Sunday, April 24, 2011

no utility whatsoever

Gretchen Morgenson reports in the NY Times: In an interview, Mr. Hosier [an investor who received $17 million punitive damages as part of an arbitration against Citibank] said the experience had opened his eyes to the disturbing ways of Wall Street.

“Instead of the financial world being the lubricant for business, they are out there manufacturing products with no utility whatsoever except for generating fees,” he said. “Somebody’s got to do something about Wall Street. It is destroying the country.”

The dysfunction of the financial system culminated in a major financial crisis in 2008, and the political response was to mortgage the country to preserve the dysfunction. The political elite simply refuses to understand. And, yet, there it is.

Compare the clear-eyed Hosier, an investor who was wronged, to the pompous but powerful Larry Summers, Director of the White House National Economic Council for President Barack Obama until late 2010, Charles W. Eliot Professor at Harvard, Secretary of the Treasury at the end of the Clinton Administration.

Stephan Richter reports on Larry Summers response, when asked a pertinent question:
For example, when the irrepressible Yves Smith asked Larry Summers about whether banking risks in the United States could not be helpfully diminished if its large institutions were run (read: compensated at the top) more like utility companies, he immediately aborted any effort at an intellectually honest answer by making it sound as if she were proposing to bring state socialism to banking.

Indeed, the tape shows him suggesting that if we went "down the path" of increased public intermediation, "we would still have U.S. Steel as one of our flagship companies and we would not have seen the kind of dynamism that we've seen".

I'd like to think that Summers is merely dodging the question, so to speak, as Richter suggests, but a more likely explanation is that he is so completely corrupt and arrogant, so little concerned by critical challenge, that he simply does not see the irony of celebrating the "dynamism" of financial crisis and rapid economic decline.

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