Finance

I had breakfast today at the usual table in the usual restaurant with a very smart journalist who works for a large salmon colored newspaper. We both had oatmeal because a guy just can't get enough soluble fiber. 

My friend said that at the moment the most over-used term in Washington is "defining moment." Of course, the reason the phrase-turning classes keep returning to this particular phrase is that they are cockeyed optimists. They keep believing that such a moment will happen and they will begin to understand who Barack Obama is. They don't want to have to grapple with the notion that he has already defined himself. They keep hoping that he is really will emerge from the chrysalis of his learning curve months in the presidency as the glorious butterfly of change everyone hoped he would be in the first place. The fact that there is precious little evidence this is likely to happen doesn't daunt them. They'll stick to their s.o.p. of doing the analysis they want and hoping that reality catches up to them sooner or later.

Personally, I'm getting a little worried. (Actually, I'm kind of perennially worried. Not as bad as my ex-wife who actually believed she was going to be hit by Skylab. But able to nonetheless find the cloud around every silver lining.) For months I have been going around saying this is a new generation of leadership, noting that Obama entered high school after Vietnam and his practice as a lawyer after the fall of the wall (that's the Berlin Wall, for you kids who don't remember). But so far, on key issues he has been acting like he isn't the first of a new breed but that he is actually the last baby boomer.

This may be due to the lack of creativity of some on his team who have ignored Rahm Emmanuel's famous admonition not to let a crisis go to waste and who have failed to carpe the damn diem to make this a transformational moment with regard to finance or health care. (The jury is out on foreign policy and climate.) But whatever the case, as recent polls have shown, the "yes we can" of the campaign seems have just been the prefix to "yes we can keep doing business as usual."

Still, all is not lost. Every day new opportunities arise for the President to have that defining moment and to demonstrate to critics that something resoundingly new is happening.

I was thinking of this last night at the big annual dinner for Conservation International, a terrific organization that has done the math and realized that when it comes to planets we have exactly one. Absent spares, they are focused on doing what we can to keep this one habitable. That was reason enough to show up. But the food was good and it was a great group of people. 

(It attracted a much better bunch than Michele Bachmann's latest effort to teabag America, the anti-health care rally that reputable news organizations said had 10,000 attendees and that Fox News said had 40,000. It says something about Bachmann -- no relation to 70s Canadian rockers Bachman Turner Overdrive except to the extent that we might all hope she soon joins them in obscurity --that at an event co-organized by a Republican Rep. named Steven King and bringing together some of America's most deranged wingnuts that she was the scariest person in attendance.)

Sitting not 20 feet from me at the CI event were Energy Secretary Steven Chu, White House Chief of Staff Rahm Emanuel, actor Harrison Ford and many, many vegetarians. Chu gave the main address and by any traditional Washington standards the remarks were remarkable. On the one hand the speech lacked any effort at soaring rhetoric or even structure for that matter. His delivery was uninspired. The talk came with 30 or 40 often very complex slides. In other words, we got remarks from a Nobel Prize winning scientist who was interested in facts and thoughtful analysis. He was the un-orator and a welcome, refreshing and even urgently needed alternative to the usual DC gloss. The point: the climate crisis is real and that the President is committed to addressing it and that if we harness creativity, science and engineering we can solve the problem. Oh ... and if we don't the Chinese will get there ahead of us and they will be the be neficiaries of the first big tech boom of the 21st Century. 

Listening you thought, "that's what I'm talkin' about!" But then reality sank in when I saw Rep. Edward Markey, co-author of the House climate bill, walk by and all the prognostications of a weak deal on the heels of a cobbled-together face-saver in Copenhagen came rushing into my brain. This is the great issue of our time (you can debate the trajectory of global warming all you want...you can't debate what's happening to the polar regions or the glaciers of the Himalayas). And unless something changes we are going to fumble the ball forward in the hopes that we can pick it up at some point in the future.

Obama could change that. As Al Gore said today, he could go to Copenhagen. Indeed, he should go there. If he could go for the Chicago Olympics ... supporting what's little more than a global marketing scam ... then presumably he can go to show that something like saving the planet is worth the trip and even the risk that things won't all work out so well. Two-thirds of Americans under 30 see this as a critical issue. Only the boomers and older are undecided. The president needs to pick a team. Is he with the next generation or the last one?

Same is true with China and his upcoming Asia trip. On this front, I frankly think he is trending in the right direction. I think that Obama, to paraphrase foreign policy expert Elle Woods, recognizes that Asia is the new Europe. Furthermore, after decades of pundits speculating about this, I think he can make this real with a productive trip to the region this month. 

The key: the turnabout is fair play meeting of the year. After 10 months at least significantly defined by how the Obama Administration is dealing with the banking community, now the president has to go meet with his banker. They have a full agenda: a deal on climate, collaboration on Iran and North Korea, the coordinated soft-landings of our national currencies. Pay more than lip service to the importance of the relationships ... produce real progress on these fronts ... because actions really do speak louder than words ... and he passes another critical test when it comes to proving this administration is about something new.

