Recovery: The New Black

11/17/2009 05:12 am ET | Updated May 25, 2011

LONDON -- Are the green shoots real or are the government economy-minders taking premature credit, partly to dampen populist anger?  That’s one of my questions when I read Ben Bernanke’s latest declaration that the recovery is under way.  His evidence: rising consumer spending last month, aided to some extent by Cash for Clunkers.   (Bloomberg TV chimes in with a cheery “Credit Default Swaps are back!”)

Obviously, Bernanke has an economics doctorate and I don’t, so I offer my questions with all due humility.  But...weren’t we told last October, in the race to approve the TARP program, that as long as the banks had untold numbers of Toxic Assets (the TA in TARP) on their books they could not regain their health?  And wasn’t TARP money used for a completely different purpose, leaving those assets (renamed “troubled” a few months later) in those same banks’ portfolios?

Further, as President Obama called Monday for reform of the financial system so this crisis could never be repeated (the same mantra heard when Depression-era reforms were passed that the Clinton Administration repealed), did he fail to mention reform of the relationship between the agencies that rate financial instruments and the clients who pay their bills?  After all, it was these agencies’ carefully considered conclusion that the packages of risky mortgages their clients crafted had been somehow transformed into triple-A investments that helped inflate the crappy asset bubble.  

So we’re out doing some spending, but the banks’ books remain unrelieved of their toxic, troubled burden, and Moody’s et al remain free to rate their clients’ exotic new financial instruments as their clients would prefer.  

And speaking of the banks, taxpayers got into this mess because certain financial institutions were deemed too big to fail.  What have we done in the year since?  Allowed, encouraged, and forced surviving banks to merge with their weaker brethren.  Result: fewer banks, even bigger, posing even more systemic risk.  Haven’t the taxpayers now been put in the position of rescuing all the surviving institutions from the effects of their next round of stupid bank tricks?

Aren’t our leaders seeing some dandelions in the lawn and calling it springtime?