The Power of Ideas

Zero For Too Many

We are not terribly tolerant of failure.  A CEO who disappoints investors and the markets often finds plenty of time to read by the fireside. A coach or manager who can’t win finds his ears ringing from boos and is soon nothing more than a spectator.  Yet, when it comes to something of real significance, like the overall performance and management of our economy, we seem quick to ignore poor performance.  Surprisingly, we also seem comfortable believing that the captain who ran this ship aground is capable of once again making her seaworthy.  I must admit, I don’t understand why.

Let me first start with our Central Bank.  Under the stewardship of its former Chairman, we were treated to a number of asset bubbles that, cumulatively, eroded the foundation of our economic systemic.  The last bubble, the Housing and Sub-Prime Mortgage crisis, is perhaps emblematic of how we should remember his long tenure.  His successor, a former Fed Governor and Chairman of the Council of Economic Advisors, admittedly walked into this buzz saw.  However, he has not distinguished himself by performance either.

Let’s take a look at the Fed’s current batting average. The housing industry is in shambles; losses in home equity are staggering; foreclosures are occurring at the fastest pace in a generation; the entire debt capital market system is in disarray; enormous writedowns are threatening the stability and viability of many financial institutions; from the peak, equities have lost approximately 15% of their value; the industrial economy is now slowing; jobless claims are exploding; the cost of goods, including many of our basic necessities, is rising rapidly; and, the US Dollar, long the reserve currency of the world, continues to depreciate.  So, as best I can tell, the Federal Reserve’s batting average is zero.  And it is not because they have been to the plate only once or twice.  They have had plenty of opportunities to swing at the ball.  They are basically Zero For Too Many.  I do not want to walk away hoisting all the blame on the Federal Reserve.  Other members of the team have not managed to get a hit either.  The Treasury Secretary, who has oversight of much of the financial and economic system, has a hand in this mess.  So does Congress and a number of other regulatory oversight bodies.

Given the breadth and depth of the problems confronting us, we must recognize that we will not be able to get out of the cellar without making wholesale changes.  The manager needs to go.  The players need to go.  The playbook needs to go.  It is time to clean house.  It will take time and patience, but it can be done.  However, we need to turn to someone who inspires confidence; basically, we have to find a manager with a winning record.  If this were a baseball team, Mr. Steinbrenner would know what to do.


February 29, 2008 - Posted by | Economics, Finance, Markets, Politics


  1. if everyone goes who runs the place?

    also my dad wants to know if you shopped for shoes today?

    Comment by michael r | March 3, 2008

  2. did the fed or treasury secty tell the banks to take on so much bad debt?

    Comment by matt evan | March 3, 2008

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