Complicated Problems, Simple Choices

by: Mike Lux

Tue Mar 17, 2009 at 14:19

The enormous complexity of the economic mess that we are in makes an incredibly smart man like President Obama understandably irritated with people who want to simplify everything down to a quick either/or equation.  I understand that, and am sympathetic to the overwhelming swirl of nuance, subtlety, ripple effects, and unintended consequences inherent in every Presidential decision when the stakes are this high.

Sometimes, though, you just have to make a basic "gut check" decision to go down one basic path or another.  To his enormous credit, that's what Obama did on the economic recovery bill, his budget, and his framing of the health care, energy, and education issues:  he decided to go big, bold, and progressive in all of those areas.  

Now he has to do that on the issue of these big bank and insurance company bailouts.

Mike Lux :: Complicated Problems, Simple Choices
After you weigh all of the complicated nuances, fundamentally you have a fairly simple choice to make: the path apparently advocated by Tim Geithner and Larry Summers, which is to continue a slow, drip by drip bailout of AIG and the big banks, but letting them run essentially as they have in the past, with the same management making the decisions, with the freedom to do whatever they think is best to save themselves from bankruptcy even if it involves paying bonuses and high salaries to executives or buying up other banks, or whatever; or the path of moving quickly to fundamentally restructure the industry, putting firms into receivership, and firing executives who got us here yet still are expecting bonuses nonetheless.

Ultimately, I believe both the politics and economics of the situation cry out for the second choice and sooner rather than later to contain the political and economic damage being done. The bankers and free market economists can tell you all kinds of reasons not to do it, but sometimes you just have to make a simple call that we're going to go clearly and certainly in one direction.

In every major crisis in our history, our leaders have had to make those kinds of calls:

• In 1790, there were all kinds of legal and political arguments against adapting a Bill of Rights to our Constitution, but James Madison realized that if it didn't happen, the country would fall apart, and he moved decisively to get it done.

• In 1862, Abraham Lincoln knew there were all kinds of resistance to ending slavery, and that the conservatives and border state people in his fragile coalition would not like it, but he decided that forcefully and clearly issuing the Emancipation Proclamation was essential.  

• In 1933, FDR knew there were all kinds of nuances and complications to the banking crisis that had the country in a panic, but he moved quickly and decisively to impose a banking holiday, and then pushed through a massive restructuring of the banking and regulatory system.

• In the early 1960s, John and Bobby Kennedy and LBJ understood there were all kinds of political and social consequences to ending Jim Crow once and for all, but they realized it had to happen, and happen now.

In each case, just like today, there were incredibly big and complicated problems, and the consequences of a mis-step were incredibly high.  But in each case, a decision was made to go clearly down the path that required big, bold change.  And in each case, it was the right way to go.

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Good diary, Mike. (4.00 / 1)
I fear the choice was made in the transtion when Summers and Geitner were picked by Obama.

But it was worth saying.  Glad you did.

Just to point out a point for clarification (4.00 / 1)
Lincoln wrote out an exemption for the border states in the Emancipation Proclaimation. Explicitly, it only applied to Confederate controlled territory. Slaves in the border states were freed by the 13th amendment, not the Emancipation Proclaimation.  

Good diary Mike. The anger is real, its becoming self organizing. (4.00 / 3)
This has legs, the anger is real, the feelings are cross political, supported in lots of ways, lots of voting blocks and its just.
Here is a new group, I found this on a very large though not normally politically centered site they are giving this issue big coverage. The site even quotes you Mike.

A New Way Forward

It's time to stop giving huge handouts to banks and start creating systemic change that helps everyone. We demand a new way forward now.

We are sick of bailouts that are enriching bankers without restructuring a broken industry. Join us on April 11, 2009 as we rally for systematic change based in fairness and intelligent economics. Nationalize, Reorganize, Decentralize. If you don't see your city or town listed on the right, please sign up your city to get it going.

NATIONALIZE: Experts agree -- Insolvent banks that are too big to fail must incur a temporary FDIC intervention - no more taxpayer handouts. (see Krugman on nationalization)

: Current CEOs and board members must be removed and bonuses wiped out. The financial elite must share in the cost of what they have caused. (see Simon Johnson on Reorganizing)

DECENTRALIZE: Banks must be broken up and sold back to the private market with new antitrust rules in place-- new banks, managed by new people. (see Mike Lux on Decentralization)

Obama needs to lead on this. Time to get in front of where people are going and lead. This is why we elected him.

Again good article.


The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky

AIG is Nationalized (4.00 / 1)
The strange thing in all this is AIG is already nationalized.  Nationalization is a useful tool, but nothing more and nothing less.  I actually think the problem could be solved without nationalization, if need be.

The key is step two, Reorganization.  That is where the real work is done and where all the resistance comes from.

Decentralizing is good, but that is more long term.  Important, but it doesn't solve any of the current issues, only prevents future ones.

[ Parent ]
What? (0.00 / 0)
To his enormous credit, that's what Obama did on the economic recovery bill, his budget, and his framing of the health care, energy, and education issues:  he decided to go big, bold, and progressive in all of those areas.

The stimulus was too small, and was started with bad pre-concessions, as has been amply talked about on this blog.

The budget and energy... I dunno, really.  Won't comment.

Health care?  Progressive?  He's not even attempting to disturb the single biggest impediment to effective universal care, as has been amply discussed on this blog.

Education, are you even serious about throwing this in there?


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