OK, the latest speech. Let's skip Obama's discouraging views on health care -- Electronic Medical Records allow more efficient denial of care! Yay -- and hopelessly Village views on "entitlement" [cough] "reform".* Why aren't we adopting proven solutions and nationalizing the banks, and instead adopting the uniquely American solution of throwing trillions of dollars at the very same people and institutions that created the crisis? Saving banking is not the same as saving the banksters! (It's so, so right that Lehman's sitting on enough yellow cake to make a bomb...) Froomkin comments:

Obama raised it on his own, noting that some critics think he has "been too timid" about shoring up the banking system. "This is essentially the nationalization argument that some of you may have heard. And the argument says that the federal government should have already preemptively stepped in and taken over major financial institutions the way that the FDIC currently intervenes in smaller banks and that our failure -- my administration's failure -- to do so is yet another example of Washington coddling Wall Street: 'Why aren't you tougher on the banks?'"

But his answer was vague and unconvincing: "So let me be clear. The reason we have not taken this step has nothing to do with any ideological or political judgment we've made about government involvement in banks. It's certainly not because of any concern we have for the management and shareholders whose actions helped to cause this mess. Rather, it’s because we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it’s more likely to undermine than create confidence."

Obama's belief has never been in question. It's the reasoning behind that belief that we've been missing, as well as the source of his faith in the judgment of economic advisers. But he once again left us all in the dark on that count.

Again, and as usual: No transparency, no accountability, down to the very details of why one policy is adopted, not another. No transparency, no accountability has been a constant between this administration and the last one. Whatever's going on, it's not pragmatism, because the administration has adopted policies that won't work. Martin Wolf, responding to Simon Johnson, comments in the Financial Times:

Yet Prof Johnson makes a stronger point than this. He argues that the refusal of powerful institutions to admit losses – aided and abetted by a government in thrall to the “money-changers” – may make it impossible to escape from the crisis.

When Obama says "more expensive," you need to ask "More expensive for whom?" The banksters, obviously, who stand to lose a great deal of personal power, personal wealth, and institutional power if they are forced to recognize their losses*. That, I would argue, is the source of Obama's belief. His Finance Democrat advisors have identified their own interest with that of the country, as ruling elites always do.

Moreover, since the US enjoys the privilege of being able to borrow in its own currency it is far easier for it than for mere emerging economies to paper over cracks, turning crisis into long-term economic malaise. So we have witnessed a series of improvisations or “deals” whose underlying aim is to rescue as much of the financial system as possible in as generous a way as policymakers think they can get away with.

I agree with the critique of the policies adopted so far. In the debate on the Financial Times’s economists’ forum on Treasury secretary Tim Geithner’s “public/private investment partnership”, the critics are right: if it works, it is because it is a non-transparent way of transferring taxpayer wealth to banks. But it is unlikely to fill the capital hole that the markets are, at present, ignoring, as Michael Pomerleano argues. Nor am I persuaded that the “stress tests” of bank capital under way will lead to action that fills the capital hole.

And that's the problem. We don't need an underpants gnome for a president. Phase 1: Collect the underpants! This we have most definitely done. Phase 3: Profit! That would be Obama's vision of a greener economy without bubbles. But Phase 2 is, as it has been, still ????? How do we profit from all the underpants we've collected? How will the bailouts work? Why does Obama "believe" what he does? Why aren't we adopting solutions that have worked elsewhere? That would be the evidence of things not seen.

NOTE * But not for banksters!

NOTE ** Goldman Sachs reduced to accounting chicanery? How are the mighty fallen. Sad. Or business as usual, I supposed.