The Treasury Officials and the Bloggers

by Rob Horning

24 August 2010


I know I would feel much better informed about what is going on in government if all press conferences were like the one the Treasury Department held with a group of econobloggers last week and all corrospondents were as frank, thorough and perceptive as Steve Waldman is in this recounting. There’s not much reason for optimism in what he reports, but the very fact of his report seems itself a reason to be somewhat optimistic at least about some of the changes in the public sphere and the media. Conversations about policy that once never circulated beyond the upper crust of the power elite are now accessible to the likes of us, if we bother to seek them out.

But as Waldman suggests, this may be a subtle way to placate those most likely to articulate criticism of various policies without those policies being altered. He begins by emphasizing that the Treasury officials are by and large friendly and intelligent:

I am very, very angry at Treasury, and the administration it serves. But put me at a table with smart, articulate people who are willing to argue but who are otherwise pleasant towards me, and I will like them. One or two of the “senior Treasury officials” had the grace to be a bit creepy in their demeanor. But, cruelly, the rest were lively, thoughtful, and willing to engage as though we were equals. Occasionally, under attack, they expressed hints of frustration in their body language — the indignation of hardworking people unjustly accused. But they kept on in good spirits until their time was up. I like these people, and that renders me untrustworthy. Abstractly, I think some of them should be replaced and perhaps disgraced. But having chatted so cordially, I’m far less likely to take up pitchforks against them.

This strikes me as a basic and important point of how power functions. There are not really evil geniuses in government or elsewhere plotting to be cruel and relishing the misery of the little people—such people are rare sociopathic anomalies, even if capitalism as a system fosters incentives to developing a sociopathic subjectivity. Because they are situated within a bureaucracy, people in positions of power lose sight of the big picture and reconfigure their typically good intentions in terms of the limited scope of their job responsibilities and, most important, make a ethical priority of being warm and human in their personal exchanges with the people their work brings them into contact with.

Anyway, that is what the technostructure is all about, I think—bureaucratizing away unpleasant realities about the overall effects of what we are doing while bringing us into enough “team” situations and interpersonal exchanges to allow us to feel good and cooperative and successful at caring about people and not greed or profit.

So it does little good to attack the good intentions of the people in government if you want to have a grown-up discussion about politics or the economy; unfortunately the commercial media does virtually nothing but discuss politics and policy in terms of personality and character. (Richard Sennett’s The Fall of Public Man assesses some of the reasons for this; maybe if I wasn’t on vacation and had the book with me I’d cite some of them.) But it also means that we have to go against our own grain and put aside the collegiality and self-regard that is our general reward for participating in society in order to sustain a critical view. Waldman explains how this process fans out, defining the hierarchy behind the bureaucracy:

Drawn to the Secretary’s conference room by curiosity, vanity, ambition, and conceit, I’ve been neutered a bit. There’s an irony to that, because some of the people I met with may have been neutered, in precisely the same way and to disastrous effect, by their own meetings and mentorings with the Robert Rubins and Jamie Dimons of the world.

His own reservations notwithstanding, Waldman offers a good critique of the state of financial reform and economic policy. Here are some points that jumped out at me.

1. “Like a gas under pressure, the financial sector pushes and prods for places where high returns can be earned at someone else’s risk.” This is the financial sector’s reason for being in capitalism; the sector collectively overrides any ethical reasons people might have for not testing the regulatory boundaries and forces every actor to play at the margin of legality. It generates the capitalist ethos over and against our personal inclinations to be considerate and reciprocal in our dealings. It generates systemic greed that exposes all possible modes of exploitation. Waldman notes “how well aligned the incentives of equityholders, bank managers, and traders are at highly levered institutions. All three groups benefit by putting creditors’ resources at risk and earning outsize profit against limited costs (loss of equity value or loss of a job).” They don’t check and balance each other; the balance must come from outside regulation.

The systemic nature of the pressure to test limits to find the most extreme profits points to why Waldman and others are always arguing for “structural rather than supervisory regulation”—hard-and-fast rules that are easy to assess and comparatively transparent. The point is to erect an obstacle that changes the banks’ incentives from profiting by gaming regulations (and shifting risk to the taxpayers by being too big to fail) to finding socially productive uses for capital. Waldman has a long footnote that elaborates his reasoning on this that is impossible to excerpt but is crucial reading.

2. About HAMP, a Treasury program meant to deal with the mass of underwater mortgages:

I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”. Treasury officials are not cruel people. I’m sure they would have preferred if the program had worked out better for homeowners as well. But they have larger concerns, and from their perspective, HAMP has helped to address those.

The degree to which the officials are not “cruel people” is the degree to which they can convince themselves that helping the “system” helps ordinary people. But to have any kind of critical perspective on society, you have to be able to recognize the status quo—the people who are already profiting from existing relations—as something that is not inherently worth defending in order to explore possible relations that might be more equitable, more just. The problem is that power invests us in the status quo and at the same time makes us feel moral only by preserving that status quo. To put that a different way, power is contingent on the ability to sell the status quo as necessary—to qualify for power within bureaucracy one must convincingly demonstrate that one has made that association of incumbent interests with the “good”.

The alternative is a form of power that takes an explicitly revolutionary and “dangerous” form that typically threatens personal identity. One is no longer a collaborative and cooperative part of society but its enemy.

To return to the case of big banks, their interests are fundamentally opposed to those of ordinary Americans, who bear the risks for their speculations under the existing economic arrangements. Treasury officials have talked themselves out of that recognition as a condition of their job. Waldman writes:

Perhaps Treasury officials really can’t see how limiting “size” might help. But I don’t think that’s right. These are very, very smart people. I think they understand the merits of the structural approach to financial regulation, but view the transition costs as simply too large to bear. But that begs the question of costs to whom, and whether (per the HAMP conversation above) it is wise to conflate the health of status quo financial institutions with the welfare of the economy as a whole.

How can that conflation be prevented? How can transition “costs” be reconceived as social progress?

3. “I view the current macro-sluggishness as a function of insufficient demand, yet stand with the hypothetical public in being hesitant to support ‘stimulus’ and ‘jobs’ programs that strike me as haphazardly targeted and sometimes wasteful or corrupt.” This highlights the conflict between the goals of the bureaucracy, the goals of the individuals who populate it and the personal goals we have as citizens in a democracy. What specifically should be “demanded” in order to increase demand? What are the appropriate channels for stimulating it, and should it even be stimulated if it can only be done in a way we would regard as socially corrupt? We want to put our collective productive capacity to use, but we have evolved a system that has undermined our capability to believe in the signals indicating what we might need as a society. Profit has come unmoored from social necessity, or the ideological overlay that associates the two has unraveled. People can find “productive” ways to spend their time but the economy is not set up to reward their efforts, and stakeholders seem to have exposed as looting the system rather than facilitating the appropriate investment of our productive capacities. That is to say the government and the banks, from the view of “ordinary people”,  seem to have their interests aligned in protecting their ability to loot the system. And there is no clear alternative politics for shifting those interests, or bringing in new people with different interests—people who might make a difference rather than assume the mantle of the bureaucracy as it already exists.


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