My Pick For Treasury Secretary

January 29, 2013 at 8:07 am Leave a comment

imagesIt always amazes me how major league sports teams consistently hire coaches who have previously been fired by other teams.  The result is that the vast majority of teams execute the same basic playbook while a handful of truly creative people think Bill Walsh and Bill Belichick dominate the game with their innovation.  Conventional wisdom is that the Treasury Secretary has to be someone from the banking culture and the result is that we tend to go by the same old playbook where innovation might be the better approach.

Jack Lew is slated to become Timothy Geithner’s replacement as Treasury Secretary next week, and while I have no reason to doubt his competence, I would like the Senate to consider another nominee, assuming he’s willing to be drafted and move to this country.  He is the President of Iceland and he made a big splash with this interview at Davos, Switzerland explaining how Iceland has managed an economic comeback and is now one of the fastest growing economies in Europe four years after going bankrupt.  What makes the Icelandic experience so intriguing is that it turns conventional wisdom on its head:  1) they let the major banks go bankrupt; 2) they imposed currency controls, which was made easier by the fact that they have an independent currency; and 3) they refused to impose austerity measures further crippling the economy in the name of reducing debt.  But the most intriguing part of the Icelandic experience is President Olafur Ranar Grimsson’s attitude toward banks:  “why do they consider banks the holy churches of the modern economy; why are banks not treated like private airlines and telecommunication companies allowed to go bankrupt if they have been conducted in an irresponsible way, the theory that you have to bail out banks is the theory of bankers enjoying for their own profit the success and then letting ordinary people pay the failure through taxes and austerity. . .”  Amen, brother.

Now, it’s easy to demagogue quotes like this.  After all, Iceland’s economy is tiny compared to our’s and if we hadn’t bailed out the banks, there’s a possibility that the economic situation would have been even worse.  Still, the President is on to something.  Policy makers like Mr. Geithner have been quick to explain the necessity of bailing out banks, but impossibly slow in moving decisively to hold banks accountable.  The truth is that the credit union industry has had a greater shakeup to its structure as a result of the financial crisis than has mainstream banking.  It would be nice to see a Treasury Secretary who can strike more of a balance between recognizing the importance of finance and advocating for changes that can make banks truly accountable for their misdeeds.  In my dream world, if a bank is too big to fail, it is too big and no bank that receives government funds of $10 billion or more at the time of a crisis would be allowed to take the money unless it first gets rid of its CEO and the majority of its Board of Directors.

On that note, have a nice day.

Entry filed under: Economy, General, Political. Tags: , , , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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