Two final related points:

At a meeting I was at with a bunch of big institutional investors in Chicago this week, the scenario for world markets that many were most concerned about was that of a failed Treasury auction ... something they felt was more plausible now than at any time in memory. The aftershocks for the global economy would be pretty darn grim. Avoiding this nightmare is perhaps job one in the U.S.-China relationship at the moment.

And on the climate issue ... as on health care ... I am starting to become embarrassed to call myself a centrist. The folks in the middle are among the greatest obstacles to the kind of reform that is really critical to demonstrating it is no longer business as usual in Washington. (After the entire Republican Party, that is.) My only consolation comes from the fact that most of these people are not what I consider to be real centrists.  They are actually "middle-ests", splitting the difference between left and right. True centrists don't take both sides and divide by two, they use every tool at their disposal to advance the national interest, regardless of what labels might be hurled their way. 

In short, we need courageous, centrist, post-Baby Boom leadership ... and absent a defining moment or two in this direction, all the moments that have come before will do the defining. Fortunately, in times like these, potentially defining moments crop up with alarming regularity.

Ron Sachs-Pool/Getty Images

Have they no shame? Have they no sense of responsibility?

Perhaps by now nothing that Wall Street does ought to shock us. After all, these were the people who told us to trust them with our life fortunes when even they did not know the risks to which they would expose them. These were the people who felt it appropriate to game the U.S. economy, force families into the street and then claim big bonuses for their actions. These were the people who told the U.S. government to stay out of their hair ... right up until the moment they needed a government handout. A when they didn't need the cash any more, what's their response? To kick the people who helped them back to the curb.

Come on, Baby! Didn't I show you the love when you needed it? Wasn't I there for you when no one else wanted you? You weren't so big and powerful then, but I gave you what little I had. I mortgaged everything I had to get you back on your feet. I crawled right into bed with you and held you all night long. And what happens the minute you get a little wind to your back? You're out the door and you don't even know my name!

It's people like this that guarantee there will always be country music, the blues and drunks in bars getting the lyrics wrong while they sink into their beers. You know what I mean, those songs like "You Done Me Wrong" or "I'll Never Get Over You (Getting Over Me)." Or maybe what I really mean are songs like "Dirty Pool" or "Chain of Fools." Songs about betrayal and abuse.  Muddy Waters:

Now look what you've done

You left me here, the lonely one

And all I could say, is look what you've done

A broken heart, a weary mind

And (just for a) few dollars baby, (every) time

I once had a dream, but now I have none

You've taken your love and see what it done

Oh sure, I never expected that the princes of Wall Street would actually change their stripes. I'm not talking about disappointment that they are not voluntarily foregoing the big bonuses for a year or two until the country is back on its feet. I'm certainly not suggesting that I ever truly expected them to use government resources to actually start lending again or to really take major steps to keep home owners in their homes. Taking smaller risks? Forswearing complex investment strategies that only benefit them while putting everyone else at greater risk? Expecting that would be like expecting a pride of lions to go vegan and open a nursery school for baby antelopes.

No, I just thought that they would do the right thing in the one way that it is surely in character, that they would say thanks in their own language, the language of money. But here President Obama is hosting a fundraiser tonight in New York City, right in their own backyard, and according to the New York Times, Wall Street is snubbing him, not forking over. In fact, according to the story, Wall Street donations to the Democrats are down since, oh, I don't know, back when the Democratic controlled Congress and the Democratic President were saving their bacon. 

Apparently,the Masters of the Universe have concluded that the same Dems that bailed them out are now actually considering reforms that might mitigate risk and save the taxpayers for having to dig deep into their wallets to ensure the Wall Streeters could keep sending their kids to Dalton and Spence. And so no more soup for you, Barack. 

Personally, I think they miscalculate. They finally may be undone by their greed. Except it won't be because they stole too much or blew up the international economy. It'll be because they stopped paying off the people who set the rules. And nothing puts a politician back in touch with his principles like a failure to keep up payments by the banker to whom he has mortgaged them.

So it is that the bankers of the most consequence at tonight's fundraiser at the Mandarin in Manhattan won't be the ones the news crews will be fussing about as they head into the $15,000 a plate gala. Rather they will be the ones who actually who don't show up ... and who, in so doing, "free" the President and the Congress to get aggressive about reforms in the way they should have been all along.

Perhaps that old Muddy Waters tune will go through the president's head tomorrow as he thinks back on his visit to the big city tonight:

Saw you last night, I was movin' around

With your new toys, paint the town

But it is ok, keep having your fun

Because someday, you'll pay for all you've done

And if you ask me, it couldn't happen to a more deserving bunch of guys.

Mark Wilson/Getty Images

It used to be that the Chairman of the Fed was regularly referred to as the most powerful man in the world. This was back in the day of Alan Greenspan and, at the time, it seemed it was in spite of the fact that people seldom understood what he was saying. Subsequently, we learned it was precisely because of the fact that we didn't understand what he was saying. And then, subsequent to that, we also learned ... largely because he had the good grace to admit it ... that he himself didn't understand what he was talking about.

