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Geithner: I For One Welcome Our New Financial Overlords

That would be Vampire Squid Overlords to you. (graphic: Mike Monteiro via Flickr)

Noam Scheiber has a beat-sweetener on Tim Geithner today which allegedly chronicles his survival in the Obama Administration, despite most of the rest of the economic team falling away. It’s all a bit nauseating, particularly the part where Rahm Emanuel labels Geithner “better than Rubin.” But in particular, you have, very deep in the article, this insight into how Geithner views the world:

I asked Geithner if he had a grand vision for the postcrisis landscape—for, say, a less bloated financial sector with a smaller role in the economy—and a map for how to get there. Could he be a figure like George Marshall, who helped win the World War and then remade Europe so that it couldn’t happen again?

Geithner hunched his shoulders, pressed his knees together, and lifted his heels up off the ground—an almost childlike expression of glee. “We’re going, like, existential,” he said. He told me he subscribes to the view that the world is on the cusp of a major “financial deepening”: As developing economies in the most populous countries mature, they will demand more and increasingly sophisticated financial services, the same way they demand cars for their growing middle classes and information technology for their corporations. If that’s true, then we should want U.S. banks positioned to compete abroad.

“I don’t have any enthusiasm for … trying to shrink the relative importance of the financial system in our economy as a test of reform, because we have to think about the fact that we operate in the broader world,” he said. “It’s the same thing for Microsoft or anything else. We want U.S. firms to benefit from that.” He continued: “Now financial firms are different because of the risk, but you can contain that through regulation.” This was the purpose of the recent financial reform, he said. In effect, Geithner was arguing that we should be as comfortable linking the fate of our economy to Wall Street as to automakers or Silicon Valley.

I don’t even know what to say about this. We’re just a few years removed from the financial oligarchs destroying the global economy through their own greed and negligence. And the man put in charge of regulating them, who had a front-row seat to all this destruction and who has been given expanded powers under Dodd-Frank to see to it that never happens again, thinks that there’s a great “financial deepening” about to take place where the demand for sophisticated financial innovations will jump. Therefore, the financial sector will need to grow and become the most reliable spur of the US economy. That’s his feeling. And regulation can reduce the risk, even though the new regulations barely put a dent into Wall Street’s core business, and are being systematically defunded besides.

Financialization of the economy has led to practically nothing but pain for the average worker and risk for the taxpayer. It has turned the allocation of capital into the placing of bets at a casino, and the stock market into a particularly sophisticated video poker game. This territory was all covered before in the run-up to the Great Depression as well, and we know the precise causes and remedies involved. Geithner prefers not to address the plutocracy he’s really advancing here – where elites provide “financial deepening” services abroad and amass ridiculous profits that they wall off.

You have the Treasury Secretary of the United States, three years after a major financial crisis, saying out loud that what’s good for Wall Street is good for America.

CommunityThe Bullpen

Geithner: I For One Welcome Our New Financial Overlords

Noam Scheiber has a beat-sweetener on Tim Geithner today which allegedly chronicles his survival in the Obama Administration, despite most of the rest of the economic team falling away. It’s all a bit nauseating, particularly the part where Rahm Emanuel labels Geithner “better than Rubin.” But in particular, you have, very deep in the article, this insight into how Geithner views the world:

I asked Geithner if he had a grand vision for the postcrisis landscape—for, say, a less bloated financial sector with a smaller role in the economy—and a map for how to get there. Could he be a figure like George Marshall, who helped win the World War and then remade Europe so that it couldn’t happen again?

Geithner hunched his shoulders, pressed his knees together, and lifted his heels up off the ground—an almost childlike expression of glee. “We’re going, like, existential,” he said. He told me he subscribes to the view that the world is on the cusp of a major “financial deepening”: As developing economies in the most populous countries mature, they will demand more and increasingly sophisticated financial services, the same way they demand cars for their growing middle classes and information technology for their corporations. If that’s true, then we should want U.S. banks positioned to compete abroad.

“I don’t have any enthusiasm for … trying to shrink the relative importance of the financial system in our economy as a test of reform, because we have to think about the fact that we operate in the broader world,” he said. “It’s the same thing for Microsoft or anything else. We want U.S. firms to benefit from that.” He continued: “Now financial firms are different because of the risk, but you can contain that through regulation.” This was the purpose of the recent financial reform, he said. In effect, Geithner was arguing that we should be as comfortable linking the fate of our economy to Wall Street as to automakers or Silicon Valley.

I don’t even know what to say about this. We’re just a few years removed from the financial oligarchs destroying the global economy through their own greed and negligence. And the man put in charge of regulating them, who had a front-row seat to all this destruction and who has been given expanded powers under Dodd-Frank to see to it that never happens again, thinks that there’s a great “financial deepening” about to take place where the demand for sophisticated financial innovations will jump. Therefore, the financial sector will need to grow and become the most reliable spur of the US economy. That’s his feeling. And regulation can reduce the risk, even though the new regulations barely put a dent into Wall Street’s core business, and are being systematically defunded besides.

Financialization of the economy has led to practically nothing but pain for the average worker and risk for the taxpayer. It has turned the allocation of capital into the placing of bets at a casino, and the stock market into a particularly sophisticated video poker game. This territory was all covered before in the run-up to the Great Depression as well, and we know the precise causes and remedies involved. Geithner prefers not to address the plutocracy he’s really advancing here – where elites provide “financial deepening” services abroad and amass ridiculous profits that they wall off.

You have the Treasury Secretary of the United States, three years after a major financial crisis, saying out loud that what’s good for Wall Street is good for America.

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David Dayen

David Dayen