right direction. It isn't nearly far enough, but he labors under the same "gold standard" fallacy that infests the profession, but is thankfully free of "banks should be unregulated" nonsense pushed by Greenspan. I don't think that this proposal will go very far either, though.

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