The downward spiral of Greenspan from philosopher king of the global economy to mere mortal caught his successor, Ben Bernanke, in its vortex. He was handed an economy in which the doors and wheels were coming off as we drove and nothing like the power he needed to deal with it. Indeed, as the current crisis unfolded we saw that the Fed chair was not the most powerful job in the world, that title was reserved for current or former ceos of Goldman Sachs. This must be so because for a while people wanted to fire Bernanke after one term in office primarily because he had inherited a mess whereas when you screw up the global economy as the current or former ceo of Goldman Sachs, people want to help bail you out or make you Treasury Secretary or both. 

I kid. It is highly unlikely any ceo of Goldman Sachs is Treasury Secretary again for quite some time. Possibly years. 

And Bernanke did earn some of the flack he got initially, largely because he was swept along in the groupthink of Washington economic honchos, buying into the "leave it to the markets" regulatory philosophy that got us into the mess we faced for far too long. But when it became clear that approach not only did not work but that real change was needed, the quiet academic stepped up and became perhaps the leading dependable voice of reasonable change. That's why there is a consensus emerging today that Bernanke, who against all odds seems to be restoring the notion of Fed Chairman as Washington's most trusted economic oracle, should be reappointed when his term in office ends. Steven Pearlstein, in a typically thoughtful piece in today's Washington Post, gets on this bandwagon and adds a few suggestions as to how to modify the Fed (as well as an absolutely justified endorsement of David Wessel's terrific new book on the economic crisis called, "In Fed We Trust.")

The growing momentum of this bandwagon has put in doubt the once conventional wisdom that Larry Summers had accepted the reins of the National Economic Council as an interim step on his way to the Fed chairmanship. But Summers has done such a good job elevating the National Economic Council to unprecedented prominence in the day-to-day operations of the White House and has so effectively earned the president's trust, that it is now almost certainly better for all concerned (including those of us out here in tax-payer land) that he stay right where he is. If there was ever a situation that called for the president to have a strong economic quarterback at his immediate side in the White House, it is this one and in Summers, Bernanke, and Geithner, Obama has got a first-rate team that has the number one criteria you need for success in each of their respective jobs -- the trust of the president.

Now, as readers of this blog know, I don't think every move they have made is perfect. I am disappointed by the speed of regulatory reform here in the United States and internationally. I think they have not done enough to address some of the underlying causes of the crisis such as the creation of massive pockets of risk in the global economy related to the development of opaque derivatives markets. I think they have cut deals with Wall Street that are too sweet for the bankers. I think they have spent too much, bought into ideas (like tax cuts) in the stimulus that amounted to political pandering and they sure haven't given the president the kind of clear guidance he needs on how to sell the health reforms that are perhaps the economic reforms we most urgently require.

That said, their job was first to stop the bleeding and to stabilize the patient. It was no easy task and what they did in terms of swift and sweeping intervention, while imperfect ... almost necessarily imperfect given the speed at which they were operating ... has seemed to work. I still fear a second dip of the recession ... the "W" rather than the "V" shaped recovery. But today's papers show Germany and France creeping out of recession. Japan may too. Economists (a group with limited credibility at the moment, I must admit) seem to think we are at least plateauing here in the United States too. So I think it is fair that this team get credit for their efforts. 

Frankly, I hope that the initial success they seem to have achieved emboldens them. If anything they have seemed too deferential to the Congress and to Wall Street and once stability seems assured aggressive measures to rein in the budget deficit, further strengthen regulatory oversight and strengthen international regulatory mechanisms will be called for with the same urgency that stimulus measures were called for earlier this year. 

We have seen the dangers of too much deference to the markets, of regulatory indifference, of not believing that government could or should play a significant role in protecting our national interests by identifying and mitigating market risks with broader macro or social consequences. I hope the president makes the early decision to keep everyone where they are so that they can focus on the next wave of reforms that are so urgently needed.

(And to be clear, does the above actually suggest that I want a bigger role for governments in market regulation, stronger global governance mechanisms, tax increases if we need them in addition to substantial spending cuts and that I am a fundamental believer that government also needs to play a much expanded role in ensuring sustainable health care...which optimally would be through a single-payer system that is not even on the table at the moment ... and preserving the environment ... ideally through a simple, straightforward and substantial carbon tax? Yes, it does. Start rolling out your labels if you would like, but if the recent crisis has taught us anything it is that we can't afford the reflexive rejection of government solutions where they are needed ... rather we need to rise to the challenge of figuring out how to make governments more effective in these critical roles that only they can play.)

Spencer Platt/Getty Images

As Barack Obama trotted the globe toward the end of last week, back home a story on the technology front was creating a bit of a buzz. Google announced its plans to introduce a new operating system called Chrome OS that tech sector experts saw as a frontal assault on Microsoft. Chrome would go after Microsoft where it lived, attempting to offer an alternative to its Windows franchise that has dominated since the dawn of the PC era it helped make possible. But Chrome would employ a new paradigm, the idea the future of computers is in harnessing the power of the web, that vast computing power, storage capacity and other resources can be found in the "clouds" of computers that are linked together in the Internet universe. 

