Wednesday, April 15, 2009

Not Clever Enough To Avoid This Quagmire

Obama just ain't all that.


Now that we have a rough idea how President Barack Obama and his lieutenants plan to prop up insolvent financial institutions using taxpayers’ money, we’re left with a more difficult question: Why?

Why doesn’t the Obama administration force insolvent banks and insurance companies to come clean about their losses first? It’s the “why” that’s so vexing. The who, what, when, and how are mere details, by comparison.

More than anyone else’s, it should be in Obama’s political self-interest to accelerate the worst of the financial crisis and get as much of the inevitable pain behind us as quickly as possible. Every day he waits is one less day he will have between the time we hit rock bottom and the next election. And yet, Obama and his minions are doing all they can to delay the reckoning, which only will make it worse.

When publicly owned companies change management, often the smartest thing a new chief executive officer can do is clear the decks and take a “big bath” charge to earnings. In other words, the company writes off all its worthless assets and reports huge losses, pushing every conceivable drop of red ink into the past. The new CEO gets to blame his predecessor’s dumb mistakes. The company gets a fresh start with the investing public.

Obama could have taken the same approach with the banks the moment he took office, while he still had standing to blame the financial crisis on George W. Bush’s administration, stupid regulators, and corrupt lawmakers -- that is, everyone but himself.

Obama didn’t do that. And now, six months into the government’s Troubled Asset Relief Program, his administration’s approach to the financial crisis is largely indistinguishable from its predecessor’s. The only objective, it seems, is to buy time, in hopes that an economic recovery somehow will materialize and lift the financial system back to health.


Whatever the case, as long as the government refuses to remove the cancer of zombie banks from our financial system, there’s little hope the U.S. will return to robust economic growth anytime soon. And the longer our wounded banks are allowed to stagger along with no end-game in sight, the greater the risk for Obama that voters will conclude he’s as responsible for blowing the cleanup as others were for causing the crisis.

He’d better act soon. Time may not be our side any longer.

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