The New York Times got the obligatory leak from the nearly-empty halls of Treasury for today’s scoop on the plan from Tim Geithner and Barack Obama on how to fix the economy. To no one’s great surprise, it involves more regulation and intervention by the government, but the only thing clear about it is that Geithner and Obama still don’t have specifics. At one point, the Times report suggests that the Obama administration knows how destructive its plan will be — and that they’ll wait to apply it when it will no longer be necessary:
Officials said the proposal would seek a broad new role for the Federal Reserve to oversee large companies, including major hedge funds, whose problems could pose risks to the entire financial system.
It will propose that many kinds of derivatives and other exotic financial instruments that contributed to the crisis be traded on exchanges or through clearinghouses so they are more transparent and can be more tightly regulated. And to protect consumers, it will call for federal standards for mortgage lenders beyond what the Federal Reserve adopted last year, as well as more aggressive enforcement of the mortgage rules.
If those rules focus on ensuring that mortgages go to those who can afford them, then that sounds great. It would get the government out of the social-engineering business when it comes to credit markets. I have a sneaking suspicion, though, that it will include tighter enforcement of the Community Reinvestment Act, which is what created the housing bubble in the first place. That will have the government penalizing banks that lend responsibly — and bailing out banks that joined the social-engineering plans of Washington’s elite from both parties. That approach will put us right back where we are now in just a few years.
The big splash for this story was that it showed the Obama administration going after executive pay, even in areas where government regulation doesn’t reach now. However, a closer look at the Times article shows that the Obama administration has no idea how it will do it, where it will go, or even if it wants to take that leap in any real way:
The officials said that the administration was still debating the details of its plan, including how broadly it should be applied and how far it could go beyond simple reporting requirements. Depending on the outcome of the discussions, the administration could seek to put the changes into effect through regulations rather than through legislation.
In other words, it could just be a Sarbanes-Oxley approach for executive compensation at publicly-traded corporations. As far as I know, publicly-traded corporations already have reporting requirements for executive compensation. The AIG bonuses, about which Democrats lied to stoke all this righteous indignation and class warfare, were disclosed in their SEC filing last November and known to Tim Geithner at the time, as well as at a March 3rd hearing before they went out (via YidwithLid). Anyone paying attention to AIG’s filings would have known about the bonuses, and the fake outrage from Barney Frank and Chris Dodd make pretty clear that they’re either lying or completely incompetent at their jobs. Or both.
But the Obama administration doesn’t seem to have much idea how to apply their new standard … or when. Their sources suggest that all of these economy-saving efforts might get put off until — well, until they’re no longer needed:
Officials said the plan would also call for increasing the levels of capital that financial institutions need to hold to absorb possible losses. In a sign of the economic system’s fragility, officials said the administration would emphasize that those heightened standards should not be imposed now because they could discourage more lending. Rather, they would be put in place after the economy began to rebound.
So we’ll wait until the economy begins to recover, and then we’ll discourage lending? If these standards are bad for the economy now, they’ll be just as bad later. Why impose them at all?
The one clear message that comes from this report is that the Obama administration still has no plan. It has a few concepts, some of them contradictory, but no clear commitment to any details at all. Which again begs the question: just what has Tim Geithner been doing with his time at Treasury?