Chrome's full potential is far off. It will first only be introduced for netbooks later this year. Laptop and desktop versions are many months away. But reading about the announcement and talking to a bunch of computer users, I came away with the sense that the market was viewing this introduction with great hope.

Why? Well, in large part because Microsoft is seen as having become a complacent bully. Microsoft was a tech darling in the 1990s, a symbol of American ingenuity and a likely engine of future American growth. When its market capitalization grew greater than that of GM, it made headlines. Ironically, this ascendancy came at the same time as America's post-Cold War assumption of its role of sole-superpower. In the mid-90s, America and Microsoft were clearly the future of the world. 

Then both started to abuse their power. America, in the wake of 9/11, undercut the international system it built, rhetorically flaunted its hallowed values and then crudely and repeatedly undercut them in its behaviors. Microsoft went from a symbol of the garage-launched entrepreneurial energy of the tech revolution to being a ruthless crusher of competitors. In fact, it became so dominant, that it felt it could foist on the American public products that didn't work, were full of bugs, were vulnerable to security breaches and, as in the case of Vista, should never have been released in the first place.

Microsoft blew it. Today, consumers and specialists alike are rooting for it to fail. (Hence the love affair with Apple which is seen as the resilient insurgent, the better unconventional choice, even in its advertisements.) Fortunately, for tech consumers worldwide, the growth of Microsoft and the tech sector led to the birth of competitors like Google (founded just over a decade ago.) Google itself is now so large that many wonder if it will become complacent or employ ever-more unfair competitive practices. But it is also big enough that it actually has a chance to undo Microsoft's stranglehold on the inside of the world's computers (of all sizes and shapes), perhaps the most important real estate on the planet earth today (which is appropriately largely virtual).

Under George W. Bush, America also blew the opportunity to consolidate the position it achieved as victor of the Cold War. For years now, many have been rooting for America to fail as well. Certainly, this was never so clear as in the calls for an end to American capitalism during the peak of the financial crisis. But here is where America's fate has thus far diverged from that of its industrial doppelganger Microsoft (the fall of GM, Microsoft's predecessor in the flagship company role, echoes and amplifies many of the points made above...it too grew complacent, ignored the consumer...and invited the competition that has crushed it.) Because while the American brand endured untold damage during the previous administration and continues to be damaged with each passing week of this economic crisis for which we are seen to be responsible, there is still no alternative brand with anything like the appeal of our system, our values or, even today, our track record for creating opportunity for our people.

There is No Alternative (TINA) was a favorite watchword of Margaret Thatcher, used by her to indicate that market capitalism was the only way, and used by her supporters to indicate that she was the only viable option available for saving Britain from the slough of despond it had entered in the 70s. Her enemies were the socialist ideas that had grown so popular in Europe in the post-war era. Soviet communism cooperated by failing during her years in power. And she, of course, spoke for a perspective that was not just British, but was embraced by her soul-brother Ronald Reagan. In a way, it all seems very old-fashioned now. That world seems far away with the Cold War over, the G8 on its last legs, emerging powers rising, America's brand so damaged. And yet, search the horizon. America's greatest ally remains TINA.

Barack Obama can lose his star luster and conduct only marginally effective, workman-like diplomacy as he did last week, and still, post-Bush, post-Iraq, post-Guantanamo, post-Lehman America remains at the center of every critical discussion, the most important player, the basis for all comparisons. China, the rising rival, gains its power from descriptions of how it will have an economy equal to America's within decades...but it is no real alternative. Its political system is defective, fraying at its ethnic edges. Its economic growth is admirable but when we get to the far side of this crisis and the world is depending on China to pick up the slack in the place of diminished American demand, we will see that there are perhaps 50 million Chinese who are anything like Western consumers, a true addition to the market roughly the size of a mid-sized European economy. China with Russia and others seek to sell an alternative to the dollar and the response of world markets is deeply skeptical. Other revolutionary voices for the most part echo the failed approaches of the past.

Had there been a good alternative, now would have been a great moment for it to emerge. In fact, it is perhaps the most telling indictment of the alternatives that are out there...politically, economically, socially, in terms of world leadership...that after such a bad streak, that nothing is really taking hold as Plan B...which creates a terrific opportunity for Barack Obama and his team. We can learn from the Microsoft and General Motors examples. We can seek to adapt to new realities. The trick is going to be convincing the world that a United States that grows at 2 percent a year (which may well be the average for the next 5 years) offers a better approach than a China or an India that grows at 10. Or that the United States offers a better way of life for its people or is a country that deserves the leadership role it has.

