The Inside Story of How Wall Street and Washington Fought to Save the Financial System---and Themselves
I remember it being the month where mainstream media is filled with bad news. Fannie Mae and Freddie Mac, Lehman Brothers, AIG, Washington Mutual, etc. etc… Stock market was crashing. Our company froze hiring, started cutting cost, the talk of laid-off started showing up in rumor mills. All kinds of unfamiliar financial terms started flying around, all flavors of economist are giving their opinion on TV/Radio/Newspaper/Internet. Some say it is going to be another Great Depression, some say no it won’t be that bad. Whatever the government and the Fed did or did not do, someone would hurl critics at them.
Chaos and confusion reigned the day.
Sometime around 2009, we suddenly realized the chaos seemed to have subsided a while back. But when? and how? What worked?
I wasn’t paying attention. Life somehow seemed to have moved on. The looming disaster that almost consumed wallstreet seemed to have been pushed aside by some unknown force.
I finally had some understanding of the tsunami like events during those days after i finished reading “Too Big to Fail” by Sorkin over the past few days.
What a great book it is! “Paulson, Gerthner, Bernanke and a dozen or so private and public sector figures who populated the drama”, they were the ones who actually stared at the abyss that they never thought would happen in their lifetime. They not only didn’t falter, but also managed to hold back the tide. Unbelievable.
We do live in interesting times. How lucky we are.
The book covered the approximately seven months period from the time when Bear Stern fell (3/17/2008) to the time when Paulse, Gerthner, Bernanke united to force the top 9 banks to sign up on TARP money (10/13/2008).
March 15, 2010 issue of the New Yorker magazine is jam packed with great reads. Two particular articles are relevant to “Too Big To Fail”. They read like sequels to the book.
One on current Treasure Secretary Geithner:
–No Credit by John Cassidy – Timothy Geithner’s financial plan is working—and making him very unpopular.
One on President Obama:
–Obama’s Lost Year, by George Packer.
I feel lucky to live in a time when great men like Paulson, Geithner, and Obama who manage to hold on to their conviction and who are always “willing to do the responsible thing, even when it is terrible politics.”
On the other hand, it came to me like a revelation. It is okay to be misunderstood, under-appreciated when you believe in what you do and was fortunate enough to be given the power to execute as you see fit. It is worth it when you can see the result of your work did pay off, even though most other people don’t. It is okay. They will. Politics don’t matter as much as doing the right thing.
The Obama article is only viewable in full to those who have a subscription. So let me quote some excerpts that I loved.
A very nice summary of this Administration’s first year.
The congressional senior aide… said, “One of the problems with this Administration is it has tried to have a grown up, sophisticated conversation with the public. That is the President’s instinct, it’s Tim Geithner’s instinct. And that itself is tone-deaf. You can’t say to people whose houses are in foreclosure, who are losing their businesses, ‘It’s a complicated situation.'” The aide went on, “The President is having a very eloquent, one-sided conversation. The country doesn’t want to have the conversation he wants to have.”
A backstage view of how the President makes decision.
Meetings with the President, various Administration officials told me, are businesslike but thorough. Opposing positions are solicited and hashed out, and Obama steers the debate with tough questions, often demanding more information than his advisers can provide, and brushing off a policy’s political consequences. Tom Perriello, who admitted to sitting in “relatively cheap seats,” remarked that the surest way to win Obama over to your view is to tell him it’s the hard, unpopular, but correct decision.
This pride in responsible process is the closest thing to an Obama ideology. It champions pragmatism without pandering to the status quo, and conveys skepticism, even contempt, for Washington’s ordinary way of doing business.
So what exactly is “Washington’s ordinary way of doing business”? The question kept coming to my mind as i was watching “In the loop” and later “The Thick of it” (thanks to Isaac who shared it with me!) – original British TV series that “In the Loop” is based on. In between laughs at how ridiculous the behind scene British and the US government day-to-day operation looked, i was horrified, is it really how our governments are run? Purely reactive, constantly trying to cover up or to make something bad look good. Completely short sighted, no long term vision whatsoever. Everyone chases for sound bites and both afraid and long for the glow under a media light.
