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Well, there is still quite a lot to lose. Why rush a depression?
Over at the Atlantic.com, Megan McArdle posts a sort of inadvertent commentary on Berman's scheme. She feels the same sort of despair about the efficacy of bailouts like Citigroup Inc. as Berman. But her response is different. She goes rooting back through New Deal initiatives trying to get a sense of what worked and what didn't. A lot didn't -- particularly schemes that seemed logical, like controlling prices through the National Industrial Recovery Act or through agricultural subsidies. And then there was Franklin Roosevelt's "awesomely lunatic" plan to buy gold to make the economy grow. "They might have more effectively written to Santa and asked for a good economy for Christmas," she writes. Berman's bank plan is like that. A year is a long time to wait for some available credit from a new bank --- and a year may be wishful thinking. And given the size of the economy, $10 billion in federal capital -- even $50 billion in private capital (which might be a stretch) -- produces a medium-sized institution that will have almost no macroeconomic effect. And if the effect turned out magically to be much greater, why would the government do anything to push an already staggering banking system to the wall, particularly since Treasury now has stakes in the largest banks and the Federal Deposit Insurance Corp. has exposures to just about everyone? Berman tosses in references to the First and Second Bank of the United States, without making it clear that a) they were operating in a tiny, agricultural, credit-starved society with vestigial markets, b) they were central banks not commercial banks, and c) they created so much criticism that they were killed (by James Madison and Andrew Jackson), putting back the cause of a modern banking system until 1913 and the Federal Reserve Act. Over at The New York Times, Andrew Ross Sorkin does his man-on-the-street interviewing thing -- the "street" being Wall Street, the "men" being firm "chieftans." The subject: What's so fabulous about Tim Geithner? After all, he's young, he hasn't succeeded in saving Lehman Brothers Holdings Inc. or banking, and we (meaning the chieftans) think he's a sort of puffed-up bureaucrat. Again, none of the chieftans, obviously sitting around their offices combing their headdresses, would speak on the record -- probably a swell idea given that there's a lynch mob gathering somewhere north of Houston Street intent on kicking them out and, worse, taking away their bonuses. See the front of Tuesday's New York Post for more on that subject. Here's the problem. These folks are self-interested, to say the least. They have been pilloried, though not necessarily by Geithner. They've seen their world vaporize before them; and it doesn't really matter who's to blame (shorts, Henry Paulson, Geithner). Is Geithner a guaranteed success? Hardly. But while The Wall Street Journal has done the best work revealing some of the arguments inside the room during watershed crises like Lehman Brothers, we -- even the chieftans -- have no real idea who said what to whom in regulator land. Right now, the prime mover looks like Paulson; he embraced that responsibility himself in The Washington Post a few weeks ago. But we don't really know. There is a definite whiff of sour grapes in the air. One last thing. Sorkin at one point mentions that "under his watch, some of the biggest institutions that were the responsibility of the New York Fed -- Bear Stearns, Lehman Brothers, Merrill Lynch and, most recently, Citigroup -- faltered." That's totally unfair. With the exception of Citi, neither the Fed nor the New York Fed had any regulatory responsibility for Bear, Lehman or Merrill; that belonged to the Securities and Exchange Commission. The situation only began to change when the Fed rushed in to open up the discount window to investment banks after Bear began to collapse. You can blame the Fed as a whole for regulatory lapses with subprime or derivatives, but its move into investment banking was battlefield triage -- and Geithner gets some of the credit. Besides, the New York Fed has always been the central bank's window on the markets, primarily the enormous market for treasuries. The expansion of the Fed into a kind of "market stabilizer" role only came after Bear and still lacks legislative authority. You can't blame Geithner for regulatory responsibilities no one really knew he had. - Robert Teitelman See Berman's column from The Wall Street Journal Robert Teitelman is the editor in chief of The Deal. Categories Deal Video
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The two M&A reporters for the big dailies appear together again; we've been wondering what 
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