Thursday, April 23, 2009

McArdle distracted by Warren's efforts

Megan McArdle, a blogger at The Atlantic, substitutes her normally smart and insightful commentary with a very dumb attack on Elizabeth Warren of the Congressional Oversight Panel.

While I don't think Professor Warren needs me to stick up for her, I feel the need to do it anyway in this case.

McArdle's criticism takes two main tracks. The first is that Warren is not qualified to serve on the COP. The second is that Warren has greatly expanded her role to include items outside of the original scope of her duties.

Here's McArdle on Warren's qualifications:
Elizabeth Warren knows a lot about bankruptcy--but just because it has the word "bank" in it, doesn't make her an expert in banking. Her specialty isn't even in corporate liquidations; she mostly writes about consumer bankruptcy.
Wow, Elizabeth Warren is the new Sarah Palin! So what if she could, "see bankruptcy court from her Harvard office," she is not qualified to monitor where the TARP funds are spent and to assess their effectiveness. Look, Warren is an accomplished Harvard professor empowered by Congress to keep and eye on taxpayer money. If, after conducting research and holding hearings, even she can't understand how and where the TARP money has been spent, then I would bet that no one can.

McArdle continues:
The highly specialized world of bank resolution is not one where she has, as far as I can tell, very much expertise.
In other words, send in the technocrats! Funny, I never figured McArdle for your typical expert-worshipping freedom destroyer. Is that what we can expect from a University of Chicago MBA?

Here's the other half of the critique, the incredible expanding mandate:
Warren has massively extended her mandate, using the office as a sort of forum for broad-ranging commentary on the financial crisis. Rather than tracking the expenditure of the funds, she's increasingly using the oversight board to push her own ideas about what should be done with the banks.
First of all, I am glad someone inside the government is pushing their ideas about what should be done with the banks. It is exceedingly clear that no politician is going to do it, Republican or Democrat, White House or People's House. Even political appointees only one step removed from the elected won't do it (see: Geithner, Timothy). Therefore, we need other people to do just that.

But wait, you say. Don't we have journalists, bloggers, think-tankers, and other policy gad-flies for that purpose? Of course we do. On the other hand, it's not like Warren is the only politically insulated (at least in theory) appointee that likes to expand their mandate.

For another, and far more dangerous, example of this type of behavior, one need look no further than the Fed. That's right. Uncle Ben Bernanke's Fed where several thousand lifetimes worth of debt can be ready in just five minutes!

Here is Bernanke himself, describing the new and improved Fed balance sheet:
[W]e no longer live in a world in which central bank policies are confined to adjusting the short-term interest rate. Instead, by using their balance sheets, the Federal Reserve and other central banks are developing new tools to ease financial conditions and support economic growth. [snip]

Though we have been creative in deploying our balance sheet, using a multiplicity of new programs (and coining a multiplicity of new acronyms, I might add), we have done so prudently
Prudent or not, let's face it, this is not your father's Fed balance sheet. Where Treasury securities once reigned supreme all sorts of financial asset interlopers now lurk. It's sort of like a version of The Beverly Hillbillies where the upscale Treasuries are horrified at the decidedly down-home new class of instruments residing in their midst. The question remains as to whether or not these new securities have the accompanying folk-wisdom that always seemed to save the day for Uncle Jed and his kin.

I'm not saying Bernanke is just taking anything as collateral like the Fed is some pawn shop with really nice Greek columns out front. But I hear that he had to call in the guys from antiques road show when Bank of America CEO Ken Lewis tried to deposit a set of antique platform shoes that he claimed had been worn by Napoleon at Waterloo. It turns out Lewis's great uncle Wilbur had an active imagination--Napoleon really wasn't short by the standards of his day.

I just think McArdle would serve her readers better by concentrating on an expanding mandate that could have real and lasting consequences for American taxpayers. Even if McArdle is right and Warren has overstepped her bounds, what is the worst that could happen? Tim Geithner has to spend a few extra hours testifying? A room in the Dirksen Senate Office Building gets an extra use or two? Other reports have given the impression that members from both sides of the aisle aren't rushing out to act on any of the COP's recommendations.

In her final line, McArdle bemoans losing the oversight panel to Warren's personal quest. In this particular post though, I would say we lost a good blogger who got distracted by what amounts to a sideshow in the bailout circus.

1 comment:

Anonymous said...

We didn't lose a good blogger. McArdle never was a good blogger and has been consistently in the pocket of the banks.

Go Elizabeth Warren! With her breezy style and clear explanations of things in terms most people can understand, yet her utter command of the legal side of it and her job security through her tenure at Harvard, she is a problem the bankers do not know how to deal with.

This is the most important assignment of her career. Hang in there, for the country's sake! We need you!