It is clear to me that absent a strong recovery, real healthcare reform that meets the needs of all Americans, genuine leadership on climate, and an effort to address the flaws in our system that are exacerbating inequality, sooner or later a weakened, necessarily more inward looking U.S. will find that TINA has flown the coop. It is a telling irony that left-leaning development advocate Susan George offered as a successor to TINA, TATA...which means "there are thousands of alternatives" but also echoes the name of the Indian entrepreneur who now owns the auto brands that were among the British industrial flagships of the Thatcher era (Jaguar and Land Rover) and is the producer of the Nano, the small car designed for the emerging market demands of tomorrow. It is a reminder that things do change and that history suggests that almost certainly there will be alternatives.

But with some luck, America can play the role adopted by the innovators who last at the top, resisting the complacency that TINA's love brings and by seeking to become the even better alternative to ourselves the era requires.

Sean Gallup/Getty Images

Somebody needs to do a new wiring diagram for Washington. Because much has changed and much is changing about the way power and influence flow through this town and while some of it is related to having a new president in place, some of it is linked to other technological, political, and social trends. In fact, while motives and many techniques for getting things done in Washington might look very familiar to the old time fixers and back room pols, much would be as alien as a lunar landscape.

Here are just a few random observations from the past few weeks that lead me to this conclusion:

• The influence of the business community is at a low ebb

The stark reality is that there are fewer business people at senior levels of this administration that at any time in decades and the Obama team is much more plugged into other interest groups: NGOs, academics, career politicians, lawyers, regulators, etc. What's more big divisions are emerging within the business community as some old school types hold on hoping that 2010 brings a reversal of fortune for the Democrats while others are being more proactive on issues like health care, energy and climate policy, seeking a seat at the table as a sea-change comes to the public sector-private sector relationship and underlying principles in those areas.

• It's even worse than that for some groups

It used to be that energy and climate policy in America (and a lot else) was heavily influenced by groups like big oil and the auto industry.  Now, as one senior energy executive put it to me, "we just don't have the access we used to. The American Petroleum Institute is completely discredited in the eyes of most of the people in this administration. We can't get in to see anyone."

As for the allies in the auto industry, well, the auto industry ain't what it used to be. And what's left is more heavily dominated by union voices than ever before (when it isn't guided by the interests of the bureaucrats who are in charge of managing the political capital the president has invested in saving GM and Chrysler). The old one-two punch of two of America's most politically powerful industries is gone.

• Traditional media are being trumped by new media

Again, this is hardly news unless you've been sleeping in a cave somewhere for the past few years. But it is really striking to me how in the recent past places like Politico, Real Clear Politics, the Huffington Post, The Daily Beast, Drudge, the political blogs and even sites like this one are driving the buzz. Look at the links between what's talked about on broadcast media and where the idea started and these days, more often than not, it isn't the op-ed writers any more. It's palpable in private conversation. Want further proof? From the White House to local embassies, there is a new, concerted focus on shaping web opinion.

• Most think tanks don't get it and are paying a price

Most of the people in the Washington policy community don't seem to get these changes and, as a result, they are losing influence. Most think tanks have lagged in their adoption of new media and when they get on the bandwagon they are doing little more than creating web-based newsletters and channels for releasing old fashioned papers. They still view policy ideas as inert products to be released every so often and they don't recognize the on-going, dynamic, more inclusive nature of the modern policy influencing process. Compounding the challenge, some of the most influential think tanks have been decimated by losses to the administration (Brookings, CAP, CNAS) creating a paradox: at the moment of their greatest influence they are least able to take advantage of the situation. Personally, I think that any think tank that does not realize their entire model of membership, communication, collaboration, fund-raising...even their role in life...needs to change is on a trajectory to irrelevancy.

• Power is shifting and settling in new ways in the national security apparatus too

State Department types have long lamented the gradual shift of power to the NSC over the past several decades. But 24 hour news cycles have made everything political and thus relevant to the White House and it's only natural that it becomes the locus for most big decisions. But within this several-decade-long trend a new trend has emerged. Power continues to increasingly shift to the White House...but within the White House, the shift is away from the NSC per se and more toward the inner office of the president. This was a trend begun during Bush with the outsized role played by his vice president. But it has been maintained...though in a different form...in this White House with a super-engaged and confident president at the center of everything, as the main foreign policy spokesperson and with his closest personal political advisors playing an outsized role in many policy decisions. Rahm Emanuel may be the most powerful chief of staff since Sherman Adams. David Axelrod, Pete Rouse, Greg Craig, and the vice president and his staff are also very influential as are folks like Dennis McDonough and Mark Lippert more thanks to their personal relationships with the president than their official titles at the NSC. 

• Power is shifting within the diplomatic community

Honestly, I think that power is generally shifting away from the diplomatic community. Ambassadors are superfluous as direct contact between higher level government officials becomes so easy and commonplace. Embassy row is a destination for cocktail parties only these days in Washington and a kind of vestigial limb reminding us of the way things worked back in our parents' day. But even within the diplomatic community, influence is shifting. The fact that the BRIC ambassadors meet once a month to coordinate policies is a sign of this shift. Ambassadors of traditional allies like those from Europe and Japan are less significant. The Chinese ambassador, because of the formalities involved in communicating with that government remains more significant. Colombia's ambassador used to be very important. No more. Mexico and Brazil are really the only two Latin ambassadors that matter any longer.

