Tuesday, July 05, 2011

Obama and Harvard

A friend (and fellow Harvard alum) sends a link to what he calls an "excellent" piece by Frank Rich suggesting that Obama's problems are bound up with the values of Harvard. Obama's problem, according to Rich, is that he hasn't Strauss-Kahned a bunch of bankers and added a system called ObamaBanking to ObamaCare.

But his refusal to do so is one of the few areas in which he hasn't succumbed to what I think is a "Harvard" problem.

"Excellent" and "frank rich" are a jarring - even oxymoronic - combination. I don't know that the problem with Obama is that he hasn't perp walked more bankers or presumed to be able to predict and therefore prevent the next financial crisis. The notion that the financial crisis can be readily explained by a "lack of regulation" is not persuasive. There was certainly regulation that could have prevented some of what happened but no one wanted it - particularly not the Democrats and Barney Frank who famously did not want to make a "fetish" out of things like soundness and creditworthiness.

I do think Obama has a Harvard problem but that problem is his overweening intellectual arrogance reflected in the belief that he and people like him can somehow order the health care system from above of remake the economy through cap and trade schemes. The Tea Party movement was a product of revulsion at that. But, of course, Frank Rich shares those particular prejudices.

17 comments:

Anonymous said...

Mr. Rich (Class of '71, magna cum laude in History and Literature, editorial chairman of the Crimson), knows whereof he speaks. As for excellence and Mr. Rich, this year he was the recipient of the Goldsmith Career Award for Excellence in Journalism, presented by the Joan Shorenstein Center on the Press, Politics, and Public Policy, at Harvard's Kennedy School.

Maybe someday you'll win the Goldsmith award!

Dad29 said...

Ah, yes.

Credentialism.

Anonymous said...

Can't wait for a Yalie to step forth and connect BushDebt to some obscure notion young George hatched while in New Haven.

Anonymous said...

So Barney Frank, from deep within the minority in one house of Congress, somehow engineered a global financial collapse because he liked black people and hippies? I think you're referring to the right-wing obsession with the role of Fannie and Freddie Mac in the subprime crisis. If so, you should do your homework. The literal definition of subprime is "stuff the GSEs couldn't legally touch." They were around since the Carter Administration...and somehow blew up the economy thirty years later? And they securitized a small minority of all MBS's. The world would be a better place if the GSE's had never existed. But you're either ignorant or deliberately lying if you blame the current recession on them.

Rick Esenberg said...

Anon 9:18

Not my point at all. Go back and read again. My point was that the requlation that - in hind sight - might have prevented the crisis, say, stricter underwriting standards and stricter enforcement of thos standards for all lending was something that no one had any stomach to do.

Anon 1:48

I would never win anything from the embarassing Kennedy school.

Dad29 said...

Any reading of the mortgage problem shows there were two underlying causes.

The first was 'creative financing' invented by brokers and (some) banks, sustained and encouraged by packagers such as Lehman, Bear, and Goldman. As time went on, more banks joined the party.

The second was the acceptance of same by the GSE's. They were latecomers to the party, but they played. Barney Frank admitted it.

Anonymous said...

Yeah, you're probably not going to win the Goldsmith award, or, for that matter, a spelling bee, at that "embarassing" Kennedy School.

Anonymous said...

The T-Party wasnt against healthcare reform but didnt like the outcome probably because Obama didnt have the experience to tell the legislature what people expected.

The healthcare program done proberly could resolve many problems facing this nation.

Anonymous said...

It's rather disingenuous for Republicans to spread the blame around for deregulating the financial chicanery that led to this mess. All you have to do is look at who's blocking legislation today that's designed to protect us from more of this nonsense?

Anonymous said...

(1) No small group of people, however smart, can possibly gather and organize enough information to understand complex and dynamic systems like the economy of the United States or the worldwide web of modern financial transactions;
(2) Even if that were not the case, regulators tend to be captured by the powerful interests of the entities they regulate, and are more likely than not to make decisions that work to favor those interests;
(3) And even if (1) and (2) were not the case, regulators might just make bad decisions. People make bad decisions all the time. Regulators have bad incentives, because they do not suffer the consequences of their bad decisions. This makes the bad decision problem worse.

The big banks and other financial entities that blew up the world were all pervasively regulated. Fannie and Freddie had their own personal regulators. The regulators for some reason did not act to control or mitigate the risks in the world financial system these firms created, undoubtedly by virtue of some unknowable combination of the three factors set forth above. They didn't really understand what was going on; or they did what their "constituents" wanted them to do; or the rules they put into place to control the level of risks in the world financial system didn't work as intended. (How many people at the Federal Reserve Bank of New York have been fired for letting the money center banks spin out of control? Tim Geithner got a promotion.)

So the Washington fix is to give the existing regulators more power, and to create a council of regulators to regulate the regulators.

See (1) (2) and (3) above. Lather, rinse, repeat.

-MIke Fischer

Dad29 said...

You hit it, Mike.

Regulators are not gods, any more than judges, priests, or Hollywood stars.

One 'reverse example' is Brooksley Born, the CFTC Administrator under Clinton, who told him to regulate derivatives. Clinton refused; Rubin agreed with Clinton.

In THAT case, she was right, Clinton was wrong.

Anonymous said...

Let's not forget that Barney Frank was sleeping with a high-level Fannie Mae executive at the same time he was allowing that government sponsored enterprise to make a market for subprime loans, which helped lead to the 2008 financial meltdown.

Andy said...

Your article is very good fit to be read because it adds new information

Anonymous said...

Did you read the article that Law schools including Harvard, are starting to teach law student how to handle real life problems?

John McAdams said...

this year he was the recipient of the Goldsmith Career Award for Excellence in Journalism, presented by the Joan Shorenstein Center on the Press, Politics, and Public Policy, at Harvard's Kennedy School.

Thank you for making the point that a bunch of elitists rather like elitists like themselves.

Anonymous said...

Indeed. Who would want to hang out with a bunch of elitists like that, let alone spend years getting a Ph.D. from a snobby establishment like Harvard?

John Foust said...

If you ask me, the 2002 Echezeaux Grand Cru was far better than the 2004. Meaty and youthful; scents of cherry, bacon fat and cedar box. More forthcoming in the mouth; bold black fruit and silky textue. Oh, wait. Different elitism. Never mind!