I don’t agree from everything that Joe Nocera has to say in this NY Times piece about the AIG situation (such as on whether AIG’s CDS counterparties should have been made to take a haircut for example. In the middle of an attempt to depress systemic risk — and despite the seeming unfairness — insisting on that would have made no sense.), but this passage is spot on:
By week’s end, I was more depressed about the financial crisis than I’ve been since last September. Back then, the issue was the disintegration of the financial system, as the Lehman bankruptcy set off a terrible chain reaction. Now I’m worried that the political response is making the crisis worse. The Obama administration appears to have lost its grip on Congress, while the Treasury Department always seems caught off guard by bad news.
And Congress, with its howls of rage, its chaotic, episodic reaction to the crisis, and its shameless playing to the crowds, is out of control. This week, the body politic ran off the rails.
There are times when anger is cathartic. There are other times when anger makes a bad situation worse. “We need to stop committing economic arson,” Bert Ely, a banking consultant, said to me this week. That is what Congress committed: economic arson.