Econ 2009

[ewmayer]

Friday Humor: (Forgot to post it that day, is all)

Interestingly, this is *not* in fact an Onion spoof or Today Show sketch - with an always-entertaining nutcase like "Berber Gone Bonkers" Gaddafi, "you just can't make shit like this up":

Gaddafi Calls for an End to Switzerland:

Switzerland should be wiped off the map and its land divided between France, Italy and Germany. That is what Libyan leader Colonel Gaddafi is calling for in a motion he filed to the United Nations, according to newspaper reports.

Gaddafi is set to put forward his plans to eradicate the Alpine state when Libya officially takes over the annual presidency of the UN General Assembly on September 15, the Daily Mail newspaper reported.

Relations between Switzerland and Libya have been tense since Gaddafi's son and his son’s wife were arrested and accused of assaulting a hotel chambermaid in Geneva a year ago.

Even though the complaint was dropped and the couple released on bail, Gaddafi withdraw [sic] $5 billion from Swiss bank accounts, closed Swiss business in Libya and arrested Swiss nationals in the country.

Gaddafi first mentioned his plans to get rid of Switzerland at the G8 summit in Italy in July, the report said.

"Switzerland is a world mafia and not a state," he said, according to the Daily Mirror newspaper.

My Comment: But they make such delicious chocolates ... could we at least keep those? WWWTD? (What would William Tell do?)


One for the "History of Central Banking" buffs

Mises.org has a very nice article about a fascinating piece of American financial history ... the Second Bank of the United States and the war between its president Nicholas Biddle and the "lesser president" of the United States, Andrew Jackson - here is a small snip:

Nicholas Biddle: The 19th-Century Bernanke?: Nicholas Biddle (1786–1844) ... was the president of the American central bank that preceded the Fed: the Second Bank of the United States.

Like Ben Bernanke today, Nicholas Biddle cultivated the veneer of a benign civil servant calculating serenely far above the political fray. In reality he, like Bernanke, was up to his neck in the backroom game of power.

When Biddle`s bureaucratic cradle was rocked, he quickly morphed into a Machiavellian monster. Keep that in mind as Ben Bernanke gets progressively cornered by Ron Paul and the burgeoning anti-Fed movement. (Already the Fed is less popular than the IRS. And the "Book Bomb" for Ron Paul`s forthcoming book End the Fed could bring the situation to a tipping point.)

When you hear about the Federal Reserve Transparency Act getting stalled in committee, think of Daniel Webster, bought and paid for with central bank money. When you read Fed apologia in the New York Times, The Economist, and the Wall Street Journal denouncing the "reckless populism" of the Act, think of the newspaper editors in Biddle`s pocket.

Most of all, when you see Ben Bernanke on television, "respectfully" insisting upon the Fed`s independence and "gently" warning of the economic consequences of any restrictions upon it, think of Nicholas Biddle — an outwardly mild-mannered fellow who would wreck a whole nation`s prosperity in order to cling to power.

Libertarian historian Lord Acton said, "Power tends to corrupt, and absolute power corrupts absolutely." And the corrupt banking magnate Mayer Amschel Rothschild said, "Give me control of a nation`s money and I care not who makes the laws." Those two dictums, taken as dual premises, lead inexorably to the conclusion that men like Biddle and Bernanke should be challenged with eternal vigilance by all people who would be free.

I shall have more to say about M.A. Rothschild`s (in)famous dictum - and how it relates in a rather surprising way to the modern-day U.S. Federal Reserve - tomorrow.

[cheesehead]

Originally Posted by garo

NYT is the uber-establishment paper.

From that u-e.p. came this Krugman article a few days ago: (I'm surprised to find that Ernst hasn't already linked and quoted it, as far as I can tell -- did I overlook something?).

"How Did Economists Get It So Wrong?"

http://www.nytimes.com/2009/09/06/ma...nted=1&_r=1&em

(The single-page version is here: http://www.nytimes.com/2009/09/06/ma...pagewanted=all)

BTW, davar55, Krugman points out on pages 3 and 5 of this article why Alan Greenspan deserves vilification.

