Legal Commentary

"Is America The New Russia?"

By Ethan Brown

That's what Martin Wolf asks in a strong column over at the Financial Times.

I'd made the US/Russia comparison here recently, prompted by the Paulson/Geithner approach to the financial crisis which I believe is hobbled by a total lack of transparency and a fundamental misunderstanding of the crisis itself (Geithner and co. don't seem to believe that the banks are insolvent). Put simply, the bailout is worthy a banana republic or perhaps Russia but not a supposedly first world democracy like the U.S. [More...]

Wolf takes a more nuanced approach to the US/Russia question. He acknowledges that "we have witnessed a massive rise in the significance of the financial sector" and that the Geithner approach is "unlikely to fill the capital hole that the markets are, at present, ignoring."

Wolf concludes that:

"Do these weaknesses make the US into Russia? No. In many emerging economies corruption is egregious and overt. In the US, influence comes as much from a system of beliefs as from lobbying (although the latter was not absent). What was good for Wall Street was deemed good for the world. The result was a bipartisan programme of ill-designed deregulation for the US and, given its influence, the world."

Fair enough but then Wolf writes that "decisive restructuring is indeed necessary."

And that to me is the problem. I don't think we're going to get a "decisive restructuring" of the financial system with Geithner at the helm. And Geithner's misguided bailout may yield catastrophic results given the depth of the crisis. So, to me the lack of will to reform a financial system that is fundamentally broken makes us indeed Russia-like.

Full post as published by TalkLeft on April 15, 2009 (boomark / email).