I listened to a Conversation with Peter Orszag, Conducted By The Atlantic’s Interviewer Steve Clemons ( Washington’s Editor at large) After listening and asking questions, I thought there’s lot’s to worry about. We’ve got brilliant self promoting kids, dazzling us with their brilliance and what do they know, they know numbers. They know algorithms , but they don’t know people . They don’t understand the effect of their numbers on people. Technology is not a tragedy, doing everything by the numbers, is a tragedy.
You need smarts , life experience and compassion to run a Country. Otherwise, you are never going to look at the big picture and the effects of Policy and politics on the People! According to Peter, this is in fact a big problem, government cannot attract big picture thinkers, the macroeconomics are lacking!
Peter Orszag was described as a policy wonk. According to the World of Words, A policy wonk, by definition, is a person consumed by minutiae who does not see the big picture. Why would anyone be happy to be described as a policy wonk? By definition, it means, you know a lot about nothing.
Worse with the revolving door, forever swinging between government and business Peter Orszag has gone from the office of Budget and management to Vice chair of Citigroup Global. ( for further information , see The Atlantic Live for the entire dialog with Peter Orszag). When I asked whether Banks would have been better off with Glass Steagall rather the Dodd Frank, his reply , “Regulations don’t matter”! ONLY BANK CAPITALIZATION MATTERED. When, I asked, how much capitalization, meaning the ratio, or % of capital to be maintained vs assets! , he said ,” we follow Basel 3“. For those of you, not Policy wonks, I’ve added a link to Basel 3. , however; the short view is 6% of assets need to be retained to protect Banks against risk. They can define their assets and they can hold money, capitalization, as collateral against risk. Theoretically , they can be leveraged 90% ? Sounds risky to me. Peter Would not discuss the mechanism nor would he discuss the amount of Capitalization required to prevent risk. He merely reiterated, all you need to know about Banks, is One Word, Capitalization. That’s sufficient to keep the Banks accountable and ” honest”, I presume.
I thought back to Dustin Hoffman‘s character, Benjamin, in the film, THE GRADUATE. Benjamin, trying to find his niche in life is cornered by his father’s friend, who imparts a single word of wisdom: ” There’s only one thing you have to know Benjamin, that’s PLASTICS.” PLASTICS is all you need to know. Just like Benjamin in the film, I , too, felt I heard a momentous pronouncement, but didn’t grasp it’s meaning. So now I’m perplexed as this earnest young man , Peter Orszag, says we only need to know Capitalization. That’s enough to keep Bankers in line? Really, we know how that movie ended once and we’re going down the same road again. The only difference , the middle class can’t bail the Banks out anymore, so the Federal Reserve is propping up the Banks for us. Why can’t the Banks stand on their own two feet, like we’re expected to do. The Banks have been given the opportunity to write Dodd Frank, they have been capitalized but they are still taking on risk. They are too big to fail, but they can, if we care, be responsible. Since they’ve made Trillions they should contribute at least 15% of their gross into a default fund, available for Bank bailouts, when required .
The Eu is considering this strategy: They are looking to establish a centralized Bank fund, contributed to by all Banks under their jurisdiction, containing enough Capital to fund Banks, as they are being unwound into insolvency. Sounds like a plan, a default account, established by the Banks for the benefit of all Banks!
Is this what Peter Orszag meant. Step one toward accountability and responsibility? We have choices.
Related articles
- LIVE: Interview with Peter Orszag (theatlantic.com)