Originally Posted by Paul Krugman

I. MISTAKING BEAUTY FOR TRUTH

It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled “The State of Macro” (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that “the state of macro is good.” The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.” And in the real world, economists believed they had things under control: the “central problem of depression-prevention has been solved,” declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making.

Last year, everything came apart.

Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy. During the golden years, financial economists came to believe that markets were inherently stable — indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. Meanwhile, macroeconomists were divided in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economies may stray now and then but that any major deviations from the path of prosperity could and would be corrected by the all-powerful Fed. Neither side was prepared to cope with an economy that went off the rails despite the Fed’s best efforts.

. . .

As I see it, the economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth. Until the Great Depression, most economists clung to a vision of capitalism as a perfect or nearly perfect system. That vision wasn’t sustainable in the face of mass unemployment, but as memories of the Depression faded, economists fell back in love with the old, idealized vision of an economy in which rational individuals interact in perfect markets, this time gussied up with fancy equations. The renewed romance with the idealized market was, to be sure, partly a response to shifting political winds, partly a response to financial incentives. But while sabbaticals at the Hoover Institution and job opportunities on Wall Street are nothing to sneeze at, the central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess.

Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong. They turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation.

. . .

II. FROM SMITH TO KEYNES AND BACK

. . .

III. PANGLOSSIAN FINANCE

. . .

... Finance theorists continued to believe that their models were essentially right, and so did many people making real-world decisions. Not least among these was Alan Greenspan, who was then the Fed chairman and a long-time supporter of financial deregulation whose rejection of calls to rein in subprime lending or address the ever-inflating housing bubble rested in large part on the belief that modern financial economics had everything under control. There was a telling moment in 2005, at a conference held to honor Greenspan’s tenure at the Fed. One brave attendee, Raghuram Rajan (of the University of Chicago, surprisingly), presented a paper warning that the financial system was taking on potentially dangerous levels of risk. He was mocked by almost all present — including, by the way, Larry Summers, who dismissed his warnings as “misguided.”

By October of last year, however, Greenspan was admitting that he was in a state of “shocked disbelief,” because “the whole intellectual edifice” had “collapsed.” Since this collapse of the intellectual edifice was also a collapse of real-world markets, the result was a severe recession — the worst, by many measures, since the Great Depression. What should policy makers do? Unfortunately, macroeconomics, which should have been providing clear guidance about how to address the slumping economy, was in its own state of disarray.

IV. THE TROUBLE WITH MACRO

. . .

V. NOBODY COULD HAVE PREDICTED . . .

. . .

VI. THE STIMULUS SQUABBLE

. . .

VII. FLAWS AND FRICTIONS

. . .

VIII. RE-EMBRACING KEYNES

So here’s what I think economists have to do. First, they have to face up to the inconvenient reality that financial markets fall far short of perfection, that they are subject to extraordinary delusions and the madness of crowds. Second, they have to admit — and this will be very hard for the people who giggled and whispered over Keynes — that Keynesian economics remains the best framework we have for making sense of recessions and depressions. Third, they’ll have to do their best to incorporate the realities of finance into macroeconomics.

Many economists will find these changes deeply disturbing. It will be a long time, if ever, before the new, more realistic approaches to finance and macroeconomics offer the same kind of clarity, completeness and sheer beauty that characterizes the full neoclassical approach. To some economists that will be a reason to cling to neoclassicism, despite its utter failure to make sense of the greatest economic crisis in three generations. This seems, however, like a good time to recall the words of H. L. Mencken: “There is always an easy solution to every human problem — neat, plausible and wrong.”

When it comes to the all-too-human problem of recessions and depressions, economists need to abandon the neat but wrong solution of assuming that everyone is rational and markets work perfectly. The vision that emerges as the profession rethinks its foundations may not be all that clear; it certainly won’t be neat; but we can hope that it will have the virtue of being at least partly right.

I've skipped a lot of really good stuff in that quote, in order to highlight what I think is Krugman's main theme.

Ernst: I know you recently criticized Krugman and Keynes. Might that be because of misunderstandings (yours or others') of what Keynes actually said, as Krugman points out in parts of the article I haven't quoted?