• Washington is now the financial capital of the United States

It's no small thing that we have created the world's biggest sovereign wealth fund to pull us out of the economic morass...even if it is the first such fund entirely debt-financed, and even if the stimulus money is only trickling out. (If Viagra stimulated as slowly as the government's package, Pfizer would also being administered by the White House by now.) But given this newly expanded role of the government, the people who administer these funds at cabinet agencies have become extremely powerful and on many visiting business peoples' must see lists.

These are just a few anecdotal observations. They understate the impact of new media on politics and influence in Washington. And old money politics still remains in place far more than one would have hoped. In some parts of Washington...on Capitol Hill, for example...dinosaurs and Paleolithic ways still rule. But my sense is that if you were to make a list of the 25 most truly influential people in Washington...particularly on the media and policy community side...you would see a new and surprising array of faces. A subject for another blog perhaps. 

TIM SLOAN/AFP/Getty Images

Maybe the problem in the United States isn't that we're paying our business executives too much. Perhaps it's that we pay our government officials too little. 

The Obama administration has made headlines this week by appointing yet another czar, this one to ensure we don't pay too much to the executives of the financial institutions the United States has bailed out. They have also made noises about trying to tackle the broader issue of executive pay in the United States. The second point is idle posturing that almost certainly will amount to little constructive change. The first has already sent the companies we bailed out scurrying to the exits of the TARP program and it will be a while before we see whether this is a healthy step, getting them off the dole, or an unhealthy one, with institutions hopping out of their hospital beds before they were fully cured. I also can't help but wonder if cutting executive pay is the best way to attract the kind of brains and efforts that will be needed to fix our busted banks.

Meanwhile, I have arrived in Singapore, home according to one count, of the 30 highest paid government officials in the world. And trust me, given the extraordinary success this city state has enjoyed, none of the people with whom I met today were complaining that those officials were overcompensated. This country wants the best minds in the government and recognizes that they have to pay to get them there otherwise they go work in the financial community, sell their souls and ultimately add to the overcrowding problem that is currently one of the biggest social issues facing Hell.

Come to think of it, the overcrowding in Hell probably plays directly into the hands of management down there. I know this because I was in Mumbai airport last night. And for all my enthusiasm for India, Mumbai airport, thronged with people as the late night flights prepare to depart, hot, fetid, and chaotic, would have had Beezelebub feeling right at home and Hieronymus Bosch reaching for his paint brush. In fact, I think I may actually have seen the Prince of Darkness himself there. He was manning a security line and he gave me such a thorough pat down that I think we are now engaged.

It would have been unbearable were it not for the staff of Singapore Airlines who met us, mere ticket holders albeit of premium tickets, at the door and whisked us through the crowds and ultimately onto the plane. And once on the plane, I knew exactly how Dante felt once he left Virgil behind and had reconnected after all those years with his old squeeze Beatrice. 

Suffice it to say that it does not appear that Singapore Airlines is even in the same business as American Airlines or United. From the meticulous, exceptionally well-appointed aircraft to a seemingly enthusiastic commitment to service, the airline that was one of the first of the businesses created by the Singapore government when it gained its independence in 1965, is achieving its strategic goal. It makes you want to travel through Singapore on every flight. Treat me like they did last night and I'd be happy to have a Singapore Airlines connection on my next flight to New York from DC. Especially when the only other option is travel on run down U.S. airlines whose flight attendants seem to have been trained under some footbridge somewhere by a particularly obnoxious family of trolls. 

Then you arrive at Singapore's Changi Airport and you are powerfully reminded that the excellence of the airline is not a fluke. This is the best airport in the world, spacious, efficient, and attractive. As such, it is the perfect preparation for Singapore itself, almost certainly the best run political entity on the planet. Admittedly, the country, led from the start by the man who is now known as its Minister Mentor Lee Kwan Yew, has practiced what I would characterize as constrained form of democracy but few places have ever so compellingly made the case that what is trade away in terms of the occasional citation for spitting gum on the sidewalk is more than made up for in a society that is prosperous (Asia's second richest), innovative, and safe.  

It is a government that has led the way by behaving in many ways like a corporation, taking ideas like competitiveness and strategic planning seriously. (At dinner tonight with a senior business executive who is one of the country's great entrepreneurial success stories, she said, "In the beginning, in Singapore, the state was the entrepreneur." And that was said with a genuine appreciation for all the state achieved in that role.) Even in the midst of a global recession it has been seen as not just responsive, but creatively responsive, promoting retraining of workers and focus on new growth industries. 

Part of the credit must go to its unique system of senior government official compensation. Ministers are paid via a formula: two thirds of the average of the eight highest salaries in six key professions (lawyer, accountant, banker, multinational executive, local manufacturer, and engineer). As a result in recent years the president and the prime minister have made in excess of $2 million a year in salary and other ministers in excess of $1 million. The result is that many of the best minds will be found in the government, zero corruption and terrific results. Want an example of the innovation? The president, prime minister, and ministers took an almost one-fifth pay cut this year because of the recession. What? Accountability among public officials? Real incentives? Imagine the loud "gak" you would get out of the U.S. government as they choked on those ideas. 

