Steven Rattner: I, MOTU. I Save World. You, Ignorant.

Steven Rattner, the Master of the Universe who may have had to step down from the Obama Administration because of ties to a kickback scandal, tells us we’re ignorant for thinking that Ben Bernanke might not the best guy to run the Fed.

But much of the barrage of criticism is unfair, and some of it is simply ignorant.

For a guy calling others ignorant, though, what is supposed to be a defense of Bernanke (but is, instead, a defense of MOTUs generally) is really stupid.

Start with Rattner’s endpoint–that, rather than putting together a systemic regulator free from the incestuous ties to the banks that the Fed has (or, better yet, reimposing Glass-Steagall), Congress should give the Fed that power.

In return, instead of looking backward, we should give the Fed the tools it needs so that the unwinding of the next AIG doesn’t need to result in an unjust enrichment of stakeholders.

I’ll leave you all to chew on that sentence for a bit, with its “instead of looking backward” refrain even while it calls for giving the Fed more power. But for the moment, keep in mind that Rattner’s basically arguing not that Bernanke should be confirmed (the logic behind the timing of his op-ed), but that Bernanke should be confirmed and be given vastly increased powers.

Now, one of the reasons for that, presumably, is because (Rattner asserts) the Fed has “independence” from those it regulates.

[The Fed] “should remain adamant about its need for independence in conducting monetary policy”

But here are three of the lame-ass excuses Rattner gives for the mistakes the government’s MOTUs made last year and before:

  • “The refrain from all quarters after the bailout of Bear Stearns in the spring was that the next floundering bank needed to be allowed to fail”
  • “All of the regulators should have been more attentive to the irresponsible lending practices and excessive risk-taking of our major financial institutions than the free-market principles of the incumbents allowed. … Regulators were not the only ones at fault; the constant push, particularly by liberals, toward the worthy goal of increased homeownership put people into homes they couldn’t afford.”
  • Policymakers labored under “unfathomable pressure” last fall

Everyone was saying the next bank had to be allowed to fail, everyone was pushing increased homeownership, and policymakers were under unfathomable pressure.

Three of the five excuses Rattner gives his buddies are that they they were under some kind of pressure, and in two cases, that pressure was distinctly political (the “unfathomable pressure” in the last instance refers to time stress as much as everything else). In a piece arguing for the independence of the Fed, then, Rattner says they fucked up because they were under too much political pressure to make the decisions they did.

Which brings us to lame-ass excuse number four Rattner gives for his fellow MOTUs.

Once the Fed and the Treasury concluded (correctly) that an AIG bankruptcy posed unacceptable systemic risks, the government immediately lost any bargaining power to demand concessions [because, unlike GM and Chrysler, AIG] operate[s] at the nerve center of our financial system.

I presume this line is the reason why Rattner was recruited to write this op-ed by people who believe, first, that AIG is a nerve center that GM isn’t, and second, that we shouldn’t look backward. I presume that they believe that Rattner, having run the GM and Chrysler bankruptcies, would have the cred to say that his MOTU peeps are more important than those slackers driving the manufacturing base of this country. “Hey Rattner,” someone who likes to look forward must have said, “go do a piece claiming that we couldn’t do with AIG what you did with GM.”

Now, set aside for a moment all the people who say this isn’t true–that at precisely this period, the Fed and Treasury had maximum leverage, that the Fed and Treasury had leverage precisely because AIG was the card holding the rest of the house of cards up. Pretend for a moment this is true.

Notice what Rattner doesn’t admit? Notice the lack of any discussion of the conflicts of interest of those who made this decision, starting with Goldman Sachs guy Hank Paulson, who bailed out his former company in full. Rattner makes absolutely no mention about the issue for with the lack of independence for the Fed and the guy running Treasury was most egregious.

Which brings us, finally, to reason number five that Rattner’s MOTUs shouldn’t be blamed for the state of the economy.

[T]he Fed (and other regulators) made mistakes, but they were concentrated in the run-up to the meltdown rather than in the response.

Remember, this guy called us ignorant already by the time he got to this claim. The MOTUs made mistakes, he says, but they were all in the run-up to the meltdown, and so you should give them more power.

