Obama today announced his proposal for restructuring the financial sector, and although there are some excellent parts of the proposal, with real teeth on them (new standards on leverage, for example), the overall gist of the package is oversight. His accompanying explanation also focused on oversight:
Mr. Obama told reporters on Tuesday that a "lack of oversight" allowed what he called "wild risk-taking." He said it led to "very dangerous" conditions that imperiled the global economy.
He believes there need to be more guards on watch, in effect. More (and more independent) weathermen and women, more border guards. In this view, the crisis happened--bottom line--because not enough good people were watching out for risk.
Last week, George Will spent his Sunday column in the Washington Post attacking an article I recently wrote in the Cornell Law Review. Of course it is gratifying to have an academic piece be elevated to the public sphere, but unfortunately I don't actually think Will read my article.
The Cornell article is basically a historical piece, with a contemporary claim. I show how the founding fathers wrestled with the concerns that money would have too much influence in the political sphere. I argue that this "anti-corruption" principle should be honored in contemporary legal cases. In particular, I argue that courts, when considering campaign finance laws, laws regulating lobbying, and other political process cases, should be less eager to strike down laws. Courts should give Congress more deference when laws are passed in order to reduce the corrupting influence of money in politics. I do not argue, as Will insinuates, that we should regulate the content or subject matter of political speech.
There are several reasons I do not think Will read the article beyond the introduction, including this passage:
In the last two weeks, there have been two big stories about antitrust law in the New York Times, and one in the Wall Street Journal. As the Wall Street Journal's blog just recommended that law students beef up on their antitrust laws. The Obama administration has openly signaled that they are going to use the existing antitrust laws aggressively.
This is a very good thing for competition law, which has lagged for years behind the creative behavior of corporations. But it is also a very good thing for our democracy. I was just reading Harvard professor F.M. Scherer's antitrust textbook from 1993, and one of the first excerpts in it is James Madison's "Federalist No. 10", perhaps the most famous of the Federalist papers.
In it, Madison describes what he sees as the great threat to democracy: the faction. The faction he defines as "a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community."
Before economics became a separate branch of study, scholars like Adam Smith used to write as political economists, examining the nature of production and its relationship to government. The fields have since split, and while there are those who specialize in political economy, there's a basic divide between political scientists, who study politics, and economists, who study ecologies of production. We see that in our newspapers too--a section on politics, a section on business, and while the twain meet from time to time, they are generally treated as distinct.
This divide is dangerous today--even as fewer and fewer people read newspapers in its section form--because it has reinforced in the culture a sense that economics, and business, is a separate expertise, somehow removed from questions of politics. Of the dozens of panels I've watched on the financial crisis, almost all are populated entirely by people with a financial services background and economists. As Simon Johnson regularly points out, there's a missing element here--this is a political crisis as much as an economic one.
This category choices: the financial crisis nomenclature, the choice of panelists, the choice of experts--it itself reinforces the idea that economics can be understood separately from politics, and that, as so many have suggested implicitly or directly, it would be far better if we could keep this roudy Congress out of it.
I hope you find these apt, and capable of serving two ends--a celebration of good poetry, a reflection on 100 days.
-- Philip Larkin
What are days for?
Days are where we live.
They come, they wake us
Time and time over.
They are to be happy in:
Where can we live but days?
The New York Times today has a fantastic profile of Tim Geithner and his thinking. It underlines, through a complex portrait, how urgent it is to replace Geithner with someone whose ideology was not fundamentally created by the institutions he is supposed to be regulating.
But two additional things struck me about the profile. The first is that he comes across as profoundly naïve. At one point he insists that he "would never put [him]self in a position where [his] actions were influenced by a personal relationship," but he has lived most of his life in Washington and New York, in communities where everyone around him has been attempting to use personal relationships to influence his actions. He doesn't show a basic awareness of his position. For such a sentence to be plausible, he would have to demonstrate a canny, rigorous array of defenses against influence. Instead, he sounds like a boy at the beach with some friends.
The second thing is something that has nagged at me about him since his arrival at Treasury, and I'm only beginning to put my finger on it. It's something about the way he talks. These sentences (from today's article) run on like an endless string of pop off beads:
Yesterday's hearing at the Joint Economic Committee, convened by Congresswoman Maloney, gave me some hope that Congress might be thinking about taking some leadership in systematically restructuring our financial system. I highly recommend that everyone watch the video.
Sam Brownback, Republican Congressman Burgess, Democratic Congressman Cummings, Democratic Congresswoman Maloney--unlikely bedfellows, to say the least--all appeared to accept the arguments of Joseph Stiglitz, Simon Johnson, and Thomas Hoenig, that the current PPIP and TARP projects are not just foolish but dangerous, and that we need a radical restructuring of the response to the crisis.
The panel starts with discussions of economic failure, but ends with the problems of political failure. As Congressman Burgess said in the opening remarks, "Trillions of taxpayer dollars are at risk, but congressional approval is not needed for the plan to proceed …on its face this is a violation of the democratic process."
Yesterday thousands of people rallied in hundreds of "tea party" protests across the country, expressing anger about the economy, politics, and taxes.
It is easy to make fun of the tea-baggers, to find idiotic quotes, and share pictures of wing-nut signs. It's easy to dismiss the participants as foolish followers of well-paid demagogues. But I'm not going to join the collective progressive dunking of the tea-bagging events. Whenever thousands of people choose to break their usual nonpolitical routine and publicly protest, we should pay attention. We should try to understand, and---for those of who believe that massive structural change of our financial system is in order---we should probably reach out.
These are my preliminary thoughts about the tea parties: