Yesterday, Tyler, myself and a handful of other economics bloggers had a chance to discuss the economy with Treasury Secretary Geithner and other treasury officials. Here are a few random notes.
There was deep skepticism about the financial industry and about reform from some of the bloggers. More let’s say “radical” approaches such as Treasury taking an equity stake in underwater homes or giving everyone a guaranteed income were brought up. I was surprised to find myself on the side of the more conservative Treasury officials who cogently argued that such reforms were neither politically viable nor likely to work. Treasury gave a good argument that reform had been deep and meaningful.
A few good lines from a senior treasury official as I recall the gist:
- “Markets believe we can borrow. The public doesn’t. We need both to move forward on the fiscal front."
- “Businesses are investing in a way that shows more confidence than they are talking.” (graph here, see the last year or so AT)
There was a recognition that the Fed could do “dramatic” things but a sense that the theory here was uncertain and untested.
The best question of the day came from Tyler. The discussion was on the financial reform bill and how it changed the incentives of players in the financial industry by creating more risk for them. Tyler interrupted with “What I really want to know is how your incentives have been changed! What is to say that next time the decision will not be made to again bailout the bondholders?”
As Tyler said after an earlier visit, Geithner is smart and deep. Geithner took questions on any topic. Bear in mind that taking questions from people like Mike Konczal, Tyler, or Interfluidity is not like taking questions from the press. Geithner quickly identified the heart of every question and responded in a way that showed a command of both theory and fact. We went way over scheduled time. He seemed to be having fun.