Over the past few weeks, I've posted a few times about how the economy is lagging largely due to a lack of demand rather than for reasons that the Republicans and some pundits want you to believe (tax policy, regulatory uncertainty, etc). Moreover, I linked to a post by Barry Ritholtz where he sort of debunked a Washington Post column written by Fareed Zakaria where Mr. Zakaria espoused the idea that corporations are hoarding cash because of concerns over Obama's policies.
Well, some follow up to report from Fareed's own show. Yesterday, Fareed hosted a conversation with Robert Rubin (Secretary of Treasury, 1995-99) and Paul O'Neill (Secretary of Treasury, 2001-02).
It seems to me that Mr. Rubin's reputation is in the tank. Other than Alan Greenspan, I'm not sure any individual has suffered such a calamitous hit to their reputation as a result of the economic collapse of 2008 (Phil Gramm & John Thain may be other candidates - but I didn't think much of Gramm to begin with and I think John Thain is still largely anonymous to the public). Anyway, Mr. Rubin didn't have all that much interesting to say. However...
...Paul O'Neill proved to be VERY quotable!
Recall as I just stated, Fareed himself had written an article titled "Obama's CEO Problem --- And Ours" and yet Mr. O'Neill let rip with these comments:
PO: I must say I'm kind of amused by some of the conversation about companies hoarding $1.5 trillion in cash or something because I had a rule when I was in the private sector for 25 years including 13 running ALCOA and that is:
DON'T HIRE PEOPLE UNLESS YOU HAVE SOMEBODY DEMANDING GOODS THAT YOU CAN'T PRODUCE WITH THE PEOPLE YOU ALREADY HAVE
so it seems pretty unrealistic to me to urge people to spend money unless there's a demand that they're not able to satisfy with their existing resouces.
FZ: And capacity utilization... the plants and factories are not at full capacity.
PO: Exactly. Until there's a reabsorption of that latent capacity, people are not going to build new capacity... why would you? It's crazy. It's not a charitable function... if you're running a business to say "oh my goodness, we have so many millions of people unemployed, I should rush out and spend my cash and hire more people".
Later in the conversation, O'Neill, once again just nailing Fareed (probably oblivious to it):
PO: So I think an awful lot of this conversation about (how) Wall St's upset with Obama... it's because people don't have something sensible to talk about I suppose. I don't think there's much merit to that conversation.
Then, O'Neill basically rips Robert Rubin right to his face (once again perhaps oblivious to it - but maybe not because he looked at him when he said it):
PO: And the financial community compounded the problem by securitizing this stuff (sub-prime loans and loans with little or no equity (down payment)), calling it 'AAA', putting it into cyberspace... it's no wonder that we cratered the world financial system. What we were doing was stupid!
(Note: Robert Rubin joined Citigroup after leaving the public sector and was reported to have pushed for the massive conglomerate to take on much more leverage and risk... i.e. they got deep into MBSs & CDOs with his encouragement).
So, there you have it. A former Republican appointed Sec. of Treasury keeping it real. Now, I will add that he stated that he was basically fired by George W. Bush for two reasons:
1) He didn't support the 2003 Tax Cuts.
2) He indicated he didn't believe there was any evidence that Iraq had WMD.
I don't know if he actually wants to be admired by liberals but - fuck it - I'll say it: I can't see any reason I'd rather have Timothy Geithner than Paul O'Neill.
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