Bull by the Horns

Early in the financial crisis I recall the economist Simon Johnson describing the FDIC as a very effective and economical tool to resolve the perilous state of the financial system. It caused me to consider Sheila Bair, the former head of the FDIC, and her actions in a different light from what up to then was a predisposition to less regulation. FED Chairman Alan Greenspan's tenure was a disaster in spite of his Ayn Rand libertarian philosophical predilection because he forgot that free markets do not work as described by Adam Smith in a system spiraling toward concentration of economic power. The mix of government intervention and laissez faire economics is particularly noxious, and Alan presided over a witches brew that as a Libertarian I will not forgive.

Sheila Bair has a clear view how government guarantee's require private equity be completely at risk when reckless management puts a company in a difficult position. She understands how those who play prudently expect to prevail when others fail and how it is resented it does not happen because special favors are called. It appears from her book, Bull by the Horns, that Tim Geithner is Mr. Moral Hazard and that his tenure as Secretary of the Treasury has been a huge drag on the Obama administration. The AIG bonus debacle in the spring of the term, the laughable disrespect given by Wall Street Banker's that summer and the general public outrage over bailouts for fat cats over the years was the genesis of the Tea Party on the right and Occupy Wall Street on the left. That Obama was re-elected has more to do great electioneering than developing a mandate.

As a Libertarian I resent that neither side understood that the mandate from the beginning is to be a Teddy Roosevelt style Trust Buster. Punish with ruin the reckless goliath's in finance for the havoc they reeked on our citizens. Obama could really set a proper course for his second term by nominating Sheila Bair as his new Secretary of the Treasury. While she is a regulator at heart she understand's how to protect the public purse and authority.  Secondly, now that the market is less stressed, will someone go out and rip Citigroup apart.  It has no right to exist as presently constructed and it would do a lot of good to set the possibility of failing even though it is big.