Gov’t. Officials Devise New Playbook
The news accounts following Wall Street’s gyrations this week frequently compared (Treasury Secretary) Henry Paulson and (Fed Reserve Chairman) Ben Bernanke to grim-faced surgeons trying to stem a potentially lethal and fast-moving infection threatening their patient.
Their countenances aside, Paulson and Bernanke’s ad hoc reaction to market developments actually reminds me more of Fran Tarkenton, the famous football quarterback. When the pocket supposed to protect Tarkenton collapsed, no one was better scrambling in the open field to evade tacklers and find an open receiver.
If anything, the analogy does injustice to Bernanke and Paulson: Tarkenton had to dodge a maximum of 11 tacklers, and had 10 defenders of his own. Bernanke and Paulson look like a solitary duo with a multiplying number of foes. (Best allies, kind of: NY Attorney General Cuomo, and the other central bankers. No help at all: Harvard MBA/President George Bush. Possibly on the other side: SEC Commissioner Chris Cox).
The positive aspect of all this is the sheer creativity on display, and the fact that no one’s managed to “sack” these financial quarterbacks (at least so far), notwithstanding some harrowing near-misses (several this week alone).
The negative, disconcerting side of the same coin is the unprecedented, “open field” quality to the public policy response(s).
What exactly is a government “conservatorship”? While “Receivership” is an established concept in bankruptcy law, “conservatorship” is . . . sort of made-up. Yet as of this week, that’s the legal state Fannie Mae, Freddie Mac, and AIG find themselves in. Details — lots and lots of details — to follow.
Ditto for the alphabet soup of “credit facilities” devised by the Fed the last year to inject money into the financial system. Strip away the exotic acronyms, and what you basically have is the Fed and Treasury shoveling money — lots and lots of money — into a hemorrhaging system as fast they can.
The pace and scope of that money-shoveling, unbelievably, has accelerated signficantly in just the last 72 hours. Perhaps inevitably, commentators are referring to the Fed and Treasury’s most recent efforts as a “financial surge.”
Let’s hope the parallels with Iraq are only superficial.