In a move that demonstrates how Eliot Spitzer might still be relevant, New York's former governor now pens for Slate -- and takes aim at federal bailouts.
This is a smart man.
Too Big Not To Fail: Slate
Spitzer argues that we need to stop using the bailouts to rebuild gigantic financial institutions, particularly the flawed ones.
"... We are simply rebuilding the same edifice that just collapsed. None of the investments has even begun to address the underlying structural problems that are causing economic power to shift away from the United States, sector by sector."
He refers to the aviation industry potentially being usurped by the Chinese, amid already $7.8 trillion in equity, loans, and guarantees so far. The former prosecutor -- who made his name tormenting the financial sector -- isn't just arguing against bailouts. He's making a lot of sense to me and seems to be more differentiating between good and bad companies, rather than tearing them all down.
"It is time we permitted the market to work: This means true competition with winners and losers; companies that disappear; shareholders and CEOs who can lose as well as win; and government investment in the long-range competitiveness of our nation, not in a failed business model of financial concentration and failed risk management that holds nobody accountable."
Spitzer notes that some problems are endemic:
"A more sensible approach would focus not just on rescuing pre-existing financial institutions but, instead, on creating a structure for more contained and competitive ones. For years, we have accepted a theory of financial concentration—not only across all lines of previously differentiated sectors (insurance, commercial banking, investment banking, retail brokerage, etc.) but in terms of sheer size. The theory was that capital depth would permit the various entities, dubbed financial supermarkets, to compete and provide full service to customers while cross-marketing various products. That model has failed."
Of course, Eliot takes his shots at Wall Street greed; "... Gargantuan losses, bloated overhead, enormous inefficiencies, dramatic and outsized risk taken to generate returns large enough to justify the scale of the organizations, ethical abuses in cross-marketing in violation of fiduciary obligations, and now the need for major taxpayer-financed capital support for virtually every major financial institution."
But he's right, and he is not rationalizing bailouts to continue the cash cancer, unlike Paul Krugman who could get that wicked grin off his face ("It Looks As If The Economy Is Really Falling Off A Cliff" -- The Huffington Post").
And that's he's done it this way, stepping way out of the box and ostensibly starting over, shows a bit of humility on Spitzer's part and good faith by Jacob Weisberg, the editor-in-chief of the Slate Group.
The New York Observer had its fun: Meet Slate's New Columnist
"It was not an epic negotiation," said Mr. Weisberg. "He was very receptive to the idea. I don't portray this as something we had to coax him into. He's got a lot to say and he was very receptive to writing on the subject."
Spitzer's November 16 editorial in The Washington Post ("How to Ground The Street") finally prompted a more aggressive offer by Slate. Weisberg had been suggesting the idea for months.
Yes ... Rather than putting Mr. Spitzer into the headline, I have linked to him as I would attribute any other journalist or "blogger" (or whatever they should call us) -- because that's what he is now.
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