And this article seems to confirm that is not too far from the truth! And Obama is trying to put a stop to that. The fact we feel frustrated with the futility of Obama Administration’s first year was partly due to our being used to that kind of short-sighted, sound-bite-chasing politics.
Axelrod…suggested that the political failures in Obama’s first year were a result of the President’s conscientiousness in addressing difficult problems like financial instability and soaring health-care costs, regardless of the political fallout. “he violated the sort of day-to-day gestalt of Washington that says every day’s Election Day, everything’s tactical,” Axelrod said, ‘I honestly don’t think people elected him because they thought he would be a great political tactician.” Obama, Axelrod argued, does what he believes to be right in spite of “short-term political calculations. In that sense, he stands apart from the sort of prevailing politics in Washington. Now our bet is that, at the end of the day, doing it differently is good politics.”
I really really hope so and i hope that day in “at the end of the day” proved to be shorter than 4 years.
Here are some examples on how conscientious this Administration has been and why their first year seems such a failure.
The Recovery Act was meticulously designed to favor the substantive over the splashy, but an unintended consequence was that its impact became nearly invisible. The largest tax cut, for example, would not be sent out in the form of single checks, which, economists have learned, tend to be saved during downturns. (This happened to the Bush Administration’s stimulus in 2001.) Instead, refunds would be distributed in pay-checks over a two-year period, which made them less noticeable and, therefore, more likely to be spent. Money from tax cuts and programs like unemployment relief stimulated consumer spending, which led to workers being hired or retained, but those jobs didn’t carry the label of the Recovery Act. Large numbers of jobs that can be directly credited to the stimulus have come from aid allowing states to keep public employees on the payroll — and nobody notices that cats that don’t run away. Many investments in infrastructure and research and development were targeted less for their immediate benefit than for their long-term effects on transforming the economy; this led to spending, on areas like high-speed rail and clean energy, that won’t immediately create large number of jobs. The White House also set up an independent board to guard against waste and corruption, which inevitably slowed the awarding of contracts.
The article also talked about how Obama tried to negotiate for Republican vote in the face of “unprecedented soullessness” from the other side. It is similar to how Obama tried to have an “adult conversation with the public”. It is a little funny, and at the same time, moving.
Obama’s quest for bipartisanship, in the face of exceedingly discouraging facts, has been so relentless that it suggests less a strategy than a core conviction: reasonable people can be civil, exchange ideas, and eventually, find points of agreement. But shortly after the Inauguration, when Obama went to Capitol Hill to discuss his stimulus bill with House Republicans, party leaders informed him before negotiations had even begun that Republicans would vote against it as a bloc….Nevertheless, the White House continued to bargain for Republican votes throughout 2009, as if the two sides were negotiating in good faith.
There was an obvious reason that Obama did not want to abandon bipartisanship: he often needed Republican votes. But this conciliatory approach came at a high cost. The White House and its allies didn’t push for advertisements against insurance and drug companies; they didn’t take the offensive early on to create outside pressure on Republicans in Congress; and they didn’t effectively use the Obama grass-roots movement and progressive organizations to embarrass Republican senators in vulnerable states like Maine and Ohio. The Administration, busily negotiating with the opposition, considered such tactics counterproductive. Meanwhile, Obama’s opponents went on the attach, and his restraint came across as weakness. Close observers of the President said that, as a consequence, he lacks a key element of Presidential power: the ability to inspire fear.
The article mostly concentrated on a rural town in Virginia’s 5th Congressional District, with a 20% unemployment rate, and how Obama’s Recovery Act’s money is impacting the town folks.
I finished reading this last night before the healthcare bill passed. So you could imagine my mood swing.
The decidedly treacherous future of this Administration suddenly seemed a little more hopeful. Maybe the 2nd year of this Administration will be looking up? We shall see. “Yes, we can?”