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Fair Question

We don't mean to diminish the necessity of the policies or their ultimate prudence. Bashing Tim Geithner has become a cheap media sport. What, after all, are the alternatives to the current course of action? Perhaps nationalization (or temporary receivership or whatever you want to call it), but that's riddled with logistical complications and not politically plausible at the moment. And there's even a non-trivial chance that Geithner's proposed fixes for the financial system might actually work.

Constructing such unprecedented state interventions--on the fly, without a full grasp of circumstances--is like trying to solve Fermi's paradox on a live game show with the 30-second clock ticking. Given the stakes involved, the first question asked of any policy must be: Does it have a shot at staving off greater financial catastrophe? But the other crucial question is whether it's fair. And, while some on the left have conflated the two--arguing that a policy can't work just because it isn't fair--that shouldn't be a pretext for erasing fairness from the calculus altogether.

It's hard to know how much questions of fairness have been on the administration's brain. The fact that it is proposing the most aggressive regulatory regime in generations is certainly a good sign. But the administration's public rhetoric-- a significant force in shaping the conventional wisdom that will emerge from this era--has been strangely tentative when it comes to wrestling with these questions about the beneficiaries of government policy. According to The Wall Street Journal, the president removed language from his February address to Congress that stated the obvious truth: "Americans are justifiably angry." The president, despite having made similar statements many times before, told his advisers that "he wanted to inject some balance." More recently, Obama has commanded that we not "demonize" Wall Street. But demonization would imply tagging banks and executives with unjust criticisms--and, while there's some of that in the air, why can't the president speak forcefully about the genuine misdeeds of certain players?

The logic driving Obama's rhetorical tepidness boils down to this: If we say too many mean things about investors, then they won't participate in the purchase of toxic assets. This is a strange analysis. The Geithner plan offers investors a sweetheart deal. Investors should jump on it because they stand to make money, regardless of the adjectives Obama affixes to them.

No, the president shouldn't become William Jennings Bryan, and he needs to be sensitive to the potential for the public's emotions to run amok. But the success of his presidency and his policies ultimately demands candor. There's some chance that the Geithner program will allow Wall Street to reap handsome rewards from the public's subsidization of its investment, while the government doesn't realize anywhere near the same returns. In other words, if everything doesn't fall the right way, the public could well lash out against the Geithner plan with the same ferocity that it unleashed against the AIG bonuses. Only the president plainly laying out the potential risks of his plans can prevent this ugly scenario and best protect his credibility for the long haul.

His rhetoric matters for another reason, too. There are plenty of ways that government can tamp down the insane levels of executive compensation that contributed to the bubble of the past decade--namely, by closing tax loopholes and implementing "say on pay" laws that empower shareholders. But, in the end, there are limits to government policy. The culture of Wall Street must also change, and it will do so only if its denizens are shamed. Larry Summers has done some of this, decrying an environment with "too much greed and too little fear." And, apparently, Rahm Emanuel has done his bit, chewing out the president of Goldman Sachs in a White House meeting, according to the Journal. But Barack Obama is the one man in the country with the moral authority to really make this case--to demand that American capitalists act a bit more like citizens of the United States.

By The Editors