The Wind Blowing from the Left

Who could have guessed that Bob Dylan's "you don't need a weatherman to know which way the wind blows" would create a new cliche genre.

And who could have guessed that the wind would suddenly stop blowing from the right?

I follow the right fairly closely and I don't know that anybody on the right has had anything significant to say about AIG bonuses, the new version of the Geithner bailout plan, or anything else having to do with the financial sector crisis.

Has Rush Limbaugh been talking about bending over because AIG has a white CEO? What's Ann Coulter's latest joke about Michelle Obama's victory garden? Sean Hannity have anything interesting to say? Controversy from Bill O'Reilly's end?

What about the Republican political leadership?

Can we really say the Republicans have contributed to the debate if nobody listens?

The wind has shifted enough that the conservative/left pole being the Obama administration, TNR, and Slate and the liberal/left pole being occupied by liberal media outlets like HuffPost, TPM, Salon, and the Daily Show, and policy progressives like Paul Krugman, Joseph Stiglitz, Matt Taibbi, and Robert Reich.

The elimination of freak show conservatives from the economic debate does simplify things somewhat, but I'm still pretty much torn between Obama and the left-critique myself.

My bad ideological self like to agree with the liberal/left critique, take over the AIG and the big banks (Citigroup, BoA, Goldman Sachs, etc.), and let AIG's counter-parties and big bank shareholders hang out to dry.

But I would bet that my Kentucky state retirement fund is heavily invested in AIG's counter-parties (hedge funds, private equity funds, Goldman Sachs, and the like) and that retirement funds all over the country will be bankrupted if AIG's counter-parties are forced to eat their very real losses. A lot of my friends who lost tons from 401k plans are waiting for the retirement shoe to drop as well (I didn't have a 401k).

That strikes me as a very big problem with the liberal/left critique.

Not that I'm satisfied with the Geithner plan. As Brad DeLong explains, the government is going to set up the world's largest hedge fund to dispose of the "toxic assets" (i.e., mortgage-backed securities) currently held by financial institutions. Likewise, the government is going to be bringing in hedge fund managers to manage the operation and guaranteeing a certain floor price to the securities.

The big problem here is that the federal government still hasn't done anything to break the business culture of big-bucks entitlement that fueled the speculative investments that burned up everybody's 401k plans and pension funds.

God, this sounds like I'm reciting "This is the House that Jack Built."

Anyway, the point is that the federal government's approach will be restarting the cycle of reckless speculation that would result in another crash pretty quickly. There will be the same players because hardly anybody was fired, the same expectations for profit that originally got everybody into trouble, and hundreds of billions in government cash to leverage.

Where the hedge funds first leveraged my retirement money into a financial black hole, now it looks like Timothy Geithner wants them to leverage my tax money into a black hole as well.

Nevertheless, I view the Geithner approach as workable if the federal government decides to once again start using government regulation as a tool for discouraging speculative financial behavior.

That's the only way I see to thread the current needle.