[ewmayer]

Originally Posted by cheesehead

Ernst: I know you recently criticized Krugman and Keynes. Might that be because of misunderstandings (yours or others') of what Keynes actually said, as Krugman points out in parts of the article I haven't quoted?

Keynes and his modern-day followers (who practice what I would call neo-Keynesian economics, which is not just Keynesian government-intervention-during-crises but in fact all the time) all hew to the Keynes theme of interventionist government policy, which is the heart of the problem. Intervention by way of fiscal and monetary policy means a strong, activist central bank - problem #1 right there, since that sort of activism leads inevitably to "mission creep" as best illustrated by the Greenspan and Bernanke Feds. You first allow the definition of "crisis" to get loosened to mean "any kind of appreciable recession", which leads to (attempted) micromanagement of the business cycle.

Then, once convinced (as Keynesians are) that government intervention is a good, that of course means a fiat currency - problem #2. Since printing of paper money (or its electronic equivalents) is most quickly seen in the baqnking sector and equity markets, that`s where the central bankers begin looking to see if their policies are "working". Great example going on right now - trillions of $ of Fed-supplied free (i.e. to borrow by the TBTF banks) money haven't done a damn thing for the remaining scraps of the real productive economy, but the banks have fattened their bottom lines and the stock markets are bubbling away in wonderfully Greenspanian irrationally exuberant fashion, so the White House and mainstream media have been falling over themselves to claim that a "recovery" is underway. In other words, putting central bankers in charge of "managing the economy" produces an incredibly distorted bankers-eye view of the economy.

Fiat money of course (especially when coupled with the special role of the U.S. $ as the global reserve currency) makes it all too easy to print one`s way out of crises, which leads to a "government bailout" mentality. The resulting government current-account deficits require continual "economic growth" to service, which means either currency devaluation, or a tendency to try to "stimulate" consumption in order to "grow" GDP, or both. This causes government fiscal debauchery to "leak over" into consumer behavior. The Telegraph had a nice piece on this synergy this past weekend:

Adam Smith would not be optimistic in today's economic world

“The US economy suffers from a growing culture of indebtedness that has increasingly contaminated the federal government since 2001 and has spilled over dramatically into private household behaviour. The combination of the ill-conceived fiscal-furnace fired by President Bush and the US Congress and the reckless monetary-furnace fired by Alan Greenspan and Ben Bernanke throughout the period 2001-2007, created unsustainable housing market and stock market bubbles whose collapse brought on the financial crisis and economic contraction of 2008-2009.”

Krugman is the King of the neo-Keynesian "government stimulators", so no surprise he tries to rationalize things so as to make his pet economic dogma look blameless.

Ha, check out this decade-old quote from Time at the Keynes wikipage:

In 1999, Time Magazine named Keynes one of the 100 Most Important People of the 20th Century and reported that, "His radical idea that governments should spend money they don't have may have saved capitalism".

The Germans have a wonderful term for this sort of premature self-congratulation: Vorschusslorbeeren. (Roughly, "premature laurels").

Note this was during the first of the Greenspan credit bubbles, which popped rather loudly a year later and plunged the U.S. into a severe recession. True neo-Keynesian interventionist that he was, Greenspan tried fixing that problem by way of even more intervention, which gave us the housing bubble. That`s the delusional "you can have all the gain without any of the pain" mind-set of the neo-Keynesian bubble-blowers and money-printers. Krugman, apparently having missed the huge irony of the above quote, makes a similarly grandiose claim in another recent NYT op-ed:

Till Debt Does Its Part

So new budget projections show a cumulative deficit of $9 trillion over the next decade. According to many commentators, that’s a terrifying number, requiring drastic action — in particular, of course, canceling efforts to boost the economy and calling off health care reform.

The truth is more complicated and less frightening. Right now deficits are actually helping the economy. In fact, deficits here and in other major economies saved the world from a much deeper slump. The longer-term outlook is worrying, but it’s not catastrophic.

If governments had raised taxes or slashed spending in the face of the slump, if they had refused to rescue distressed financial institutions, we could all too easily have seen a full replay of the Great Depression.

As I said, deficits saved the world.

