Treasury Secretary Henry Paulson Considers Name Change for Office of Financial Stability

The Treasury’s newly formed Office of Financial Stability may be renamed “The Office of Financial Stability, Tee Hee Hee”.

The change of name for the office made responsible for administration of the 700 billion dollar bailout fund under the Emergency Economic Stabilization Act of 2008, is being considered in view of market reaction to its creation.  Other possibilities include, “The President’s Working Group on Fubar”, “The Wall Street Employment Opportunity Commission”, “Malinvestment, Inc.”, or if a folksy sound polls best, “Paulson and Friends, We Inject the Capitul into Capitulation”.

Secretary Paulson said in a statement last week following the meeting of the G-7 nations (and o.k., now this part of my editorial is true), that “it’s naïve of the markets” to expect that different governments with different structures would all want the same solutions.  (The markets will probably apologize the only way they know, by naively plummeting in horror.)

But is the market’s wish really all that naïve?  Capitalism is capitalism, surely, and a capitalist solution might be better in the long run than a solution from someone’s secret police.  Secretary Paulson’s comment is an odd one for a capitalist to make– though it makes perfect sense as a comment from one of a gang of fascists, where after the quest for raw masses of power is taken care of, priorities may need a little fine tuning from one fascist state to the next.

Different structures aside (or not), the G7 has vowed to take action, and the G20 agreed (Gee, 20?).  If there was a G100, it probably would agree too– in government logic, the key to everything now is to “inject capital”, and portray confidence (with a confectioner’s coating of empathy for the little people they’ve screwed out of hopes and dreams.)

In the “naïve” logic of the markets however, this is no longer credible.  While spokespersons for the markets hopefully express support for the government moves (perhaps as a trial balloon for a job in government before Wall Street lays off everyone except a skeleton cleaning staff), the markets themselves are no longer clearing this disinformation.  There isn’t a reason for confidence when there’s now recognized massive malinvestment, and the government solution is to add more.

The plunging and “freezing” markets were actually trying to fix the systemic problem, in the same way that the necessary but unpleasant gag reflex would try to fix the systemic problem of a seven year old who just ate half a bag of Halloween candy.  However, the G7 (and the Gee, 20?), are offering up banana splits with chocolate sauce and pudding cake.

This is beyond Treasury Secretary Paulson’s capability to understand– not because he’s stupid, but because a lifetime of finely tuned self-serving bias (a Wall Street specialty) makes him incapable of seeing himself as not part of the solution.  Unfortunately for all of us, the markets and the economy will continue to try to teach him that his is not a creative power.

By Les Lafave

Banking Reform –

Tags: ,

Comments are closed.