Kinds of Confidence

Ana Marie Cox Twitters:

Geithner on new toxic assets funds: “They’re managed by professionals who know how to do this for a living.” Uhm.

I think this highlights a really problem for the administration. They want to maintain and restore confidence. But we’re now looking at a bifurcation of attitudes. Wall Street and other big business insiders take a different view of what sort of steps inspire confidence than do most people. To most people, as per Cox’s Tweet, the Wall Street whiz kids are, themselves, jokes and what would restore confidence is some kind of sense that they’ve had their assess kicked and some new people are brought in the run the show. But to the insiders, it’s just the reverse—they want themselves and their pals to continue to control the commanding heights of the economy.

Ideally, you’d want to play to both audiences simultaneously, but I don’t really see any way to do that. Consequently, the administration has pretty consistently chosen to play to the audience of insiders. And they’ve done it pretty well. You can see that stocks are up on this announcements, just as they were on Geithner’s nomination, and on most other days on which significant anti-crisis measures were announced. But on another level, Wall Street doesn’t manufacture cash out of thin air. The financial system depends on a broader set of non-financiers being willing to trust their earnings to financial institutions. And whether or not this plan shores up large banks’ balance sheets, nothing that keeps all the incumbents in place is going to do anything to reassure people about doing forward-looking business with these institutions.