May 21, 2008
How Wall Street Rules
James Kwak on Baseline Scenario says that Wall Street exercises power over Geithner through cultural capital, not financial capital. In other words, Geithner is ideologically corrupted, not monetarily so. Referring to that long New York Times piece from Monday on Geithner, Kwak writes that:
he has internalized a worldview in which Wall Street is the central pillar of the American economy, the health of the economy depends on the health of a few major Wall Street banks, the importance of those banks justifies virtually any measures to protect them in their current form, large taxpayer subsidies to banks (and to bankers) are a necessary cost of those measures - and anyone who doesn't understand these principles is a simple populist who just doesn't understand the way the world really works.
But the best part of Kwak's long post, which begins by referencing the late great French sociologist Pierre Bourdieu's work on "distinction" -- cultural status -- is this extraordinary dispatch from a former NY Fed employee who sat in on meetings with Geithner:
The other thing I got from witnessing these meetings is that, in support of the cognitive capture theory (as opposed to the corruption theory), given that he was such a careful and deliberative thinker, he seemed to have a good deal of integrity. He respected people's opinions and considered them carefully, and he gave credit where it was due. He seemed to follow a Gandhian leadership philosophy: lead by walking behind."