Fixing Banks Ain’t Easy
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James Joyner | Sunday, March 1, 2009 |
In a NYT column, Tyler Cowen argues persuasively that none of the “simple” solutions floating around, ranging from nationalization to bankruptcy to the Swedish Plan are likely to work in fixing America’s “bank holding companies.” But, while I’m as capitalistic as the next guy (if, say, I’m sitting between Dan Drezner and Megan McArdle) I had to chuckle at this:
On top of that, the government doesn’t have the expertise to run large bank holding companies like Citigroup. There is the danger that caretaker managers, with bureaucratic incentives, will never return the banks to profitability. And restrictions on executive pay, already enacted into law, will make it hard to hire the necessary talent.
Dude: The talented people attracted by massive salary and benefits packages didn’t seem to have the expertise, either.
About the Author: James Joyner is the publisher of Outside the Beltway and the managing editor of the Atlantic Council. He's a former Army officer, Desert Storm vet, and college professor with a PhD in political science from The University of Alabama. He lives just outside the Beltway in Alexandria, Virginia with his wife and infant daughter.
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Well, then let the cream rise to the top and let the garbage be carted away. We shouldn't be subsidizing failure. There are plenty of banks whose managers HAVE the expertise and WERE responsible. What is happening is criminal.
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Uh, aren't "bad banks" just a Democratic fearmongering?
It's a point that I've been making for years and it applies to fields other than banking. The folks who want to make the highest income, i.e. those most motivated by money, aren't necessarily the best qualified or more capable. What you want are people most attracted to running successful banks which is not necessarily synonymous with the people who want to make the most money quick.
Dave, I think the biggest problem with the evolution of business is the preoccupation with bottom line results each quarter, etc. Maximizing profits has taken precedence over optimizing long term growth. Too much short term thinking.
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Dude: The talented people attracted by massive salary and benefits packages didn’t seem to have the expertise, either
Wooooord.
Expertise and judgment are two different things. The executives displayed poor judgment and in turn their boards and shareholders were not vigilant. For their errors, the owners should therefore pay the price in any restructuring.
But that is not a predicate for having govt types run the banks, or to assume some equivalence of expertise.
Hmmm. Won't a "tea party" fix everything?
Expertise and judgment are two different things.
Business is business, gov't is gov't, never the twain shall meet.
The problem, as always, is the interface between the 2. Corruption doth follow.