I could go on regarding the innovation here, and perhaps I will tomorrow, but while we're on the subject of incentives, one last thought. Yesterday, I noticed that in exchange for taking those 17 Uighur terrorists, Palau was getting $200 million from the U.S. government. That's $14 million or so per terrorist. And incentives being what they are, I immediately concluded that I want some of that terrorist action.

I will take 100 of them or however many they have left. 100 will fetch me $1.4 billion. With this I will spend maybe $200 million on a small island on which to house them (and my appropriately comfortable warden's compound). Maybe I could buy Devil's Island from the French space agency -- which apparently currently controls it -- for about that much. Then I would set aside another $200 million to care for the prisoners (at $50K per year for an average of 40 years each that would cover it). And I'll pocket the billion as my fee. Secretary of Defense Gates or his representatives can contact me at FP to work out the details.

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If you are looking for a unifying theme to describe the overarching policies of the Obama administration, you will find it coming from the least likely source: Hillary Clinton's State Department. I don't say the source is unlikely because HRC is doing a bad job. She's actually done very well. It's just an unlikely source because for reasons that have to be more than an accident, the department itself seems to have become the equivalent of Dick Cheney's undisclosed location. It, and particularly the Secretary, is off the radar. Everyone in DC these days is talking about how she hasn't appeared on a morning show. The Hill had a piece the other day on "The Incredible Shrinking Clintons." Richard Holbrooke has a much higher profile than his boss. Certainly, Bob Gates has had a higher profile and even the nearly invisible Jim Jones has gotten more press recently if only because of the leaked articles about some of his early (and I believe overstated) missteps.

Anyway, the theme and the metaphor that ties so much of what has been going on is "hitting the reset button," made famous when just such a button was delivered, mislabeled, by the state department to the Russians who were the first focus of what has become reset-mania. In addition to attempting to restart that relationship with our former arch-enemies, you can see evidence of the same mentality everywhere. We are attempting to hit the reset button for GM and Chrysler by pushing them through the bankruptcy process (the same one we spent tens of billions to avoid months earlier). 

Today President Obama heads to the Middle East to hit the reset button on our relations with the Muslim World. Problems in Iraq and AfPak? Hit reset. Frayed alliances? Reset. Economy in the tank, Wall Street a mess? To many observers the impulse has been less toward sweeping reform and more toward getting things back to the way they were (with modest changes). In other words: reset. Demonstrating that no issue is too marginal or too antiquated for the focus on resetting, you need look only 90 miles away to Cuba. We even seem to be approaching health care by trying to hit the reset button to take the debate back to the days before the Clinton health care plan cratered and set health care reform back for more than 15 years. 

Of course, the impulse to hit the reset button is pretty natural given the toxic nature of many Bush-era policies. And the reset button metaphor works for all of us in the information age and is undoubtedly better than suggesting that we cleanse ourselves of all the Bush dirt and toxins by climbing into the shower together.

But as any computer user knows, hitting reset doesn't work all the time. It's kind of magical when it does...to the extent that it seems inexplicable to most of us. But it would be a big mistake to make too much policy based on the notion that President Obama has -- to mix metaphors slightly -- the equivalent of the Fonzie touch, the ability to make a jukebox (or Bushed-up policy or relationship) work with a slap to its side. (I don't think it's mixing metaphors that much. The Fonzie touch is the '50s equivalent of the reset button.)

But here's the problem: if your computer is broken, the motherboard is fried, the demon viruses are at work on your data -- the reset button doesn't work. Same is true with broken companies, broken relationships, and broken global economies. Sometimes you may get signs that things are spluttering back to life but without real, material changes the problems will re-emerge. Sometimes you will get nothing at all.

In this respect, going to the Middle East to "restore relations with the Muslim world" sounds great in the reset context...Obama certainly achieves the main goal (and to some extent the primary deliverable) of Resetism, he demonstrates he is not George W. Bush. But it is unlikely to do much to actually fix the problem. It may help, to be sure. But many of the biggest problems that we have with regard to the Muslim world aren't actually problems we created or exacerbated. Neither Saudi Arabia nor Egypt, the President's two regional destinations, are anything like democracies...or for that matter are they home to anything like enlightened governments. Economic mismanagement and corruption are chronic and widespread and a bigger source of regional instability than many other issues that achieve more prominence. They are home to human rights violations, abominable treatment of women and tolerance of radical factions who are as big a threat to the Arab world as they are to the U.S. or any of our allies. These places are breeding grounds for risk to our interests and even doing the right thing and underscoring that the U.S. embraces Islam and all peace-loving Muslims, doesn't get down to the hard business of resolving tensions between the Arab and Persian worlds, the Sunnis and the Shiites, radicals and moderates, reformers and authoritarian rules or Arabs and Israelis. 

