This American Life

So this weekend I was listening to NPR's This American Life, the recent episode entitled "Bad Bank" and I hope you don't mind but I couldn't help but relate it back to the topics we've been covering.

Here is the link, if you'd like (you should be able to download it for free and the first 38 min. is all that is really necessary):
http://www.thisamericanlife.org/Radio_Episode.aspx?sched=1285

What this episode does is explain what is happening right now with the collapse of our banking system and in a way that I've never heard explained before. I do have to admit that I was a bit confused until I heard this so if you are at all confused it explains it in a very (simplified yet) straightforward way. Where it connects to class is when it talks about the possibilities of the roles the government could play in this crisis. What it says is that many if not most of our largest banks have become insolvent or are very very close to it, yet they won't admit it because then they'd be declaring bankruptcy and if we let these banks fall so will our economy. So what are our options? The government (or really the taxpayers) could buy the homes for what they're worth and not necessarily teach the bankers a lesson. Or another option would be to help the banks directly to help keep them afloat, which would make it so that the government owns the banks, at least for a while until they fixed them and resold them. The episode then discusses the larger It then leads to this section of the episode that I think really connects to our class:

When they begin talking about what our government actually is doing,

former IMF official Simon Johnson says: "Yes, I think there’s a level of deceit here. Right, I’m part of the banks, and I think the government is going along with it far too much. One of my colleagues, nicely articulated what should have been the principle, now, which is “No New Lies.” Right? The balance sheet, of these banks is as far as we know, a huge lie. Right? They don’t want to show you, or tell themselves what this stuff is really worth. And we’re saying, deal with it now, deal with it seriously, deal with the problems in the banking system openly. Or, there will be hell to pay"

NPR's economist, Adam Davidson: "Simon Johnson says every day we delay taking over insolvent banks, the economy gets weaker and the solution gets more difficult. Well, according to the plan, the Obama administration revealed this week, they have a different view, and they think it’s best to go about things more deliberately. They announced on Wednesday, they’re going to take two months to figure out how healthy the banks are, that’s the stress test you’ve heard a lot about, and another 6 months to give some money to the banks that need it. And they’ve said, to the media, and to Congress, that they’re pretty sure that they know what those stress tests are going to find: that America’s biggest banks are healthy. The government will never need to take them over."

economist, Alex Blumberg: "In other words, given a choice between a scary, and unprecedented, for this country at least, takeover of the banks immediately, and much smaller measures where they keep the banks afloat, don't challenge them too much on the truthfulness of their balance sheets, and hope that in time, things will sort themselves out, they're going with time. But their public statements did leave them plenty of wiggle room. And of course ... if they WERE planning to take over the banking system ... they wouldn't announce it beforehand. They'd probably say exactly what they're saying right now ... wait till everything's set up ... till they hired enough people and got all their plans in order ... and then one Friday evening, they'd make an announcement, and nationalize the banks over the weekend."

What this episode said had huge implications of deception from the government. It not only says that government is enabling the banking system to lie (and in doing so is just as guilty?), but it says that the government most likely will be lying to us soon, if it hasn't already. Whether they tell us that the economy is healthy or whether they do intend on buying the banks up in one sweeping motion, without letting us know beforehand. This podcast made a lot more sense of something that I was unclear about and it actually changed my mind in the end.

As you see I've been taking a very absolutist approach to the idea of lying and deception. I don't think that lying or deception can do any good in a democracy. I think that any problems or sticky situations that we face are symptoms of larger problems and to cover them and only let certain people deal is to be hiding the symptoms. Without knowing the extent of the problems we are facing then how can we really come up with an adequate solution? Transparency and the ability for everyone to have a voice are key to having a successful democracy. By not holding the government to a higher standard and allowing the government to lie, we are defeating both transparency and the ability for everyone to have a voice. I didn't think that there was ever a time when the government ought to be allowed to lie because I felt that since these people are leading our country they should be moral role models and should be held to a higher standard as representatives of us. They are privileged to be representing us and should be ashamed and looked down upon for lying to us.

After I heard this podcast though, I realized that there are very rare but real scenarios in which secrecy should be permitted. I think that it has became a lot clearer to me that if our current administration were to help the banks by nationalizing them, that it would be necessary for it to happen very quickly so that the economy doesn't collapse ahead of time. That is however provided that we realize and see that there is a bigger problem going on and that we all try and figure it out and fix it. This American Life did a good job at pointing out a bigger underlying problem, and that is our lifestyles. It shows a chart comparing our personal debt to the average person GDP and they show the same patterns as right before the great depression. We have unsustainable consumptive lifestyles and this needs to be addressed. If secrecy and lying is ever to be okay, it needs to only be something quick like this, in which the public will soon be able to understand and take action, so we can all try to address the larger problem together. This can't be a situation where we are simply trying to keep mending something that is broken. Before now I hadn't really seen a example of when it'd be okay but now I see that it'd be justified in this rare exception as long as the greater message is taken from this problem.