Sunday, June 07, 2009

Questions for Mr. Obama

Sandy Lewis and William Cohan, both with many years on Wall St. and environs, have some questions about the current financial mess, which has not yet run anywhere near its course.

Six months ago, nobody believed that our banking system was well designed, functioning smoothly or properly regulated — so why then are we so desperately anxious to restore that model as the status quo?

Why is so much effort being put into propping up those at the top of the economic pyramid — the money-center banks, the insurance companies, the hedge funds and so forth — when during a period of deflation like the one we are in, any recovery will come only by restoring the confidence of the people down at the bottom of the pyramid?

Instead of promising the imminent return of good times, why isn’t Mr. Obama talking more about the importance of living within our means and not spending money we don’t have on things we don’t need?

Why is the morphine drip still in the veins of the financial system? These trillions in profligate federal spending are intended to make us feel better again even though feeling pain, and dealing with it responsibly, would be healthier in the long run. It is time to stop rescuing the banks that got us into this mess.

Is there to be any limit on bailouts? We have now thrown money at the big banks, any number of regional ones, insurance companies, General Motors, Chrysler and state and local governments. Will we soon be bailing out Dartmouth, which just lost its AAA bond rating? Is there no room left for what the Austrian economist Joseph Schumpeter termed “creative destruction”? And what is the plan to get the American people out of all these equity stakes we now own and don’t want?

Why has Mr. Obama surrounded himself largely with economic advisers who are theoreticians and academics — distinguished though they may be — but not those who have sat on a trading desk, made a market, managed a portfolio or set a spread?

Why isn’t the Obama administration working night and day to give the public a vastly increased amount of detailed information about what happens in financial markets?

Why is the government still complicit in making the system ever less transparent, even when it comes to what should clearly be considered public information?

Why do we still not know why Mr. Paulson, Mr. Geithner and the Federal Reserve chairman, Ben Bernanke, allowed Lehman Brothers to file bankruptcy last Sept. 15 but then, a day later, saved A.I.G.? Or why last November this trio decided to absorb potential losses on $301 billion of Citigroup’s shaky assets, when conventional wisdom among insiders held that they were worth only $150 billion at best?

Also, before Dick Fuld, Lehman Brothers’ chief executive, appeared before the House Committee on Oversight and Government Reform last October, it demanded from company executives boxes of documents about what happened at Lehman and why. Where are those documents?

Why hasn’t President Obama insisted on public hearings over what happened during this financial crisis?

Why are we not looking to change our current civil and criminal racketeering statutes, which are playing a perverse role in investigations of the crisis?

We are in one of those “generational revolutions” that Jefferson said were as important as anything else to the proper functioning of our democracy. We can no longer pretend that our collective behavior as a nation for the past 25 years has been worthy of us as a people. Many of us hoped that Barack Obama’s election would redress the dire decline in our collective ethic. We are 139 days into his presidency, and while there is still plenty of hope that Mr. Obama will fulfill his mandate, his record on searching out the causes of the financial crisis has not been reassuring. He must do what is necessary to restore the American people’s — and the world’s — faith in American capitalism and in our nation. Answering our questions may help us get back on track. But time is wasting.

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