Further, we need to remind ourselves that we are not the primary cause of the problems we face. We may have exacerbated some. There is no defense for Abu Ghraib, Guantanamo, or for the hundreds of thousands of innocents who died thanks to our invasion of Iraq. But neither is there any defense for 9/11, terrorism directed at anyone, or state-supported hate mongering. Our support for Israel may inflame the Arab world but even when we acknowledge Israeli policy failures or brutality, even when we condemn them and work against them, we are only addressing part of the problem. 

As a consequence as President Obama wings off to the region, it heightens my sense that there is as at least as much reason for the leaders of the Muslim world to come to America to restore relations with us, to make amends and commit to change, as there is for the President to go there and do so. Indeed, there is much more given the level of dysfunctionality within their societies and their long record of miserable treatment of their own people.

Similarly, the reset button won't fix GM or Chrysler. Admittedly, doing what we should have done six months ago, letting the companies go into bankruptcy and be stripped down to more efficient pieces will help. But U.S. ownership certainly will not (and has not...save for all that writing of big checks.) Merging with Fiat probably won't either. I think the odds are pretty high that we will look at the U.S. monies spent on the auto industry as the most expensive golden parachute in history, designed to make the demise of failed companies as painless as possible and not really terrible effective at identifying, preserving or fostering value within either of them. There is a reset hope in all this -- strip 'em down and let them regrow like a backyard shrub-but without creativity and truly new thinking, neither of which will come from the government or the labor unions who have gained too much sway in all this given their roles in creating the problem, these efforts will likely be frustratingly costly and unsuccessful. 

The list goes on. If there were core problems associated with the creation of new invisible unregulated risks in the global financial systems, even restoring growth to markets and the U.S. economy is not a fix. The risks will remain until addressed. To restore US-Russia relations really requires a fix in Russia and not here. To restore U.S.-Cuba relations to their rightful place in our foreign policy, we need to transfer it to the Deputy Assistant Secretary of State responsible for the Caribbean, normalize, and start treating like we should in much the same way we handle Jamaica or Trinidad and Tobago. In short, to achieve the ambitious goals the Obama administration has set and the American people seek, we need to rethink, reinvent and remember where the real problems lie...and not just hope that the world is as easily rebooted as our PCs. 

FABRICE COFFRINI/AFP/Getty Images

Now that all the ecstatic moaning of the press surrounding the president's first hundred days has subsided, we can return our attention to the fact that things are worse in Pakistan, Afghanistan, and Iraq, the global economy is still deteriorating, the U.S. deficit is still ballooning, and I am experiencing sudden dizziness and a slight fever (although I think it is just from listening to replays of the Vice President's remarks on the Today Show this morning.)

So, to stay on top of the news, let's start with a few questions about the auto industry:

Is anybody stopping to work the numbers on this Chrysler deal? How much did we have to pay for the privilege of having Chrysler go bankrupt in springtime rather than winter? Isn't it true that bankruptcy was always the best outcome and that this was just a very costly stall to make the unions feel their members were being taken care of?

Aren't the unions getting a disproportionately large chunk of Chrysler and GM at the expense of creditors and shareholders? What'll happen if the companies go belly-up again in a few years and the unions lose the stake they got in exchange for the pension money that they were owed? (Hint: The taxpayers will cover it again after having shelled out a fortune now to protect them. )

Wouldn't it have been cheaper to let the companies go bankrupt, sell off their good assets, pay off the workers who got fired, retrain them and invest the billions in incentive programs to develop new, green transportation technologies? And are the unions really the people we want to be the dominant owners of these companies? Do we really think it is either right or in our collective interests to reward union leaders (as opposed to rank and file workers) who played a central role in forcing into place the unsustainable business models that essentially killed GM and Chrysler?

Isn't a pattern becoming apparent here? Can't people see that the deals the government cuts -- whether it is forcing Merrill and B of A together or "bailing out AIG" or the auto deals -- are actually lousy? Isn't anyone other than Ken Lewis going to argue for a discussion about what is the appropriate thing for the government as an owner to do when the national interest conflicts with their fiduciary responsibilities to other shareholders? 

And when is anyone going to notice that the "white knight" that is going to save Chrysler is one of the world's crummiest car companies, one just back from the brink itself and that they are getting their stake in Chrysler for a song? Or that much of the benefit from this deal will accrue to stakeholders outside the U.S.? Also, for the fun of it, ask yourself if we would be doing all this to secure this deal if the purchaser in question were Chinese car manufacturer Chery? (Hint: we would not.  Even though it would likely be a much better deal for all concerned.)

Another question is who are the creditors and if any of them are financial does the U.S. have a stake in any of them? Is it using its clout in the financial services sector to influence the outcome of the auto deals? If so, how, with whom, and in whose interests in the long-run?

After we get answers to these questions, I will offer my opinion of the deal. In the meantime, as with everything else right now, I am just hoping for the best (and, like the proverbial Bavarian at lunchtime, expecting the wurst.)

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