Wednesday, January 18, 2012

Better Financial Reporting Please

One policy area I'm admittedly not very well-versed in is financial industry regulation. When we first started to hear about the need for bank bailouts and TARP, I went along with the recommendations even though one of the few risks I did recognize was the moral hazard associated with bailing out the banks for their reckless behavior. I didn't really dive into the evidence for or against the need for the bank bailout because the people I trusted on economic matters generally agreed that it was a necessary evil - people like Matt Yglesias, Ezra Klein, even Paul Krugman (who I hold above all others on economic matters). However, rightly or wrongly, people on both the left and the right really did punish candidates on both the left and the right for voting for TARP. In fact, while I think most political commentators are buffoons when they suggest that an alliance can be forged between the left and the Tea Party on financial issues, there does seem to be some convergence on the concept of "bank bailouts." That's why you'll sometimes see Paultards at Occupy Wall Street rallies, even though libertarian polices would substantially exacerbate the very economic and political inequalities the Occupy Wall Street demonstrators are said to be fighting. While I'm personally satisfied to rely on the recommendations of my economic betters, this has not satisfied the opinions of the public at-large. A public that wildly reviles TARP. A public that believes that TARP was ineffectual (it was not) and cost the US a trillion dollars (it did not). A public that thinks, due to Republican lying and the media's deference to Republican lies, that the economic stimulus was a failure. It most certainly was not. There is a rundown of the economic literature on the stimulus here. The reason why people think the stimulus did not work, and that TARP did not work, and that Obama has failed the economy, is because the economy still blows. It is still choking the middle and lower classes to death. Unemployment is still sky high. These facts are indisputable, but I promise you this - it would be much, much worse, if these steps were not taken.  I cannot even imagine what kind of grotesque economic nightmare we would be living in if John McCain was elected President. Or if the Republicans controlled both chambers of Congress these last four years (let's remember that Republicans in Congress and in the Executive branch created this mess in the first place).
This is where the financial analysis, has, ultimately, failed us - not necessarily on the internet (where one can type in "Did the economic stimulus work?" and get hundreds of well-researched, and well-cited literature on the topic), but in the more traditional forms of mass media. Let's face it, analysts and experts on TV and in the newspapers do a very bad job at explaining alternate scenarios or counter-factuals. For example did anyone (the Bush administration, the Obama administration, finance industry experts, etc.), even attempt to explain why TARP was necessary? Like I said, I deferred to my experts of choice who told me these actions were necessary. But I still don't know why these actions were necessary. I mean seriously, who gives a shit if we let Lehman Brothers fail? Who cares about Bear Stearns? I'm still not sure how the success of failures of these mega-rich banks affect me. That's what I mean about better financial reporting please - we need better talking heads on TV and in USA Today. On the cable networks and in the pages of Newsweek. I mean, Paul Krugman (who does a wonderful job), can only be in so many place at once. We need the Brad DeLong's, and Michael Lewis', and Felix Salmon's out front and center on these topics. We need Matt Bai and David Leonhardt to explain these things to people. We need (shudder) Tim Geithner to explain these things. Because right now they are not doing it. And this contributes greatly to the bewildering public clamor for the creative destruction and economic austerity that underline the conservative agenda and assure the utter destruction of our middle and lower economic classes.

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