In fact, we would be better off if governments were willing to run even larger deficits over the next year or two...

My Comment: As Mish points out, Krugman has done a huge flip-flop on the issue of the debt:

http://globaleconomicanalysis.blogsp...ved-world.html

[cheesehead]

It seems to me that both Krugman and I think:

a) the earlier Bush tax-cut deficits were unnecessary once the economy had recovered from the dotcom bubble,

b) the unnecessarily-extended tax-cut deficits (plus the unnecessarily-low Fed interest rate) helped blow the housing bubble during the mid-2000s, and so boosted national debt for no good purpose,

but

c) after last year's financial crash, a Keynesian stimulus has been necessary.

Mish seems unable to distinguish the difference in context between a) and c).

If the federal budget had been returned to near-balance in, say, 2002-3 and stayed there until 2008 (i.e., if the GOP had returned to its historical fiscal responsibility stance), then the Keynesian stimulus deficit would not have to have been so enormous (say, sub-trillion). We would currently be facing a national debt amounting to about half of what it is now, with a projected debt growth rate half or so of what we're facing now.

If the Fed had raised interest rates while the economy was healthy, it would have had more room to fight recession by lowering them now -- which would also have lessened the need for Keynesian deficit stimulus.

Note that Krugman pointed out that when the Fed has lowered rates to zero -- which happened during the 1930s as well as now -- it has no more margin (in that regard, that is) for fighting recession, so other measures, such as the Keynesian stimulus, have to be used to have the effect that lowering interest rates would have had if they were still possible.

[cheesehead]

Originally Posted by cheesehead

Mish seems unable to distinguish the difference in context between a) and c).

... should have been "... between b) and c)."

[garo]

Ernst,
I think you, Mish and most of Austrian school economists misrepresent Keynes. Keynes called for counter-cyclical monetary policy. Once could say that the problem is that Greenspan remained pro-cyclical in the booms and counter-cyclical in busts. That is not Keynesian or neo-Keynesian. That is just plain stupid. So before you criticize "Keynesian clowns" any further you need to own up that you and others have made a mistake and completely neglected half the story. The problems were caused by Greenspan failing to take the punch bowl away not once but twice - in direct contravention of Keynesian economics.

[ewmayer]

Originally Posted by garo

Ernst,
I think you, Mish and most of Austrian school economists misrepresent Keynes. Keynes called for counter-cyclical monetary policy. Once could say that the problem is that Greenspan remained pro-cyclical in the booms and counter-cyclical in busts. That is not Keynesian or neo-Keynesian. That is just plain stupid. So before you criticize "Keynesian clowns" any further you need to own up that you and others have made a mistake and completely neglected half the story. The problems were caused by Greenspan failing to take the punch bowl away not once but twice - in direct contravention of Keynesian economics.

I have noted - in this thread - that Keynes *did* call for government (and its market-interventions) to shrink back during "good" times. But Keynes did not write in the 12th century - he was presumably well-acquainted with the way "modern" governments really work, which is that due to the bureaucratic ratchet effect and humanity's innate love of a "free lunch", significant voluntary downsizing almost never occurs, especially when the tax revenues are flowing. Just look at my home state of California.

I'm not letting JMK off the hook that easily ... at the very best he was hopelessly naive when it came to voluntary government downsizing - at worst he was willfully ignorant of the massive volume of real-world data pointing to the fallacy of that proposal.

Anyway, we currently find ourselves smack in the middle of the "crisis" part of the interventionist-promoted bubble and bust cycle, and Keynesian interventionism is at the heart of the bailout mentality running amok around much of the developed world, especially here in the U.S. Were he alive to witness it, Keynes - Much like Marx - might well be appalled at what his latter-day acolytes are wreaking, but that that does not absolve him of responsibility for starting modern economics down the path it it is pursuing.

[garo]

On today's must-read list
Priceless: How The Federal Reserve Bought The Economics Profession

[ewmayer]

Originally Posted by garo

On today's must-read list
Priceless: How The Federal Reserve Bought The Economics Profession

Nice ... so academic economics has been "deep captured" by the Fed much as U.S. financial regulatory bodies have been co-opted by Big Finance.


