The N.Y. Times has broken a story today that I think may hold some potential for a great step in the right direction. To quote the story:
"Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials."It goes on to note that the plan is in a preliminary form and it wasn't clear how it would work at this stage, but that it would likely be voluntary for those banks that avail themselves of it. This will bear watching. This is basically a recapitalization program on a huge scale. It also would have an immediate effect of a re approach to regulations in which the absence of has been a major element of enabling the massive credit crisis too begin with. Stephen Roach, the renowned Morgan Stanley economist and today the Chairman of Morgan Stanley Asia, was recently quoted as saying that failure to re-cpitalize the banks would mean that we wasted the bail out money. He has several other ideas too, including a much larger rate cut then the one announced today and coordinated throughout several nations. He states in a recent Financial Times article that
"In the end, this is not just a crisis of markets, financial institutions, risk management and regulators. It is a crisis of leadership. The authorities who gather in Washington this weekend should be locked in a room until they come up with a true global fix for this mother of all global crises. Incrementalism and failure are not an option."Frankly, the idea that all those rows of regulations and laws on the law school book shelves have not existed for decades, and that "free markets" should be equal to an unfettered financial industry is a myth, and one that is particularly disingenuous. Regulations and controls are a cornerstone of civilization. The simple fact is that wholesale deregulation does not work, any more then does, say...ethnic cleansing.
We can throw money ineffectively at the problems in the name of defending free enterprise or we can use our brains, admit no perfect system ever existed or exists today, and the universe was no more ideally conceived by Adam Smith than Mao. American mores must shed the isolation and hubris that has crept into it's bloodstream via the twin catalysts of antipathy and eogism so carefully cultured by the new right policies of Reaganomics and it's hybridized spin off of the Bush era (just add large doses of fear mongering and greed).
If this crisis has awakened us from our slumber and given this thinking a sharp slap in the face, then we may be experiencing a cleansing, or at least a catharsis, that future historians may call a moment of salvation.
The plan roughly described in the NY Times article is a good step in the right direction. It is fascinating in the sense that I find it to be totally at odds with the Bush doctrine (if there is such a thing). It suggests to me that in these final days, government is no longer following, in all cases, Dubya's lead.
It is about time that we address the present and more importantly, our precious future.