Extend And Pretend

It has been announced that Larry Summers, director of Obama's Economic Council and the unholy spawn of the Prince of Darkness, will be returning to Harvard at the end of this year. And why not? His work is done. Barry Ritholtz says good riddance—

 
Summers is the former Clinton Treasury Secretary, mentored by Robert Rubin. As such, he was one of the chief architects of the crisis. In addition to believing all of the usual foolishness about efficient markets, he bought into the radical deregulation arguments pushed by the free market absolutists.

Summers was Treasury Secretary when Glass Steagall was repealed. Instead of speaking out against the irresponsible Gramm–Leach–Bliley Act (Financial Services Modernization Act of 1999), he actively supported it. Instead of explaining to the public how Glass Steagall prevented Wall Street crises from spilling over into Main Street for 65 years, he rolled over for Citibank.

The repeal of Glass Steagall was not a cause of the crisis, but it allowed the net damage to be far far worse than it would have otherwise been. And it was emblematic of the corporate takeover of the legislative process. For a fee (campaign donation) you could write your own regulations. How could that ever go wrong?

Even more ruinously, Summers oversaw the passage of Commodities Futures Modernization Act of 2000 that exempted financial derivatives from all regulatory oversight. The CFMA made the AIG collapse not only possible, but likely. It helped to set up both Lehman and Bear Stearns. CFMA allowed AIG FP to write over $3 trillion in derivatives, reserving precisely zero dollars in case an underwritten derivative needed to be paid...

Barry characterizes Obama's hiring of the Usual Suspects as a mistake—

During the Bush administration, we saw the bailouts of Bear Stearns, Fannie & Frediie, AIG, Citigroup, Bank of America, Merrill Lynch, Morgan Stanley, Goldmasn Sachs, etc.  The new White House lacked the will or the understanding or the nerve to break with those Bush policies. That was their ultimate error. Instead of imprinting the failures of the prior administration on his predecessor, Obama decided to adopt them, making them their own. Huge mistake.

OK, I want to make some crucial distinctions which I hope everyone will take to heart. Obama's hiring of Larry Summers was not a mistake. That characterization implies an error in judgment. There was no such error. Summers, Geithner and the rest were hired to maintain the status quo. And this they did. The phrase "extend and pretend" has been used to describe the accounting rules banks use to hide their losses. Americans generally do not understand that Extend And Pretend is an apt description of all Imperial Behavior & Policies.

There was never a chance Obama would repudiate the power of Finance in politics. Ah, some of you will say, Dave thinks there's a conspiracy. But that's wrong too, there is no conspiracy. There is only Right Thinking and Wrong Thinking. The former supports and advances Imperial agendas. The latter buys you a one-way train ticket to nowheresville. Barry Ritholtz is closer to the truth than he knows when he says—

Summers was incapable of saying, let’s repeal the Glass Steagall Repeal; lets overturn CFMA. Most humans have a hard time saying: “My bad, let’s just reverse the error and start over.” By putting into senior positions the people who helped create the mess, we ended up with a defense of the decision making that [preceeded Obama] instead of a fresh approach. This was not change we could believe in — it was simply more of the same.

Sure, people have a hard time admitting they made mistakes, but there was never any chance of a "fresh approach" as Ritholtz and the rest of us wanted. Repealing Glass Steagall to let loose a hoard of predatory bankers was not a mistake, it was a policy which Wall Street bought & paid for.

The issue is not whether the Son of Satan will admit he made a mistake. Instead, the issue is whether the Empire will acknowledge its fundamental Corruption. Rest assured, that admission of guilt will never happen. Extend And Pretend means more of the same now and in the future. I was being facetious when I wrote the president a letter asking him to level with the American people. Admitting the moral bankruptcy of past & present Imperial policies is not on the agenda.

If those Inside the Beltway started admitting "mistakes" there would be no end to it. And here are the "mistakes" we made under W, and here are the "mistakes" we made under Bill Clinton, etc. It would go on and on. Oh, yeah, implementing policies that allowed 1% of Americans to own 25% of the wealth was a mistake. Sorry, our bad! 

The history of the exercise of Imperial Power is not littered with confessions of wrongdoing. If you were to ask Obama, Summers or Geithner point-blank whether protecting bankers has undue influence on their decision-making, they would be indignant, they would vehemently deny it. They would talk about what is politically possible and what is not. They would say that a half-way measure that doesn't fix a problem is better than nothing at all, and so on.

And from their own point of view, they would be completely sincere. The human mind is an amazing thing. Vast swathes of reality can simply be blanked out. Or, it's I'll scratch your back and you scratch mine, which is related to what Mark Twain wrote—

You tell me whar a man gits his corn pone, en I'll tell you what his 'pinions is

Self-serving bias is easily, unknowingly disguised and thus remains unacknowledged. Truly, the mind is a wonder to behold.

If we characterize Obama's policies as mistakes, we are already defeated. In so doing, we have completely failed to understand what's going on in Washington. Psychologically, this mischaracterization stems from our need to feel like we control our own destiny, that we live in a Democracy, that voting matters, and all the rest. But as I've said, for those Inside the Beltway only maintaining the Imperial status quo matters.

One of the reasons I write this blog is to destroy the pretence that everything is on the up and up, to show that the Emperor has no clothes. I think it best for all of us if we deal with the reality of our Imperial Extend And Pretend instead of  playing the elaborate, irrelevant, insane games that obfuscate that reality. I was watching the PBS NewsHour the other day. They were covering fraud in an election in Afghanistan. They assumed I cared. They went to great lengths to tell the story, with live interviews from Kabul, an earnest follow-up discussion of the true meaning of the story, the whole bit.

Why in hell would any American living outside Washington D.C. care about a fraudulent election in Afghanistan? I mean, do we look like we give a shit? I think you can see the problem here. Goodbye Larry Summers, we eagerly await your Right Thinking replacement.

Update

The very heart of the administration's failings at a presidential economic town hall.

Comments

[Jason]

Wow Dave! The last 2 paragraphs came out of nowhere but perfectly describe my experience of watching similar news pieces.