The congressional consensus on President Obama’s nearly $800 billion stimulus package achieved yesterday was overshadowed by the second of the new administration’s one-two punch opening salvo to stem the rapidly-disintegrating global economy.
Predictably, the push, as presented by Treasury Secretary Tim Geithner, to thaw frozen credit flows out of the U.S. banking system, combined with targeted and massive mortgage relief, has had Wall Street and other free market types howling,
That’s because, just as the target of the stimulus package is aimed at one thing, and one thing only – saving and creating jobs – so the new banking and mortgage reforms are aimed at getting cash and relief into the hands of middle class Americans.
One can never cease to be amazed by the dissembling conducted by the Wall Street types, barely suppressing fits of high-pitched screeching and rug-chewing as the new Washington pushes relief to “the little people” and not to their own bonuses, private jets, pet investors and admirers.
Geithner suffered the “kill the messenger” outrages of these types Tuesday not for the reasons they said, and were widely reported in their darlings in the media, but because it is becoming clear the direction the new administration is moving things.
It is a source of increasing amusement to see the death throes of “radical free market” America, from the radio talk show punks to the better-groomed major bank CEOs, subjected as they were to “mea culpa” groveling at yesterday’s Congressional hearing. Back in the old barbarian days, such confessions and bleating for mercy were extracted just prior to beheadings or other forms of retribution.
Then there is the laughable, hypocritical moral umbrage harrumphed from such haughty elevations as in the case of Bush loyalist Michael Gerson, who masquerades as a Washington Post columnist these days, and decries, as he did yesterday, President Obama’s abandonment of a “visionary” approach in favor of pragmatic efforts to ram his stimulus and banking reforms through in record time.
These folks are reluctant to concede that their way of doing things is dead. Not only did they bring this global crisis down around our ears with their decades of radical free market deregulation and greed, but they’ve been swept out of power like a pile of dead cockroaches discovered under the garbage can stinking up the kitchen.
Their world died the day last fall when their greatest prophet, former Federal Reserve Chief Alan Greenspan, offered a sincere and profoundly mind-altering revelation. He admitted that the entire foundation of his philosophical, radical free market world view has turned out to be in error. He said that his operating assumption that the captains of finance can be counted on to act in the best interest of their investors turned out to the patently false.
So much for the cult of radical deregulation and the free market: vaporized with one amazing confession.
Now, even the most historically conservative of economists, like Harvard’s Martin Feldstein, are conceding that not only are Obama’s reforms indispensable to address the current crisis, but that they are nowhere near enough to turn the tide. So Feldstein said in a TV interview yesterday.
Feldstein, along with Paul Volcker, another card-carrying conservative, are on the President’s new Economic Recovery Advisory Board, and concur with the need for a massive re-regulation of the economy and financial markets to avert the greatest planetary economic meltdown since the Dark Ages.
The root of the problem stems from the advanced sector’s coordinated shift from a production to consumption-based economic model in the 1950s and 1960s. It moved valuation and profit measures from actual cost-of-production parameters to margins defined by the success of marketing and sales methods. It is the outlandish differential between real cost of production and market price that is the air now escaping the global economic balloon.