Social Security Trust Fund Shocker - $6B August Deficit: This was supposed to be a 2037 problem. No longer.

The Social Security Trust Fund reported an August net deficit of $5.865 Billion. This is the largest monthly deficit in nineteen years. Base on recent years data it was not surprising the Fund ran a deficit in August. But the magnitude of the shortfall was a surprise to me. This deficit is now the seventh in the past twelve months. That pace has never been seen before.

We deal with very big numbers these days. 100rds of billions and trillions are how we measure things. So a $6b monthly deficit for the Fund would appear to be a ho-hum. That is not correct. This is an important number.

The Actuarial analysis of the Fund is misdirected. Their focus is based on the future value. It should be focused on the here and now. In the June annual report the Trustees concluded that the Fund would be broke in 2037. This conclusion is so far into the future that it is easy for everyone involved to say, “this is a next year problem, health care comes first”. Stephen Goss the Fund’s head honcho said as much in a recent interview.

While there is a political case that we have to prioritize health care as an issue, it is wrong on a purely economic basis to ignore the exploding problems at the Fund. Every month that the status quo is allowed to continue makes the cost of the ‘fix’ that much larger. Based on the past twelve months performance I now estimate that the Net Present Value of future committed liabilities is in deficit by $7 trillion. To plug this sized hole would require a significant increase in payroll taxes. That isn’t going to happen. Raising payroll taxes by 4% would kill the economy. No White House economist would advocate that. The alternative of cutting benefits would be very unpopular. There are currently 52 million beneficiaries of the system. A lot of them vote. To shore up the fund would require across the board cuts greater than 20%. While that may not be a hardship for some it most certainly will be for others. The only way to address this inequity will be a means test.

The August deficit reconfirms that the Funds foundations are wobbly. Some observations:

-In August the US Treasury had to borrow an additional $6 billion in the public market to finance the cash shortfall of Social Security. We already have too much paper for sale to fund the budget deficit. SS added to the supply problem last month.

-The 2037 Future Value of the August deficit is -$17b based on a 4% return. What this means is that there will be a very significant revision in the 2037 drop-dead date. Based on current trends the go broke date is closer to 2025.

-This is not just a bad month. The net decline in the Funds assets for June/July/August comes to $7 billion. In 08 that period was in surplus by $5 billion, In 07 it was +$7b and in 06 it was +$13b.

-The decline in payrolls is hurting the Funds’ top line. January-July 2009 payroll tax receipts were down from 2008 by $5 billion or 1%. While the monthly declines in payrolls will fall over the next six months it is unlikely that there will be much net increase either. It will be a very long time before we see monthly gains of 250k. Without that kind of growth the Fund will quickly fall into annual deficits.

-The expense side is exploding. The September monthly benefits cost will be $56.6b up from $51.5 in 2008, a 10% increase.

-In 2007 the SSTF produced a surplus of $191b that it invested in the US economy. This year it will be closer to $100b. Based on the current trends that surplus will be gone by 2012. Six years earlier than the Trustees forecast in June of this year.


SS is the mother of all systemic risks. Even the debate on this topic brings risk. It will expose an additional $7trillion unfunded liability. Another reason for holders of dollars to worry.

There is no fix to this. Raising taxes is a dead end. Age warfare is a possible social consequence. The really bad news is that no one will touch this for another year. By then it might be too late.

My Comment: An excellent rundown of the rapidly deteriorating financials of the Social Security "Trust Fund" - I enclose both of the latter words in quotes because they are misnomers by now - by one of the top non-anonymous contributors at ZeroHedge. One issue where Bruce K and I disagree is his characterization of the SS surplus as being "invested in the US economy" ... that is not how I would describe "helping to paper over massive structural U.S. government budget deficits". Those deficits have *zero* chance of ever providing a net "return" on such an "investment", so are in fact not an investment but a subsidy.

[ewmayer]

Lehman Monday Morning Lesson Lost With Obama Regulator-in-Chief Geithner

Sept. 11 (Bloomberg) -- Less than 24 hours after his swearing-in ceremony, U.S. Treasury Secretary Timothy F. Geithner surprised Camden R. Fine with an invitation to a one- on-one meeting about the financial crisis.

