Barack Obama is purported to have studied the Lincoln, Roosevelt, and Reagan presidencies in depth before he took office, yet he appears to have ignored one of Lincoln’s best known sayings: “You may fool all the people some of the time, you can even fool some of the people all of the time, but you cannot fool all of the people all of the time.”
We’ve commented at length at the Obama Administration propensity to rely on propagandizing to mask the shortcomings of its policies. No where has this been so evident as on the financial services front. As we wrote:
The widespread, vocal opposition to the TARP was evidence that a once complacent populace had been roused. Reform, if proposed with energy and confidence, wasn’t a risk; not only was it badly needed, it was just what voters wanted.
But incoming president Obama failed to act. Whether he failed to see the opportunity, didn’t understand it, or was simply not interested is moot. Rather than bring vested banking interests to heel, the Obama administration instead chose to reconstitute, as much as possible, the very same industry whose reckless pursuit of profit had thrown the world economy off the cliff. There would be no Nixon goes to China moment from the architects of the policies that created the crisis, namely Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, and Director of the National Economic Council Larry Summers….
Obama’s repudiation of his campaign promise of change, by turning his back on meaningful reform of the financial services industry, in turn locked his Administration into a course of action. The new administration would have no choice other that working fist in glove with the banksters, supporting and amplifying their own, well established, propaganda efforts.
Thus Obama’s incentives are to come up with “solutions” that paper over problems, avoid meaningful conflict with the industry, minimize complaints, and restore the old practice of using leverage and investment gains to cover up stagnation in worker incomes. Potemkin reforms dovetail with the financial service industry’s goal of forestalling any measures that would interfere with its looting. So the only problem with this picture was how to fool the now-impoverished public into thinking a program of Mussolini-style corporatism represented progress.
A core proposition of marketing is that your advertising cannot fundamentally misrepresent your product; you’ll not only disappoint and alienate customers, but you will also built a brand reputation for dishonesty. Yet the Obama Administration honestly seems to believe it can snooker Americans on any and every topic. When that approach fails, the fault must be in its messaging, not in its fundamental strategy.
The Financial Times has a revealing piece tonight on the rather late recognition by the Administration that its efforts to depict the TARP as a success are getting no traction. The bizarre thing is the subtext , namely that Administration members themselves as having no choice and being victims:
Although it is too early to come up with a final estimate of the cost of the co-ordinated cleansing of the financial system, the US effort looks to have come comfortably below the average fiscal cost of resolving a systemic crisis – 12.8 per cent of gross domestic product, according to a World Bank study.
Yet no one is expecting political rewards for Democrats in the midterm elections next month. In a striking phrase, Mr Geithner acknowledged at a conference in Washington last week that “we saved the financial system, but lost the country doing it”.
Yves here. The 12.8% figure is wildly misleading. It does not include the damage of the crisis to the broader economy, such as the fact that the US is suffering lower growth and much higher unemployment as a result, and this lower output level is just about certain to produce a permanent reduction in the standard of living. The Bank of England, by contrast, has tried to measure the cost of the crisis using these broader considerations (which are admittedly very hard to measure) and has concluded the cost of the financial crisis was one to five times GLOBAL GDP.
Moreover, the tacit assumption in the Geither comment, and other Administration defenses of its bank-friendly actions, is that the choice was the program that the Administration implemented or no intervention at all. But that is bunk. There were plenty of other options for shoring up the battered financial firms; giving them generous support with virtually no strings attached, and in particular, no changes in management, was unheard of, at least outside of kleptocracies. Various forms of resolution, in particular the Nordic model, were widely discussed early in the Obama Administration and pointedly ignored. The Obama crowd took a tough line with the auto companies, dispatching its top brass, forcing the recipients to produce long term plans, forcing bondholders and union members to take haircuts. Why did the banksters get kid glove treatment? The answer is all too obvious: financiers are one of the biggest sources of campaign contributions.
The TARP was created by the Bush regime; why not distance yourself from it or deploy it differently? This Administration has chosen to make the TARP its own and has no one but itself to blame for the consequences.