To address the problem we need to grasp the nature of the problem, a task that seems to have been largely overlooked.
Let's look at the whole question known as "stability" and "health" of the financial sector, and reason from solid underlying basic principles that govern all complex adaptive systems, caring as little as does gravity about politics and winners and losers.
As I have stated numerous times in the past, there is expertise in the world regarding what is involved in stabilizing a system, any system. There are universally applicable principles. This field is called "Control System Engineering". The principles are the same whether the system is a jet aircraft in flight or an economy in motion.
Probably the first thing that needs to be said is that "intuition" as to what to do is uniformly wrong. Our intuition is based on very simple systems, almost uniformly lacking feedback, or having consequences we have carefully built a narrative allowing us to ignore.
This sin is equivalent to designing a car so complex no human can drive it, and then blaming the drivers for the subsequent crashes, instead of blaming our own design.
So, doing the "obvious thing" is almost always the wrong answer. This does not depend on how stridently one asserts that it is "obvious" or what caliber gun one can point at the head of those who disagree with one's "obvious" brilliant insight into a system no one else can fathom. It is, after all, "obvious" only if you ignore all the parts that don't work, and focus on the few parts that
do.
There is an entire science of "stability" and a whole field of designing "controllers", electronics that can provide such stability to a given engine or system. Even to those with PhD's and a lifetime experience, the solutions that the computers reveal are seldom "obvious".
We need now to make an extremely important distinction and disentangle two concepts that are generally incorrectly mushed together.
One is the concept of "being under control" and the other is the concept of "controlling".
It is desirable that systems we rely on, drive in, fly in, or put our offices within are "stable" and "under control." The alternative is bridges, planes, or economies crashing down with significant loss of life and treasure.
That said, how the "controlling" occurs, and what the agent is of such controlling, turns out to be a more complicated issue that we are used to.
Let's consider some alternatives. There is the "great man" or "king" or "Czar" approach, in which a single human, possibly with or without advice, uses his great wisdom to decree each step in turn in order to bring about stability. If there is no stability, the solution is either "more wisdom" (seldom mentioned) or "more authority" (a far more popular request.)
On the far side, there is a more complex type of agent, spread more diffusely, hard to see on a small scale, but easy to see on a large scale. One example, and mind you this is only one, is the "Invisible hand of Adam Smith", or the functioning of a "free market."
This is just one example of millions of possible "emergent agents" that brings about stability, often in a way baffling to humans, or incomprehensibly difficult for humans to fathom. One example often cited is the set of decisions involved in feeding New York City on a daily basis.
The conservatives have it right, that some kind of emergent agent can be far more powerful at setting things right and repairing instability than can any single local human with their local perspective. What they have wrong is that there is only one such solution, so they don't put in the time and effort to find one BETTER than Adam Smith, but still not in the hands of any small clique of people, regardless how sincere, who as all humans do, will lose all sense of perspective once they gain power, and who will therefore spend all their assets attempting to acquire more power, which they incorrectly think will finally solve things. It is so "obvious" to them that the solution is close, if only they had complete control.
The problem with this logic is that other people are only part of the obstacle. Another obstacle is that complex systems have a mind of their own and do not behave in a manner comprehensible to a human, or predictable by a human, any human, regardless who they are. the only reason it seems that it is close to such a Nirvana is that all of the things not understood have been diminished and discarded. So, all the points I have kept on this graph form a straight line, see? (of course, I had to discard all those that didn't fit my preconceived notion that there is in fact a line here, not a sine curve or something more complicated.)
Ok, so, say for a moment you had 100% of the world budget, 100% of the world in worshipful obedience, and total authority. Then what?
It's not like the world has a steering wheel and only needs to be brought back onto the road, now that we've decided who's driving. The world is more like a 747, and we are more like 6 year olds, and having total authority to push buttons does not a pilot make.
The only solution remaining for us is to find a type of distributed emergent agent, like Adam Smith's hand only better, that can be created using simple decision rules, such as "be greedy", and that collectively form a stabilizing field.
My perception is that "be greedy" as a generative rule is not a very good solution and "be nice" is a better one. Before concluding such a solution is impossible, we need to study the role of context in making behaviors occur and sustaining them in the face of apparent results.
That is the task that we should be putting 700 billion dollars into, not fighting over WHICH human should make 'the decisions",
Wade
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