Thursday, July 1, 2010

Coulda, Shoulda, Did-a

atrios of Eschaton speaking truth (not to Power, but only because Power is not listening):

Bernanke could have sent money from the Fed's magic money machine in all kinds of ways. They could have paid down mortgages. They could have put money in my bank account. They could have given it to state governments. What they did was prop up a failed banking system, and the worst failures of the failed banking system, under the premise that capital misallocating financial intermediaries were necessary for a stable economy.

It's one way to do things.

Policy debates confuse people into thinking that policy doesn't matter. They don't know what the policy is, or was. They think there wasn't any choice, that circumstances force those in charge into certain channels.

On the whole, the struggle over what policy is to be, just isn't very edifying. Policy is a joint product of the actions of many people, and so no single person's intentions are controlling; plus, people deny what their intentions are. And, the policy may concern broad and confusing areas of collective life: social institutions, the functions and evolution no one fully comprehends, let alone can explain. And, even the parts of the debate, which are not outright deceptions, may be -- probably are -- oversimplifications. Bumperstickers, slogans, cliches.

All of that said, journalism -- contemporary, narrative observation of what is -- can be really useful. And, succinct.

The U.S. had a definite policy, in responding to the Financial Crisis of 2008. It really didn't involve very many people at the top. So, it was, unusually coherent. By contrast, the fiscal policy enacted at the beginning of 2009 had many participants, and little coherence.

And, looking back, the shape is sharp and distinct and unmistakable.

I suspect that many folks, who spent years contemplating in prospect how to respond to the emergence of such a crisis, and wrote opinions about what to do -- as Bernanke himself was wont to do -- thought they knew the best course. But, they never really came to grips with what the basic policy forks would be. They faced imminent disaster, and like a driver, whose car has started to slide on ice, their impulse was to steer away.

The most basic decision fork -- whether to let a failed system, collapse -- received minimal consideration in the moment.

If someone did glimpse the choice, I suspect their impulse might have been to think they could parse the decision: patch things together in the moment, and reform later.

I cannot read minds. I don't know what primitive decision heuristics the key players were using at the time: Bernanke, Geithner, Secretary Paulson.

Now, in retrospect, as their panicked decision-making is revealed in detail, it is convenient to charge corruption or worse. I don't care to go there.

But, I consider that the policy was what it was, and it has consequences.

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