We know that banking executives aren’t exactly the most popular guys in the world right now (see: the arse-whooping they’re taking on Capitol Hill), but still, you’d think that if you were crafting a bailout for the industry, their input might be useful.
But Obama apparently didn’t think so. The WSJ tells the story of how the administration got into yesterday’s trainwreck. We’re thinking one word: Hubris.
There were also political calculations, including a decision made early to not consult heavily with Mr. Paulson’s team, according to people familiar with the situation. The Obama team spent weeks wrestling with many of the same issues that bedeviled Mr. Paulson’s efforts, including how to deal with bad assets.
For a time, the Obama team considered setting up a “bad bank,” where the U.S. would buy distressed assets directly from financial institutions. It discarded that idea after realising it would be too costly and difficult — as Mr. Paulson also had concluded.
The Obama team also steered clear of consulting Wall Street about its plan in an effort to avoid being seen as joining with a much-maligned industry, officials say. Top bank executives have been complaining in recent days of being frozen out as the administration crafted its plan.
Lovely. Glad to see the administration, with more political capitol than it knows what to do with, so concerned about politics that it won’t even consult with the people who might’ve told you: If you drop a big goose egg on the market, it’s going to tank.
As Larry Ribstein notes, this is hope and change in action. All about the promise of something better, with no substance to back it up.