Ending Banker's Holiday: Greed and Stupidity

In a column last week, “Greed and Stupidity,” NY Times columnist David Brooks outlines the development of two narratives to the economic crisis. One, called the greed narrative, locates the crisis in the overreach of an investment banking Wall Street oligarchy elite, growing from 16% to 40% of corporate profits betw the ’80s and this decade, and extending its power into government. Brooks cites Simon Johnson as chief explicator of this narrative. The second, called the stupidity narrative, suggests the collapse was caused by an over-reliance on the diversifying trick of securitization (bundling and reselling loan assets) and inflexible mathematical models that ignore inevitability of historical shocks and the unexpected tendency of the internet to accentuate runs. Elaboration of this position is provided by Jerry Z. Muller from right-wing think-tank the American Enterprise Institute. The odd thing ab this supposed narrative split is that if you’re even casually familiar w/ the literature tracking the crisis you’ll note that the stupidity narrative is already part of the greed narrative. Brooks even admits that the reform measures for the financial markets proposed by both narratives are more or less the same, with one important exception. The greed narrative describes an insider, collusive, dysfunctional relationship betw Wall Street and Washington (Geintner, Summers, Bernanke, etc). To effectively recover from the current mess, Johnson argues that it is essential to sever the backroom ties betw Wall Street and Washington, nationalize and breakup and reorganize the banking system so that banks can no longer be too big to fail. Meaning, at least temporarily, a bigger government role. This is anathema to Brooks and conservatives raised on 25 years of Reagan Revolution free market BS, who, at this point, sound like flat-earthers. Even if we got into this crisis b/c of arrogant Wall Streeters who didn’t know what they were doing it’s those same people now in Washington serving up the weak sauce concerning the bonuses and sheisty accounting rules and black hole bailout plans. Brooks would have us believe that changing a few rules and recapitalizing (meaning: more taxpayer bailouts) will do the job. Even if Wall Street hubris has got us into this mess we should still fear even more Washington hubris, argues Brooks. All of which just seems like fodder to extend the dithering by the O Team and stem the tide of calls for breaking up the Wall Street lock on Washington. Meanwhile, job news is increasingly dreary; 663,000 jobs lost in March. Unemployment has reached 8.5%; the underemployed (that includes people w/ part-time jobs who’d rather be working full-time) is over 15%. News from the Washington state proposes huge cuts in public education. Everyone at work is bracing for layoff notices in May.