My friend Jason is the world's worst driver. In Jason's view, the traffic signal can be divided into three parts: a green light means go, a yellow light means hit the gas and go faster, and a red light means press the gas pedal all the way to the floor and give Jeff Gordon a run for his NASCAR money. Needless to say, being a passenger with Jason helped reaffirm my religious convictions – in the course of the ride, I usually wind up muttering, ‘Please, God, don't let me die!’
I am mentioning Jason's driving skills as an admittedly fractured analogy in regard to last week's speech by Federal Reserve Chairman Ben Bernanke that outlined ways to strengthen regulatory oversight of the financial industry. The Bernanke speech was very similar to last month's speech by Treasury Secretary Timothy Geithner that presented the administration's bailout program – heavy on outline but quite short on details.
At the time of the Geithner speech, many people (including myself) were not happy that its unveiling lacked key specifics. But those details started to show up in the following days and weeks. Likewise, Bernanke's speech touched on very basic concepts regarding the long-overdue reform of the hopelessly rickety federal regulatory system, but the meat and potatoes of the proposal were still in the oven and will not be brought out for a while.
If the Geithner and Bernanke offerings are any indication, the new modus operandi from the executive branch is to go slow in shaping and polishing the recovery proposals and policies. This may explain the lack of a big, pre-packaged bundle of solutions that some people may have been expecting – in many ways, the disastrous reception to the Geithner speech last month was due to the expectation that all questions would be answered at that time.
There are still many areas of the financial recovery thrust that have yet to be made public – the ultimate fate of Fannie Mae and Freddie Mac (which won't be weighed until next year, according to Federal Housing Finance Agency director James Lockhart), the seeming exclusion of warehouse lenders and jumbo mortgages from Pres. Obama's proposals and Bernanke's challenge to the ‘too big to fail’ status quo come to mind. While it is easier to prefer answers sooner rather than later, I would rather be patient and wait for a well-considered and fully detailed program than be bum-rushed with a hasty program.
In many ways, I believe today's crisis was exasperated by the hasty and improvised rescue plan pushed forth by Bernanke and former Treasury Secretary Henry Paulson in 2008. While the urgency of the matter required that immediate action be taken, and considering no one in Congress was up to the challenge of addressing the matter, it appeared that the country's options were limited to that plan or doing nothing. In retrospect, it was the ultimate lose-lose situation, and the Paulson-Bernanke approach was the proverbial lesser of two evils.
Yet that approach was the federal financial equivalent of my pal Jason at a red light – go as fast as you can and don't worry about the possible ramifications of your action. Today, we have the luxury of seeing this strategy create more problems than solutions: $350 billion that didn't quite save the economy or the financial institutions that soaked it up, major image problems for the financial services industry, and a conspicuous lack of oversight that will inevitably result in more bureaucratic regulation.
I am not going to bemoan what some commentators have seen as a too-slow approach to the crisis. The administration recognizes the red light in front of the economy, and the need to stop and put everything in its proper place before resuming at full speed.
– Phil Hall, editor, Secondary Marketing Executive.
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