Years of Poems and Spirits

Just read the news on WSJ: “Federal Reserve Bank of New York Pushes For Tougher Rules on Credit Derivatives”

It looks like a quiet movement is undergoing to reverse the course Greenspan set for the Fed.

WSJ appears to be a more critical voice than the Economist in evaluating the Greenspan legacy. Not long ago, it published several pieces (e.g. “His Legacy Tarnished, Greenspan Goes on Defensive“) highlighting the downside of the Greenspan legacy: too lenient on opportunistic investors and too loose on market regulation.

Therefore, it is little wonder WSJ put Timothy Geithner’s recent speech at the top of its web page today. This is yet another evidence that Greenspan’s successors are seeing the danger in his policies and are trying to reverse the course. People may ridicule Bernanke for his seemingly wobbling response to the credit crunch earlier, particularly when he led the three quarter cut (?) after a sharp market drop. Some even wondered whether he was duped into a rookie mistake. However, the continued market slide and the weakness in the economy vindicated his foresight. Now he’s done with the cuts but still pumping heavily into repo market–seems to be another sign of determined monetary discipline.

Geithner’s efforts are equally remarkable. Those who say that financial market should remain the ultimate free market are either fools or pirates (or both). Those reckless loan or swap underwriters are no different from the lawless polluters or highway litterers. It is just as ridiculous to suggest that ordinary investors (or even conventional credit agencies) are equally responsible for the credit mess as calling regular consumers environmental polluters or labor abusers because they bought goods manufactured by wrong doers.

However, what strikes me the most is the mediocre background of the second most important central banker in the U.S., Timthoy Geithner. Something tells me this guy is a man to watch. His academic training and personal achievement don’t appear to warrant the position he is in (the President of NY Fed), and I wasn’t able to figure out his family connections either. Geithner could be a Jewish name but nothing in his personal connections suggest an outright Jewish background: his sibilings all have biblical names (David, Sarah) but David married a Catholic, it seems. He himself went to Dartmouth and Johns Hopkins. His mentors include Summers and Rubin. But if one is to survive to be the Prince of Banking, it is hard to imagine he could do without a Jewish mentor. His father, Peter, now sits on a Harvard philanthropy fund board and others (including Harvard-Yenching and earlier, the Ford Foundation) but the trail goes cold beyond that.

So who is this guy? Only 46 years old with no economics or finance training or background but presides the New York Federal Reserve. A political appointee but is well connected to Wall Street. According to a recent posting on Muckety, “If there were ever a career civil servant’s Hall of Fame, Timothy F. Geithner would no doubt be an inductee”. I certainly second that sentiment.

Anyway, two more things found about him:
An old speech on the need to regulate financial market.
A profile written by a financial reporter.

It was always a pleasure meeting like-minded folks. This is true for hillbilly racists, white working class laborers, liberation theologists, too-poor-to-own-property-but-enough-to-afford-a-latte-a-day liberal activists. So is it true for immigrant intellectuals from the Orient.

ZDS is a professor in law school. We are of the same age but took quite different routes to the same spatial and temporal location as we did this afternoon… that is too much. We met in his office about my coal mine paper.

But the conversation diverged soon after. I am pleasantly surprised that he’s a fan of Foucault and Said too (more so of the latter and P Bourdieu). His has a insightful view concerning the two: Foucault is too concerned with domination and permeation. Said, however, expands Foucault’s thesis and dares to contest the symbols that were created by the powerful.

Our different views of recent events: Tibet, 08 election and the Western liberal democracy, echo our choice of favorite between Said and Foucault. I suspect his training in law and legislation breeds in him a more optimistic outlook for the outcast surviving in democracy. After all, his job is to protect the right to be different.

I am much more pessimistic about where the liberal legacy in the U.S. is heading to. Now think of it, I may have been “shocked and awed” by the collective reactions following 9.11. But the force of conformity is unmistakeable.

Will an Obama presidency change the paranoia, the hysteria of fear and the intolerance of dissent? To me, that is the hypocracy and the weakness of popular democracy, for it creates a paradox that is unsolvable: even if Obama’s election will change the political ethos of our time, he cannot win unless sufficient majority are ready for the change. If, just for the argument’s sake, the majority is wrong, irrational or stupid, what’s in liberal democracy that can bring a change to this sorry reality?

Yunus came to campus today to give a speech. General impressions:
1. A dynamic speaker who has a very compelling story: an economics professor in a Tenn college, went back to Bangladesh after independence. One day found out 42 poor neigbhors needing total of $27 from loan sharks. That is how everything started.
2. Anti-system: the “system” creates and traps poverty. Banks won’t consider lending to the poor even after being proved wrong. He did everything against the system convention: lending to the poor, turning 99% male clientelee to 97% female, established a “begger program” that has 100K members.
3. Built everything based on raw trust: banking at client’s house in Bangladesh. Thousands staff members going door to door to collect tiny payments. No forms, collaterals, etc.
4. Turning the system resources to his advantage after being recognized: Grumin phone, yugort factories, etc.
5. 90+% repayment rate, 7 million clients out of a population of 150 million

Q&A at reception: very unstructural, very anti-system, does not sound like an economist at all.