The U.S. may not be close to loosing mere anarchy upon the world — yet — , but how much time do we have left before the chaos begins? If last week’s financial news doesn’t impel us closer to a national (global?) breakdown, I don’t know what does. The country is still in a crisis of leadership, from the executive and legislative branches of government to the offices of the corporate community. The more things stay the same in Washington and Wall St., with Democratic arrogance, Republican recalcitrance, and business tone-deafness, the more leaders will discover that a still divided public is fast becoming ungovernable.
The indignation unleashed by news of A.I.G.’s payment of bonuses to executives who created the derivatives that caused the problem has swamped the message. Administration spokesmen’s inability to explain why the bonuses were inserted into stimulus package legislation has eroded confidence in the administration. Congress, covering its own tracks in the debacle, has proposed a 90% tax on the bonuses. Few take their or the Administration’s espousals of outrage as sincere, and no one understands that if the government demands autoworkers to renogotiate contracts to bail out their firms, why won’t it demand the same of A.I.G. and troubled banks receiving goverment dole?
And all of this takes place on the eve of Treasury Secretary Geithner’s announcement of plans to remove troubled assets from the big banks’ balance sheets, the core problem of the credit freeze. Temporary nationalization of distressed banks that pose a systemic risk seems to have lost its place at the table. Paul Krugman this morning despairs over the details of the plan, suggesting that the Obama administration may be squandering its political capital in a scheme to inflate the prices of toxic assets with taxpayer money to bring in private investment. “But,” says Krugman, “the Geithner scheme would offer a one-way bet: if asset values go up, the investors profit, but if they go down, the investors can walk away from their debt.” Krugman may not have all the details of the plan, but his essential point is that the plan can’t work. If it doesn’t, what happens then?
Posted by soberingnews 
