Tuesday, August 17, 2010

Who the Hell Did the Treasury Invite Into this Room?

Alex Tabarrok reports on his afternoon at the Treasury, yesterday. (Note: It is interesting that the Treasury did not put this meeting on its daily calendar of Geithner activities, which I publish here daily. Almost everything else goes on it):

Yesterday, Tyler, myself and a handful of other economics bloggers had a chance to discuss the economy with Treasury Secretary Geithner and other treasury officials. Here are a few random notes.

There was deep skepticism about the financial industry and about reform from some of the bloggers. More let’s say “radical” approaches such as Treasury taking an equity stake in underwater homes or giving everyone a guaranteed income were brought up.
The Treasury taking an equity stake in underwater homes! A guaranteed income for everyone! Who the hell did Treasury invite to this meeting?

Tabarrok was somehow surprised that these wacky ideas didn't even gain traction with ALL the Treasury officials:
I was surprised to find myself on the side of the more conservative Treasury officials who cogently argued that such reforms were neither politically viable nor likely to work.
But overall, the wacky reform bill that no one has read or understands is viewed at the Treasury, Tabarrok reports with a straight face, as "deep and meaningful."

Tabarrok continues:
A few good lines from a senior treasury official as I recall the gist:

  • “Markets believe we can borrow. The public doesn’t. We need both to move forward on the fiscal front." [Translation: Only the Chinese are buying our debt. We have no idea why. The public is on to us. With the way Obama is spending money, I have no idea how we are going to get out of this.-RW].....
 There was a recognition that the Fed could do “dramatic” things but a sense that the theory here was uncertain and untested.
[Translation: It looks like the only way out is if the Fed prints us out and who the hell knows what the ramifications of that is?.-RW]

Then Tabarrok tells us Cowen stepped up to the plate:

The best question of the day came from Tyler. The discussion was on the financial reform bill and how it changed the incentives of players in the financial industry by creating more risk for them. Tyler interrupted with “What I really want to know is how your incentives have been changed! What is to say that next time the decision will not be made to again bailout the bondholders?”
Wow! I mean cut off Cowen's mineral water. How can Cowen step into the House of Geithner and ask such a question? Give Cowen his libertarian credentials back.

In truth, the question is typical Cowen. In front of him is a 2,000 page monstrosity that does such things as create the Consumer Financial Protection Bureau that will suffocate parts of the finance industry, lay the seeds to track gold holdings and who really knows what else, and Cowen comes up with a question that raises it to an esoteric challenge where it means nothing.

It's as if someone walked into a Nazi concentration camp and asked the camp Commandant, "Why do you hate Jews so much?"  A wonderful theoretical question that does not directly challenge the Commandant and does nothing to stop the dirty work that is going on.

Tabarrok then fawns over Cowen fawning over Geithner:

As Tyler said after an earlier visit, Geithner is smart and deep.
Tabarrok then does a little bit of independent fawning (or so he thinks):

Geithner took questions on any topic. Bear in mind that taking questions from people like Mike Konczal, Tyler, or Interfluidity is not like taking questions from the press. Geithner quickly identified the heart of every question and responded in a way that showed a command of both theory and fact. We went way over scheduled time. He seemed to be having fun.
This tells me two thinks. Geithner has confidence in his advance men. Geithner's advance men are not going to let anyone with a hostile question near him.

Second, I have seen Geithner up close on a number situations and he doesn't have fun answering questions. Even when he was questioned by the mild mannered WSJ managing editor, Alan Murray, he was sweating bullets. If he was having fun during this meeting, it only means he knew he had these guys completely snowed.

1 comment:

  1. I want to see Tabarrok's bank account statement the day before the meeting and the day after. Sounds to me like we've figured out where some of the missing stimulus money is going.