rocket science
It appears that the $700 billion bailout fund isn’t going to be used to buy "toxic assets" from the banks after all. I’m not sure how I feel about that.
On the one hand, the folks at Planet Money have been telling me since before the bailout bill passed that most economists think a stock injection plan makes more sense than buying assets of unknown value. On the other hand, Congress certainly thought they were giving Treasury authority to buy lousy assets, not all this other stuff. Neel Kashkari, who is running the bailout office, may be doing the right things. But no one elected him anything, and no one confirmed his appointment. And I’m enough of a believer in checks and balances to think that
maybe the Treasury ought to be going to back to Congress and saying
"this is what we want to do and why."
I also think the fact that Kashkari is literally a rocket scientist* (well, technically an aerospace engineer) is a symptom of what’s been wrong with the American economy. There’s just been so much money sloshing around the financial sector that it’s been sucking smart people away from jobs where they actually do something productive. Being an engineer is on average a good-paying job, but it’s not a winner take all job — very few engineers make more than $200,000 a year.
*For what it’s worth, David Kestenbaum at Planet Money has a PhD in Physics. I haven’t been able to find anyone working in finance who is literally a brain surgeon by training.
November 12th, 2008 at 9:30 pm
I am completely dumbfounded by this entire bailout and the G20 summit is making me nervous. All I know is there were a multitude of omens that the economy was going to collapse – one being the ridiculous inflated home costs and the fact that we are predominantly a service economy. Is there just one highly intelligent person out there that can fix this, if it can be fixed?
November 13th, 2008 at 12:14 am
“Is there just one highly intelligent person out there that can fix this, if it can be fixed?”
I don’t understand the weird stock market stuff, but I’m a very faithful reader of thehousingbubbleblog.com, and I think the core issue is that we have had huge resources commited to an oversized housing sector–real estate agents, mortgage brokers, construction workers, etc. I’ve read that during the boom, the number of real estate agents grew by something like 500,000. Add to that all the other housing workers who have been or are going to be laid off, and we are talking about millions of people who need to find something else to do. That employment issue alone is going to take a couple of years to work through, especially in a weak economy.
November 13th, 2008 at 9:59 am
I would be suprised to find a brain surgeon in finance. The engineers and pysicists make sense as their core studies in school are all math based. Brain surgeons are smart but I don’t think they have to do much math to graduate.
I’m an engineer myself and I have seen one person I graduated with move out of engineering into finance in NYC. You have to have the risk it all personality I think though. Engineering is boring and safe.
November 13th, 2008 at 12:53 pm
Yeah, it would be weird for a brain surgeon to become a financier. There are non-practicing brain surgeons (i.e. “neurosurgeons”) but they tend to go into writing (Katrina Firlik). A neurosurgeon is a smart, and risk-taking technician. They’re training teaches them a physical skill (think concert pianist). It doesn’t particularly translate well to finance (though they are comfortable with extreme risk, on the whole).
November 13th, 2008 at 12:55 pm
I agree about the skewed incentives. Folks talk about this a lot within the legal profession. The stat is that in the olden days, taking a job at Justice meant you’d make (in made up, current dollars) approximately 80K, while if you took a job at a private firm, you’d make 90K. Now, the differential is 80K/160K, and that’s for the first year. The upside at Justice is 160K (the starting salary at a private firm) and the upside at the private firm (1000K). So, it becomes much tougher to choose the public position, and skews the position.
(And that’s not even taking into account the 100K debt burdens)
November 13th, 2008 at 4:33 pm
Kashkari is the wrong man for the job. My heart sank as soon as I saw him — he’s the perfect guy for a sharp, well-oiled, rational machine, and this is anything but. He’s the direct descendent of that Fight Club guy ordering loden towels from the can.
What Paulson did made sense, but not enough of it to translate. He was trying to keep the money pressure up, these bank guys wouldn’t open the valve, and he basically said, “to hell with you, we’ll send the flow where it’ll do some good.” I don’t buy the bankers’ complaining about unpredictability — they know perfectly well that this is crazytown, and that there is no predictability, and that furthermore it’s their own fault. But they did like the cheap money.
Is there one highly intelligent person who can fix this? No, I already tolja. None of this is fixed until a few ten-thousand American merchants start selling more stuff to the rest of the world and then we don’t spend all the money they make, and we do that for years on end. And that will mean poor is poor.
All of the rest is desperado games, and it cannot last more than another couple years. I’d lay odds that there’ll be a payroll tax moratorium coming up; that’ll mean more borrowing to meet current federal expenditures. Where does the money come from? You got it, the Fed’s press.
Really, at some point, the rest of the world is going to get very itchy about the declining value of all these dollar-denominated debts they’re holding. I keep hearing George C. Scott yelling at Fast Eddie.
It would help if people would stop screaming for bailouts.
November 14th, 2008 at 5:40 pm
He’s not a brain surgeon, but I think there’s a guy over at Money magazine who is a neurologist. But I guess that makes him a writer.
November 14th, 2008 at 6:09 pm
Ho ho. Apparently Congress has an even lower opinion of Kashkari than I had. Check the “we’re trying to help you, here, son, here are the rules for Washington” tone from Issa:
http://www.huffingtonpost.com/2008/11/14/is-kashkari-a-chump-video_n_143913.html
Yeah, I think he’s pretty much the chump. Ow. Batting next….
November 17th, 2008 at 4:55 pm
Brain surgeons are like really good mechanics, following set procedures in a given situation. Engineers actually have to figure things out on their own. Bureaucrats are dull witted.