Forward to the Past

By Paul Greenberg (Archive) · Thursday, February 4, 2010

Some things still surprise. Even about politicians. Barney Frank, for example. He's just come out for disbanding Fannie Mae and Freddie Mac.

Yes, that Barney Frank. The very same. The chairman of the House Financial Committee and the moving force -- indeed, the uncontrollable force -- behind Fannie and Freddie, those terrible twins and financial tumors whose bad loans led to the meltdown of the housing market. And then to general panic as banks, insurers and investment firms followed suit.

Now this same Barney Frank has come out for putting Fannie Mae and Freddie Mac, his old sweethearts, out of their and the taxpayers' misery. Chairman Frank needs to be told that somebody is making perfectly sane policy recommendations in his name. At last.

This isn't at all like the man. Or the rest of the Great Thinkers who for years explained how we could all borrow our way to prosperity regardless of race, color or credit-worthiness.

What a turnaround. It's as if Chris Dodd, the senator from Countrywide Financial, had come out against friendly loans for pols.

It's as if the Hon. Timothy Geithner, secretary of the Treasury and patron of Wall Street in that ascending order, were to come out for everybody paying his taxes on time. Or announce that he favored breaking up the United States of Goldman Sachs.

Secretary Geithner sounds as if he's all for Chairman Frank's one good idea a decade. Naturally he's in no hurry to carry it out. Would he favor disbanding Fannie and Freddie? "We are committed to propose a set of detailed reforms beginning this year." But: "I don't think we're going to be able to legislate that until that process can start until next year, because it's just a complicated thing to get right."

Mr. Geithner seems unable to make a clear decision unless he's in panic mode. And then it may be a bad one. The atrocious this administration can accomplish in a New York minute, the sensible takes a little longer, like forever. With this bunch, anything worth doing is worth delaying.

It's not that this administration lacks good people. It's just so easy to easy to forget that they're there. They tend to disappear from view for long periods of time. The other day, good old Paul Volcker -- Ronald Reagan's old chairman of the Federal Reserve -- suddenly turned up. Usually he's the man who isn't there. Technically, he's an economic adviser to the president. He must be the one in charge of offering good advice that's never taken.

These days Mr. Volcker, a man who learns from the past, perhaps because he was so much a part of it, wants to restrain the kind of speculation by banks-cum-investment houses that led to the financial panic the country has just sweated through. His ideal is the old Glass-Steagall Act of the New Deal, which insured the banks but only if they remained banks -- rather than investment houses, hedge funds, credit-default swappers or casinos by some other name.

Lest we forget, the New Deal was overflowing with ideas -- good and bad, sensible and wacky -- much as this administration is. Its history is a whole Alexandrian library of what worked and what didn't. From federal deposit insurance, which still works well, to the Resettlement Administration, which never did. (Any collectivist dream for American agriculture is doomed from conception, American farmers being American farmers.) The New Deal inaugurated both Social Security, which still works smoothly, and the NRA, a vast wage-and-price fixing scheme that only made a terrible economy worse.

But all these volumes of experience on history's shelves grow dusty -- as unconsulted and unemployed as so many Americans these days. Where is this administration's Works Progress Administration and Civilian Conservation Corps? That is, Where are the jobs? Instead we get phony figures for jobs-created-and-saved, a highly imaginative if not downright fictive category. Plus unprecedented, and ruinous, long-term deficits that buoy the economy about as well as a 10-ton anchor. Let us return, or at least turn, to the past; that would be progress.

It would take some moxie to erect Glass-Steagall's old wall between ordinary commercial banks and huge speculative investment houses like AIG, which dared call itself an insurance firm. Just as it would take some courage to finally kill Fannie and Freddie, both of which turned out to be the evil twin in this story. Just as it took political courage for Ronald Reagan to let Paul Volcker tame inflation in the early 1980s, a painful but necessary undertaking.

But this administration is deeply infected by the most common malady of the age: a presentism that approaches every experience as unprecedented, unique, one-of-a-kind that requires action NOW! That was pretty much Timothy Geithner's excuse for bailing out AIG with billions of our tax dollars. And making the auto companies dependents of the U.S. Treasury.

It's the spirit of a feckless age: Act now, think later -- if at all. A crisis, to quote this president's consigliere, Rahm Emanuel, is a terrible thing to waste.

If this crew consults history at all, it is only to cherry-pick examples that favor the policies it had intended to follow all along. Instead of history guiding it, it manipulates history. As in its Fable No. 1 -- that Barack Obama ended the Second Great Depression in record time.

The alternative explanation for the country's continuing economic doldrums is much too prosaic, like reality itself, to be taken seriously by our intelligentsia: that the Great Obama with his magic wand only aggravated an old-style financial panic, turning an overdue recession into a severe and persistent one. But to consider that possibility would require something alien to the spirit of these times: historical perspective.

In his State of the Union address, careful listeners will have noted that the president did take his share of the blame -- not for his actions so much as for not explaining them as well as he should have to us simpletons out here in the country. Have you noticed? Bad judgment on the part of our intellectuals has a way of being accompanied by lofty condescension.

(c) 2010 TRIBUNE MEDIA SERVICES, INC.

Third-party content does not necessarily reflect the opinions of The Patriot Post.