Tuesday, February 10, 2009

Bailout by Yes-Men

Timothy Geithner, Hank Paulson, Robert Rubin, & Co. did not get ahead by saying things people did not want to hear. As in any strongly authority-driven culture, they worked to please authority. Thinking unconventionally, sticking out, saying what is unpopular is anathema.

The New York Times ran a story on February 9th ("Why Analysts Keep Telling Investors to Buy") which fits well into this framework. The buy buy buy mentality is more complicated since there are issues of conflicts of interest etc. But a basic problem is that bad news is never welcome. People don't seek it out. And messengers dread delivering it.

But now we are in a time when, one, bad news must be delivered. And, two, unconventional thinking is a must. As long as the ship was sailing on steady seas under a steady wind, it was easy to make money and for the Rubins, Greenspans, Paulsons to claim credit.

But in these times, their minds are too small to grasp the nature of the problem. They are neither capable or willing. And more important, they are deeply unwilling to risk their own fortunes, in either money or prestige. "Failing upward", as is common on Wall Street, is all about putting obedience and conformity before substance, thought, invention. This is not to say that the native talent is absent. They are as gifted with native intellect as any other. But they have thrown most of it over the side in the service of wealth or approval.

One of Geithner's few purported pluses was that he had not worked for years in the bellies of the beasts — Goldman Sachs, Lehman, Citigroup, and so on. He worked in the beast of Greenspan's design, the Fed. The supposition was that Geithner made a choice of public service. But who knows? Maybe he just didn't have what it took to get a job at Goldman Sachs. He studied government and Asian studies at Dartmouth — not irrelevant, but neither a subject obviously involving any study of business or economics (certainly no mathematics or anything comparably rigorous, not that Wall Street shows much command of math). Then the CIA farm league at Johns Hopkins, the School of Advanced International Studies with international economics and East Asian studies.

Who can say. Geithner is unlikely to tell us what jobs he was rejected for. But he failed up into Secretary of the Treasury. Likewise, Larry Summers failed up from Harvard (where he distinguished himself with his abrasiveness, ignorance and outright bigotry).

Sadly, President Obama seems so far to be a conformist, too. Again, like his peers, he clearly has an excellent mind. But his "team of rivals" betrays an utter unwillingness to challenge what John Kenneth Galbraith originally called the conventional wisdom.

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