Of course, Rattner has dealt with approximately one week from September 2008. He has not dealt with all the things–like guaranteeing bonuses, or Maiden Lanes, the laughable stress tests, the refusal to cooperate with Congress–that have come since. In lauding his MOTUs for their response, he focuses on a few stressful days in time, but not on the more leisurely decisions Bernanke and others have made to sustain the very worst aspects of the system that broke in the first place. It’s a scam, you see, to always define these problems as the nerve center of the universe so that only MOTUs can be trusted to regulate it.

image_print
26 replies
  1. Slothrop says:

    They took taxpayer money and paid themselves million dollar bonuses. The too-big-to-fail friends of Rattner are backstopped by taxpayers because they are too big to fail.

    Let’s summarize: Rich banking executives get richer on the backs of taxpayers who get fucked.

    Who will step up and end this? Barrack? Ben? Timmey? Larry? What a sad chapter in this nation’s history.

  2. PJEvans says:

    I don’t remember liberals pushing home-ownership as a cure-all. ISTR that that was Bush and his buddies.
    But maybe Rattner doesn’t remember the ‘ownership society’ stuff.

      • PJEvans says:

        There wasn’t a great deal of logic to that ‘ownership society’ either. (I’ve stopped expecting most of these guys to make sense. They never seem to have gotten past the stage of life where someone else will fix everything when they get in trouble.)

    • bobschacht says:

      You need to read up on your Clinton administration history. Bush did not create the “ownership society” idea out of whole cloth. The Clinton administration IIRC did push gov agencies to make home ownership easier. But I make that claim from memory and I don’t have the links to prove it.

      Bob in AZ

      • Ishmael says:

        According to Krugman, “Reagan Did It” by laying the groundwork for deregulation, combined with an explosion of debt (NYT, May 31, 2009)

        “There’s plenty of blame to go around these days. But the prime villains behind the mess we’re in were Reagan and his circle of advisers — men who forgot the lessons of America’s last great financial crisis, and condemned the rest of us to repeat it.”

        http://www.nytimes.com/2009/06/01/opinion/01krugman.html?_r=1&scp=1&sq=%22Reagan%20Did%20it%22%20Krugman&st=cse

        • bobschacht says:

          True enough. But Clinton’s hands are not clean. Think Robert Rubin.

          Remember also that it was Clinton who, on the advice of Rubin and others, signed the bills rescinding the Glass-Steagall Act and allowing the Credit default swap market to get out of hand. And Larry Summers & Tim Geithner are disciples of Rubin.

          Bob in AZ

  3. bmaz says:

    Hey, anybody remember when Bernanke and Paulson showed up with their grand plan to save the world economy and it was like a couple of double spaced pages? That was impressive. Guess Rattner liked that too.

    • qweryous says:

      I seem to remember the $700 BILLION check drawn on the taxpayers, with the pay to the order of line to be LEFT BLANK.
      Who was that?

      Was that this plan you are describing here?
      It could have been same plan different month, or different plan…

      I do remember it was Hank Paulson and Ben Bernanke with the $700 BILLION blank check plan.

      Was it the pressure of a blank check for $700 BILLION in their pocket that was causing all this stress for the MOTUs; Or did the stress lead to the $700 BILLION blank check idea?

      “The unwinding of the next AIG..”
      Are there any checks left??

  4. DeadLast says:

    The logic in bailing out AIG was that if it went under, the companies insured by AIG could end up being in technical default on their contracts which required insurance. Of course, the government could have passed legislation addressing that issue (like the terrorism insurance guarantees). But cash subsidies work so much faster.

  5. orionATL says:

    my god, what intolerable, self-centered arrogance!!!

    does “MOTU”

    stand for “MOtherfuckin’ sTUpid moron”?

    or might it just be a latin abbreviation for “too stupid to be allowed to live”?

    steven rattner, MOTU, says:

    “…Regulators were not the only ones at fault; the constant push, particularly by liberals, toward the worthy goal of increased homeownership put people into homes they could’t afford.” …”

    what caring, let alone politically aware, leader in this society would write:

    “…Regulators were not the only ones at fault; the constant push, particularly by liberals, toward the worthy goal of increased homeownership put people into homes they couldn’t afford.” …”

    “…homes they could not afford…”?

    might that be “could not afford”

    without a job?

    might that be “could not afford”

    because they were simple people manipulated by the sleaze-ball mortgage and banking operatives,

    operatives whose activities were sanctioned by the rattners

    and who made MOTU rattner lots of good money?

    this situation seems to bear a precise analogy to the very damaging-to-our-nation cheney escapades cum incompetence.

    screw up royally out of unvarnished self-interest, arrogance, and ignorance,

    then find others to “hold accountable”.

