Tuesday, February 10, 2009

A Parable

So imagine a car company -- or better yet, the entire American automobile industry -- has spent years growing in wealth and influence, to the point where major auto companies or their representatives control most of the government positions that are nominally there to regulate their conduct. (Shocking image, I know.)

Then, one day, it turns out that almost every car built and sold in the last 10 years will explode. Not may explode, will explode. This leaves tens of millions of people either dead, wounded, or in the best possible case poor and without something they need to contribute to the economy. Worse still, these cars -- call them sub-prime engines -- have been dispersed throughout the global economy, leading the entire planet to swoon in a major recession.

Now imagine that the government, with hundreds of billions of dollars at its disposal, and trying to avert a further catastrophe, proposes not to fire the managers and board members who caused this catastrophe, nor even to punish the shareholders who profited from this crime, but simply to buy up the existing inventories of sub-prime cars, and extract meaningless promises from the businesses involved that they won't do it again.

Of course, no such thing will happen in the automobile industry, because there are unions to bust and nobody really likes unions anymore, except for people who belong to them. (Fun fact: most right-wing newspaper columnists belong to surprisingly strong unions.) This will happen in the banking industry in the US not because it's the most efficient use of taxpayer's money, but because Timothy Geithner is the Secretary of the Treasury, and if he were to execute a rational plan (either managed bankruptcy or nationalization) he wouldn't be welcome at the dinner parties and country clubs any more.

Some of you are no doubt convinced there's more to it than that, that policy isn't decided on such petty, venal concerns. You are mistaken. Geithner and Obama will throw away hundreds of billions of dollars for the very simple reason that it would never occur to them to do otherwise.

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