Michael Hirsh

Stories by Michael Hirsh

  • What Geithner's Plan Doesn't Do

    If you parse all the testimony and the punditry we’ve heard in recent weeks, a common theme emerges: There is a deep philosophical divide between those who want to fix the financial house we have, and those who think we should knock down the old house and build a brand-new one—a new Wall Street, in other words. On one side: Tim Geithner and Ben Bernanke, as well as Obama-appointed regulators like Mary Schapiro of the SEC. They want serious fixes to the system—new rules to repair the old house and ensure that it is safe in the future--but they also seek to keep the old house intact. On the other side: critics such as Paul Krugman and possibly even Paul Volcker and Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, who think the old house is structurally unsound. They believe that not only can’t we solve the present crisis by merely tinkering with the old house, but we’ll assuredly find ourselves in another crisis down the line if we don’t dismantle it entirely. It...
  • Populist O is back

    President Obama, announcing another dip into the federal coffers today to save the auto industry, blamed a “failure of leadership”—perhaps a potshot at the soon-to-be departed GM chairman, Rick Wagoner. The workers were not at all fault, the president said. “I will fight for you,” he declared. I’m sure that line was popular back in the factories, but in his eagerness to stay ahead of the populist curve Obama seems to have ignored entirely the role of the unions. Like the fact that for decades the UAW has resisted the kinds of changes that would have made the U.S. auto industry marginally competitive with the foreign companies that have been beating it up since the ‘70s. One example: the "Jobs Bank," a two-decade-old program under which auto workers continue to get paid wages and benefits often topping $100,000 a year after their companies stop needing them. The Treasury Department has demanded that the UAW cut compensation to levels competitive with Nissan, Toyota and...
  • What Geithner Is Reading

     It’s amazing Tim Geithner has time to read anything at all beyond drafts of his latest plan to save the financial system. But in an interview last week with my colleague Jeff Bartholet and me, the Treasury secretary revealed that he was deep into “Lords of Finance,” Liaquat Ahamed’s brilliant history of the hapless central bankers of the Depression era who “broke the world,” mainly by adhering blindly to the gold standard (read my full report on the interview here). I finished the book myself not too long ago, and it’s a great read. The hero of “Lords of Finance” is John Maynard Keynes, who fought valiantly against the tragically dated conventional economic wisdom of his day. “More than anything, the Great Depression was caused by a failure of intellectual will, a lack of understanding of how the economy operated,” writes Ahamed, an investment manager who has worked both at the World Bank and on Wall Street. Ahamed, of course, draws a parallel to the present crisis (though it has...
  • Nationalization After All?

     It ain’t over yet, folks—both the banking crisis itself and the debate over what should be done about it. Barack Obama and the nation’s major bankers made nice at a White House meeting on Friday, with everyone agreeing that 'we're all in this together,'' as Obama spokesman Robert Gibbs put it. The bank chiefs are happy that Tim Geithner and Ben Bernanke have emphatically rejected nationalization of the worst-hit banks, saying that critics like Paul Krugman who embrace the scorched-earth approach don’t understand how difficult this would be (think AIG). Geithner and Bernanke (whom I've profiled here and here, respectively) would prefer to stand pat and leave the banks intact; they hope that what’s left of TARP, along with the public-private partnership funds designed to buy up toxic assets and the TALF securitization plan, will be enough to nurse most of them back to health. But Geithner and Bernanke have also hinted that the government may have to...
  • Treasury Secretary Geithner Hits His Stride

    For weeks he's looked like a deer in the headlights, flubbing speeches and rattling markets. But the Treasury chief retains the support of his boss—and he's starting to hit his stride.
  • Ben Bernanke: Economic Czar

    Is anybody really in charge of this crisis? Barack Obama's off in California doing the "Tonight Show"-- "These financial industries are holding us hostage," the world's most powerful man complained to Jay Leno Thursday night -- and Treasury Secretary Timothy Geithner is under constant fire for his handling of AIG and just about everything else. So it occasionally feels as if there’s a bit of a power vacuum in Washington. But if there is, Federal Reserve Chairman Ben Bernanke is moving aggressively to fill it. Though his interest-rate toolbox is all but empty, Bernanke has managed to find yet new ways of acting with striking speed and force on his own in recent days. Bernanke is basically printing money on a large scale to fortify the financial sector, committing himself to buy $300 billion of Treasurys and committing an additional $750 billion to mortgage-backed securities. This latest effort has annoyed the Wall Street Journal editorial page. "The...
  • The Reeducation of Larry Summers

    He's become a champion of massive government intervention in the economy, and he's even learning how to play nice.
  • Hillary Gets Squeezed in Foreign Policy Power Play

    Secretary of State was the consolation prize, but Hillary Clinton was still delighted to get it. Her problem now is that the Obama administration is populated with big players—and some big egos—who are stealing away her turf bit by bit. Hillary may think her worldwide fame will give her leverage, but there's a two-word rebuttal: Colin Powell. Here's a rundown of who may steal Hillary's thunder—and her headlines.Jim Jones The retired Marine general is reasserting the National Security Council's role in Washington as coordinator of all foreign-policy and national-security issues—and expanding it to include environmental and economic issues. Hillary will have a seat at the table, but not at the head of it.Tim Geithner Since the Asian financial crisis, Treasury has taken the lead on China. And with Geithner in charge of Obama's financial plan and the markets hanging on his every word (he speaks Chinese, by the way), Hillary won't have much room to reassert State.George Mitchell He'll...
  • Who's Watching the Money?

    With the economy worsening and the Bush team adrift, queasy markets are looking to Obama to set the course. But is naming a Treasury secretary enough?
  • Hirsh: Can Obama Save Capitalism?

    The new president may think his only task is to rescue the economy. But like FDR, he may have to save capitalism itself.
  • The Candidates' Economic Gurus

    Obama and McCain have taken different tacks to handling the meltdown. It's not by accident. How their economic gurus shape their views.