    MOTU – Motherfucking’ sTUpid moron –

    seems too kind an accolade to bestow on

    that

    whining brat

    steven rattner.

  6. orionATL says:

    from the fountain of knowledge, aka, widipedia:

    “…[rattner] is one of the four founding partners of the private investment firm Quadrangle Group, which invests media and communications companies globally…

  7. earlofhuntingdon says:

    Rattner put all of GM into bankruptcy and got only a chunk of it out again. The jury should still be out on his, um, stewardship. Left in bankruptcy are 1200 rather large, mostly probably environmentally questionable former GM real properties and some 500,000 contracts.

    Rattner’s “success” with GM is rather like taking the man in the grey flannel suit to the cleaners, pressing the suit and sending it back to Madison Avenue. The guy inside it is still 75 pounds overweight, with a bad heart and arteries. But Dr. Rattner did all he could: the suit is beautifully creased. Whether Mr. Whitacre can walk in it is another matter.

  8. earlofhuntingdon says:

    Rattner thinks the response to the meltdown was brilliant. He would. As a member of the closed circle of MOTU’s who receive and never give, he’s glad the Fed and the Treasury decided it would be too rude to use their multiple levers to demand a more stable, responsible financial market and to punish with disdain and loss of employment those MOTU’s who brought about that meltdown.

    Listening to Rattner argue might be like the sorority girl listening to all the reasons her fraternity president date positively, absolutely has to have it right now. From Animal House, the response would be, “Is it supposed to be that soft, honey?”

  9. Ishmael says:

    “…Notice the lack of any discussion of the conflicts of interest of those who made this decision, starting with Goldman Sachs guy Hank Paulson, who bailed out his former company in full.”

    Not to mention, the Fed let Goldman (and others beside investment banks, to be fair) go to the Fed window for cheap money when they were allowed to convert to bank holding companies. And while Rattner said the Feds had no leverage, Goldman went hat in hand to Warren Buffett, who got $5 billion worth of perpetual preferred stock, a 10% dividend and warrants to buy $5 billion of common stock with a strike price of $115 a share exercisable at any time over five years. I guess Buffett was just too dumb to know he didn’t have any leverage!

  10. Ishmael says:

    The lack of “stress tests” on financial institutions in the fall of 2008 was another failure of Paulson’s Treasury. When J.P. Morgan resolved the Panic of 1907 (which led eventually to the establishment of the Fed in 1913), the first thing he did was find out which trusts and banks were solvent and which ones were not – the over-leveraged ones were allowed to fail, the sound ones given liquidity by other banks. I’d say that was “a mistake in the response” by the Fed, not the run-up.

  11. runfastandwin says:

    Shorter version:

    I defecated in the corner of your office yesterday afternoon after you went home. But let’s not look back, because going forward, you can trust me not to do it again.

  12. abinitio says:

    A few good questions for the Senate Banking Committee when they consider Bernanke’s re-nomination – courtesy Zero Hedge.

    I read many folks at Dkos who write that Bernanke should be confirmed because he “saved” the financial system from collapse. That’s like saying we should make the arsonist who turned on the water hose at the fire he set become the next fire chief. It’s the bubble and the mis-allocation of capital during it that creates the disaster. Bernanke was the intellectual propagandist behind the credit bubble and his response was to make the middle class the taxpayers the bagholders. He along with Greenspan, Paulson, Geithner, Rubin and Summers are the architects of the financialization of our economy where bankster profits are private while their losses have been socialized.

    Sen. Bernie Sanders gets it! I hope other senators get it too. Unfortunately for working Americans Obama is a weak willed President captured by the oligarchic interests.

Comments are closed.