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Spitzer’s Back — but is what he has to say something we want to hear?

Ever since the announcement that Slate had signed former NYS Governor Elliot Spitzer as a columnist, anticipation has run high as to the subject matter of his first column, which came out on Thursday. In it, Spitzer addresses the bailout of the US financial institutions from the viewpoint that it basically is propping up a failed situation and stands in the way of true rebuilding of the US economy. It is an Rx that I think many people are not going to want to swallow, especially given that the implications surrounding it are extremely bitter…and with no ‘spoonful of sugar’ to help it go down. If Spitzer is correct, we’ve wasted a tremendous amount of money performing a face-lift and ‘boob-job’ on a patient with lung AND brain cancer.

As a side issue, however (and I encourage anyone to go to Slate and read the first couple of paragraphs and go to the article mentioned)and as his ‘hook’ in the piece, Spitzer uses the example of GE Capital’s signing a long term agreement with CACC, the Chinese government-sponsored aircraft manufacturer to purchase up to 25 medium sized aircraft as an indicator of what US (and Canadian and UK and French) aircraft manufacturers will be facing in the near future, just as China’s entry into the auto business fifty years ago can be viewed, in hindsight, as the precursor to what we are seeing with the US auto business today.

But that is a digression from the meat of the piece:

“The CACC story highlights the risk that current bailouts—a remarkable $7.8 trillion in equity, loans, and guarantees so far—may merely perpetuate a fundamentally flawed status quo. So far, at least, 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…”

…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…”

“Imagine if instead of merging more and more banks together, we had broken them apart and forced them to compete in a genuine manner. Or, alternatively, imagine if we had never placed ourselves in a position in which so many institutions were too big to fail. The bailouts might have been unnecessary…”

“…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 Speaks!

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Snarky housewife from Upstate New York. Into gardening, fiber arts, smallholder farming.