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.
|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.