He created a huge, unwieldy Department of Homeland Security.
To hide their lack of any actual ideas about what to do, managers sometimes make a big show of rearranging the boxes and lines that say who reports to whom.
He tucked FEMA deep inside the new superagency, so deep you could hardly find it.
You now understand the principle behind the Bush administration’s new proposal for financial reform, which will be formally announced today: it’s all about creating the appearance of responding to the current crisis, without actually doing anything substantive.
Even when the storm hit with enormous force, the overriding ideology demanded reduction of dependence on government and its agencies. That would account for the otherwise inexplicable delay before he flew over the Gulf Coast and expressed surprise and dismay.
The financial events of the last seven months, and especially the past few weeks, have convinced all but a few diehards that the U.S. financial system needs major reform. Otherwise, we’ll lurch from crisis to crisis — and the crises will get bigger and bigger.
Trucks with food and water were rushed to the disaster area. Absent effective federal coordination, many of them never, in fact, found a way to deliver the needed goods and had to haul rotting cargo home.
When push came to shove, however, the Federal Reserve didn’t dare let market discipline run its course. Instead, it rushed to Bear’s rescue, risking billions of taxpayer dollars, because it feared that the collapse of a major financial institution would endanger the financial system as a whole.
The newly-created Department of Homeland Security was in disarray. Key agencies, buried within the new structure, found it almost impossible to communicate with each other effectively.
The administration, then, has learned nothing from the current crisis. Yet it needs, as a political matter, to pretend to be doing something.
So the Treasury has, with great fanfare, announced — you know what’s coming — its support for a rearrangement of the boxes on the org chart. OCC, OTS, and CFTC are out; PFRA and CBRA are in. Whatever.
Will rearranging these boxes make any difference? I’ve been disappointed to see some news outlets report as fact the administration’s cover story — the claim that lack of coordination among regulatory agencies was an important factor in our current problems.
As criticism of the administration reached a crescendo, it tried to pass the blame along to state and the city officials even as it tied their hands. Anything goes when it comes to reducing federal government's role in saving people. Its purpose now is to insure corporate profit.
Oh, and the Bush administration actively blocked state governments when they tried to protect families against predatory lending.
So, will the administration’s plan succeed? I’m not asking whether it will succeed in preventing future financial crises — that’s not its purpose. The question, instead, is whether it will succeed in confusing the issue sufficiently to stand in the way of real reform.
Let’s hope not. As I said, America’s financial crises have been getting bigger. A decade ago, the market disruption that followed the collapse of Long-Term Capital Management was considered a major, scary event; but compared with the current earthquake, the L.T.C.M. crisis was a minor tremor.
If we don’t reform the system this time, the next crisis could well be even bigger. And I, for one, really don’t want to live through a replay of the 1930s.
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