“I about fell out of my chair,” said Fine, president of the Independent Community Bankers of America, a Washington-based trade group with about 5,000 members. He was in a corner office overlooking the White House at the Treasury Department the next morning, telling Geithner that behemoths such as Citigroup Inc. and Bank of America Corp. were a menace, he said.

“They should be broken up and sold off,” Fine, 58, said he declared, as Geithner scribbled notes before thanking him for his time and ushering him out into the January chill.

The Treasury secretary didn’t follow through on Fine’s suggestion, just as he didn’t act on the advice of former Federal Reserve Chairman Paul A. Volcker, or Federal Deposit Insurance Corp. head Sheila C. Bair, or the dozens of economists and politicians who pressed the White House for measures that would limit the size or activities of U.S. banks.

One year after the demise of Lehman Brothers Holdings Inc. paralyzed the financial system, “mega-banks,” as Fine’s group calls them, are as interconnected and inscrutable as ever. The Obama administration’s plan for a regulatory overhaul wouldn’t force them to shrink or simplify their structure.

Policy of Containment

“We could have another Lehman Monday,” Niall Ferguson, author of the 2008 book “The Ascent of Money” and a professor of history at Harvard University in Cambridge, Massachusetts, said in an interview. “The system is essentially unchanged, except that post-Lehman, the survivors have ‘too big to fail’ tattooed on their chests.”

My Comment: Barry Ritholtz thinks team Obama made a huge blunder by punting on any serious fiunancial-industry reform and instead attempting an overhaul of healthcare:

Tactical Error: Health Care vs Finance Regulatory Reform

I believe the brain trust behind the Obama White House has made a huge tactical error.

As Rahm Emmanuel likes to say, one should “never waste a crisis” — and the White House has done just that.

There was a narrow window to effect a full regulatory reform of Wall Street, the Banking Industry and other causes of the collapse. Instead, the White House tacked in a different direction, pursuing health care reform.

This was an enormous miscalculation.

I’m not sure who to blame, but the leading suspects (in order) are Larry Summers, Rahm Emmanuel, Tim Geithner, and (perhaps) David Axelrod. Instead of a populist clean up of The Street (ala Eliot Spitzer circa 2,000), Obama advisors allowed a smoldering resentment to take hold and build amongst the electorate. The massive taxpayer wealth transfer to inept, corrupt, incompetent bankers has created huge resentment amongst the populace — regardless of political affiliation.

There was widespread popular support for a full reform of finance. What the White House should have pursued was: 1) Reinstatement of Glass Steagall; 2) Repeal the Commodity Futures Modernization Act; 3) Overturning SEC Bear Stearn exemption allowing 5 biggest firms to leverage up far beyond 12 to one; 4) Regulating the non bank sub-prime lenders; 5) Continuing high risk trades to be compensated regardless of profitability; 6) Mandating (and enforcing) lending standards, etc.

All of this could have been accomplished in the first 6 months of the Obama administration. The consumer protection stuff could have been tossed in as well, though it was not the cause of the collapse.

What we got instead, was the usual lobbying efforts by the finance industry. They own Congress, lock stock and barrel, and they throttled Financial Reform. It did not help that the Obama economic team is filled with defenders of the Status Quo — primarily Summers, but it appears Geithner also — the dynamic duo that fiddled while the economy burned.

Such dithering can be fatal to an administration.

This was a colossal blunder. Passing reform legislation successfully would have fulfilled the campaign promise of “Change;” it would have created legislative momentum. It could have provided a healthy outlet for the Tea Party anger and the raucous Town Hall meetings. It might have even led to a “throw the Bums out” attitude in the mid-term elections, forcing the most radical de-regulators from office.

Also wasted: The enormous anti-Bush attitude throughout the country that swept team Obama into office. He should have been “Hooverized,” and O should have tapped into that same wave to force the greatest set of Wall Street and Banking regulatory reforms seen since the 1930s.

Instead, we have a White House that appears adrift, and the most importantly, may very well have missed the best chance to clean up Wall Street in five generations.

[garo]

Excellent, excellent post by Barry Ritholz.