I heard an interesting story on NPR this morning, and it got me to thinking, so I put some thoughts down. It's a story that's underreported, I think: when government goes good, and also a smaller story about the financial crisis.
Over the past eight years, we were subjected to an endless barrage of messages — from the White House, from Congress, from pundits, from my grandmother — that government is what is wrong with this country. That government is the problem, not a solution. This sentiment goes back much further than the Bush administration, but those guys perfected the government hatred.
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They were ideologues who, deep in their core, truly believed "Government bad. Private sector good" like it was some Orwellian mantra. Who wanted to "reduce it to the size where I can drag it into the bathroom and drown it in the bathtub," as Grover Norquist said.
And, despite all evidence to the contrary — anyone looked at the financial sector lately? — they largely won public sentiment on that front.
It’s easy to do, really, particularly when one of the hallmarks of your governance is to prove how government fails. (And fail it did, spectacularly, so well done, George.) All you have to do is repeat this mantra, and then stock the government with people who believe the same thing to a fault — that the private sector can always do better than the government, full stop, end of story.
It then becomes a self-fulfilling prophecy. Of course the government is the problem, when you stack the government with incompetent people. You get things like Katrina. (How’s that bathtub working out for you, Grover?)
Of course, Republicans still cling to this notion, which is fine for them, I guess, since they’ve largely relegated themselves to irrelevance for the time being.
So it’s nice to see a story like this one. NPR’s Chana Joffe-Walt takes us through the "anatomy of a bank takeover," when the FDIC swooped in this January to take over Bank of Clark County, in Vancouver, Wash.
It’s nice for two reasons. One, it shows just what a brutally efficient and competent — and even kind — group the FDIC is. They know their stuff, they do it quietly and effectively, with all the skill of a military special-ops unit. Even the employees of the failed bank sing their praises.
As President Obama says, government isn’t the answer to everything, it can’t solve all our problems, but it has a truly irreplaceable role in making our society work, making it better — you know, providing for the common defense, promoting general welfare, securing liberty. All that quaint stuff.
But the story also highlights something I think has been missing from coverage of the financial crisis: the fact that the federal government takes over banks all the time. One FDIC agent, in his 25 years with the agency, has placed more than 200 banks into receivership, as it is called. From October 2000 to October 2007 alone, the FDIC placed 27 banks into receivership. (Of course, the number of banks failing has grown a lot in the ensuing 18 months.)
Another interesting point, one about scale:
The Bank of Clark County had 100 employees and assets of $446 million — it was a really small bank. But the federal takeover kept 80 FDIC agents, about 50 Bank of Clark County staff, and 100 Umpqua employees, working round the clock for three days.
Most of the largest banks in trouble right now — Citibank, Bank of America — are about 6,000 times the size of the Bank of Clark County and much, much more complicated.
Considering the scale involved, it’s not surprising the U.S. Treasury secretary’s latest plan does everything it can to avoid using this process on those big banks. When you take over a little bank, it’s called receivership. When you do it to a big bank, people throw around the word nationalization.
But on the other hand, check these FDIC folks out. They know what they’re doing. And every week they get more experience. In the 10 weeks since the FDIC took over the Bank of Clark County, 18 more banks have failed. That brings us to a grand total of 20 since the start of this year — a number that will likely grow tomorrow.
So you see what a task they have ahead of them.
Cross posted at K Street Blues.