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Tim Geithner’s Gilded Blinders

April 23, 2010

The Center Square Blog started a thread yesterday after Tim Geithner’s appearance on Morning Joe, to which I posted a comment about regulatory capture. I thought it would be good, particularly in the context of my ongoing discussion of Goldman Sachs, to continue the discussion here.

‘Regulatory capture’ is a condition in which a regulated industry infiltrates a regulating body, either attitudinally by persuading them that the regulations are too burdensome, or literally through a revolving door between industry and government. RC is a structural problem in the best of times, but it’s been made much worse by the denigration of attitudes towards public service in the US since Nixon’s criminality & Reagan’s cynical 1980 “government is the problem” campaign meme.

RC embodies the fundamental cancer that the radical right (a/k/a The Republican Party) poses to the body politic. By formally adopting the principle of self before nation – which is Dick Armey’s stated philosophical position, the primary premise of the Tea Party movement, and has been the strong theme running through the Republican’s talking points since 1992 – the Right has bathed in cynicism the notion that people should step up and use their commercially valuable skills for the benefit of their country. That cynicism has degraded public service into nothing more significant than a building phase for one’s career. Thus the typical path has become: gain some industry skills –> support a candidate –> get a patronage job –> use that job to earn career capital by learning how to “manage” regulators or by flat out favoring the regulated –>leave government for a much better job than you would have gotten had you worked your way up the ranks.

Lest I be accused by some of my conservative friends of being a naïf, I’m not saying that this hasn’t always been the behavior of some people. However, there was a period of time – between FDR’s having saved the nation from the Great Depression and the great hate of ‘The Establishment’ so lovingly nurtured by Tricky Dick & Ronnie, to be precise – when there was a class of people for whom public service was a highly-respected career path.* Those people set the standard for what it meant to be a respectable, bureaucrat (and I use that word in its original, non-pejorative sense), and created a culture of public service to which many well-educated young Americans aspired.  Profiteers would certainly find their way to Washington, but they didn’t get a hell of a lot of uptake from those who took pride in being part of that elite, and consequently didn’t generally get too far.

But the old guard has been pretty much chased from government in the past few decades, and with it the institutional values that made it possible for people who didn’t get paid very much relative to private sector jobs to conscientiously administer the resources given to them. (If you doubt this, here’s a quick test: think of a major scandal between 1930 and the present which involved misappropriation of Federal funds and didn’t involve an elected official. Bet you can’t. All of the scandals involved either influence-peddling or legislative misbehavior…the bureaucrats just didn’t pull that sort of crap. Another indicator of the fact that money wasn’t a meaningful motivator is the fact that buying the politicians has always been so cheap; if bureaucrats were in the game setting the standards, the pricing bar would have been set much higher.)

To be clear, Geithner is not that kind of careerist. But he he did grow up professionally in an environment in which the use of a job in government as a stepping stone to lucrative “bridging” functions (such as lobbying) evolved to become the norm – a standard of behavior which was greatly accelerated by the dissolution of the boundaries that formed the philosophical core of Bush’s great push to privatize government responsibilities.

The relevance to the conversation about Geithner is that even though he’s been a civil servant most of his professional life (and his private sector experience was limited to working for Henry Kissinger’s consulting firm just out of college…so…y’know….), he’s operated in an environment of contempt for “the feds” for his whole career. And of course, nowhere was that contempt more strongly felt than on Wall Street, where being underpaid relative to one’s authority is a much worse sin than activities that would pass for fraud anywhere else. As a result this environment, the norms that he’s used to are strongly warped. This is what happens when the moral authority of the watchdogs is degraded over time – even the good guys (and Geithner is definitely a good guy) have to adapt to survive, and end up becoming something approaching karmic klowns. At a certain point it starts to resemble something out of ‘Heart of Darkness’ or one of those movies in which the well-meaning undercover cop becomes a drug addict. Simply put, they go native.

In Geithner’s case, drinking the local kool-aid starts to look a little like Stockholm Syndrome;  he can’t see the benefits of structural changes nearly as clearly as he sees the disruption they would be cause. Part of this is because he’s internalized the notion that banker’s greed & intransigence are unalterable states of nature. Another part is that he’s bought their line of bullshit that the status quo is essential to the performance of the economy. Another is that he’s well-aware of the risks of really taking them on (he doesn’t have to look any further than Larry Summers tenure as President of Harvard for an object lesson in the perils of taking on entrenched insiders.) Like the Scarecrow in The Wizard of Oz, it’s not that Geithner lacks intelligence: he’s just been cowed into thinking that neither it nor his Constitutional office as Secretary of the Treasury can stand up to them. Sadly – as with the administration’s abysmal performance in the heat of the battle over healthcare reform, which cost us the public option – such milquetoast behavior only reinforces the notion that meaningful reform is impossible, and so increases the cycle of cynicism and disaffection.

Geithner’s effective defense of the status quo is a little hard to swallow for the rest of us, who can’t help but notice that the current structure tears apart the fabric of society with near mathematical regularity and has created little real wealth in the past decade or so (as measured by either the incomes or the assets of the vast majority of Americans). Instead it has decimated the middle class, the success of which was at one time arguably our proudest achievement.

Geithner’s damned smart, and he’s a good guy. Unfortunately, he’s just another example of the best lacking all conviction. And so it goes.


* It’s worth nothing that Nixon & Reagan were both Southern Californians and therefore culturally inclined towards contempt for people from “back east.” As a kid growing up in LA, I recall a strong mixture of admiration (because they were powerful) and contempt (stemming from the belief that the west coast had inherited the mantle of trailblazing consonant with the country’s founding principles) towards Easterners. Now that I’m older, I recognize that there was a strong taint of jealousy and competitiveness driving that rift. Californians craved the respect and cultural heritage present in the East, and were painfully aware that the culture was tracking in a direction away from substance as opposed to towards it.

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One Comment leave one →
  1. The Center Square permalink
    April 23, 2010 5:20 pm

    I swell with pride that my modest little post should have provided even a bit of impetus for your elegant and thoughtful piece here.

    There is a bitter irony in the idea that Republicans have, for more than 40 years now, been systematically working to erode the nation’s faith in government. I say bitter irony because, after all, what is the point of being a Republican (or Democrat for that matter) if government is to be irrelevant? How crassly cynical is that?

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