More frustration with the man at the top

by Russ Roberts on March 11, 2009

in Financial Markets

From Andrew Grove:

I have found that to succeed, an organization must travel through two
phases: first, a period of chaotic experimentation in which intense
discussion is allowed, even encouraged, by those in charge. In time,
when the chaos becomes unbearable, the leadership reins in chaos with a
firm hand. The first phase serves to expose the needs and options, the
potential and pitfalls. The organization and its leaders learn a lot
going through this phase. But frustration also builds, and eventually
the cry is heard: Make a decision — any decision — but make it now.
The time comes for the leadership to end the chaos and commit to a
path.

We have gone through months of chaos experimenting with ways to
introduce stability in our financial system. The goals were to allow
the financial institutions to do their jobs and to develop confidence
in them. I believe by now, the people are eager for the administration
to rein in chaos. But this is not happening.

Until the administration does this, we should not embark on
attempting to fix another major part of the economy. Our health-care
system may well be ripe for a major overhaul, as are our energy and
environmental policies. Widespread recognition that all of these
reforms are overdue contributed to Barack Obama's victory in November.
But if the chaos that resulted from initiating such an overhaul were
piled on top of the unresolved status of the financial system, society
and government would become exhausted. Instead, the administration must
adopt a discipline; not initiating a second wave of chaos before we
have a chance to rein in the first.

The point is, all administrations, including this one, have a finite
capacity to deal with the details of monumental problems — and the
financial system's troubles certainly are monumental. Equally important
is that society has a finite capacity to understand what created the
problem, what the likely solutions are going to be and, most important,
what can be expected from the new order of things and when.

And here is Howard Fineman on Obama losing the faith of the "establishment":

But, in ways both large and small, what's left of the American
establishment is taking his measure and, with surprising swiftness,
they are finding him lacking.

They
have some reasons to be concerned. I trace them to a central trait of
the president's character: he's not really an in-your-face guy. By
recent standards—and that includes Bill Clinton as well as George
Bush—Obama for the most part is seeking to govern from the left,
looking to solidify and rely on his own party more than woo
Republicans. And yet he is by temperament judicious, even judicial.
He'd have made a fine judge. But we don't need a judge. We need a
blunt-spoken coach.

Obama may be mistaking motion for progress,
calling signals for a game plan. A busy, industrious overachiever, he
likes to check off boxes on a long to-do list. A genial, amenable guy,
he likes to appeal to every constituency, or at least not write off
any. A beau ideal of Harvard Law, he can't wait to tackle extra-credit
answers on the exam.

But there is only one question on this great test of American fate: can he lead us away from plunging into another Depression?

If
the establishment still has power, it is a three-sided force, churning
from inside the Beltway, from Manhattan-based media and from what
remains of corporate America. Much of what they are saying is
contradictory, but all of it is focused on the president:

  • The $787 billion stimulus, gargantuan
    as it was, was in fact too small and not aimed clearly enough at only
    immediate job-creation.
  • The $275 billion home-mortgage-refinancing plan, assembled by Treasury Secretary Tim Geithner, is too complex and indirect.
  • The
    president gave up the moral high ground on spending not so much with
    the "stim" but with the $400 billion supplemental spending bill, larded
    as it was with 9,000 earmarks.
  • The administration is
    throwing good money after bad in at least two cases—the sinkhole that
    is Citigroup (there are many healthy banks) and General Motors (they
    deserve what they get).
  • The failure to call for
    genuine sacrifice on the part of all Americans, despite the rhetorical
    claim that everyone would have to "give up" something.
  • A
    willingness to give too much leeway to Congress to handle crucial
    details, from the stim to the vague promise to "reform" medical care
    without stating what costs could be cut.
  • A 2010 budget
    that tries to do far too much, with way too rosy predictions on future
    revenues and growth of the economy. This led those who fear we are
    about to go over Niagara Falls to deride Obama as a paddler who'd
    rather redesign the canoe.
  • A treasury secretary who
    has been ridiculed on "Saturday Night Live" and compared to Doogie
    Howser, Barney Fife and Macaulay Culkin in "Home Alone"—and those are
    the nice ones.
  • A seeming paralysis in the face of the
    banking crisis: unwilling to nationalize banks, yet unable to figure
    out how to handle toxic assets in another way—by, say, setting up a
    "bad bank" catch basin.
  • A seeming reluctance to seek
    punishing prosecutions of the malefactors of the last 15 years—and even
    considering a plea bargain for Bernie Madoff, the poster thief who
    stole from charities and Nobel laureates and all the grandparents of
    Boca. Yes, prosecutors are in charge, but the president is
    entitled—some would say required—to demand harsh justice.
  • The
    president, known for his eloquence and attention to detail, seemingly
    unwilling or unable to patiently, carefully explain how the world
    works—or more important, how it failed. Using FDR's fireside chats as a
    model, Obama needs to explain the banking system in laymen's terms. An
    ongoing seminar would be great.
  • Obama is no socialist,
    but critics argue that now is not the time for costly, upfront spending
    on social engineering in health care, energy or education.
Other than all that, in the eyes of the big shots, he is doing fine.

Other than that, how did you like the play Mrs. Lincoln?

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