Saturday, September 27, 2008

The week good policy won!

I say that because George W Bush - the man who believes in minimal government - came to accept that at times government has a very big role, and because of our own Wayne Swan.

First Bush:

The words of his speech say it all:

"I'm a strong believer in free enterprise. So my natural instinct is to oppose government intervention. I believe companies that make bad decisions should be allowed to go out of business. Under normal circumstances, I would have followed this course. But these are not normal circumstances. The market is not functioning properly...

The government is the one institution with the patience and resources to buy these assets at their current low prices and hold them until markets return to normal."

Thank God!

And then there's Wayne Swan...

When the Opposition leader Malcolm Turnbull suggested on Sunday that the Treasury's Office of Asset Management should buy mortgages from second-tier banks, Swan rubbished the idea.

Here's what his media advisor emailed to me Sunday afternoon:

Gday - as discussed - from Wayne:

"It is very worrying that despite all his claims to financial literacy, Mr Turnbull is out there today asserting the Government should be following the US in taking on bad debt, when the fact is Australia simply does not have the type of bad debts prevailing in the US banking system.

"It is either a monumental gaffe or intentionally irresponsible for Mr Turnbull to be out there again asserting that our banking system faces the same problems facing the US banking system.

"As Governor Stevens pointed out, the reality is that the health of our banks is light years away from that of US banks, and it is plain reckless for Mr Turnbull to be out asserting otherwise and talking down our banking sector.

"In the national economic interest, it's important Mr Turnbull stop shooting from the hip in an attempt to promote himself, and in the process talking down our banking system at a time of global uncertainty."

(For the record - Mr Turnbull never suggested buying bad debt. )

On Friday came the backflip - in order to implement good policy.

One of the architects of the idea, Christopher Joye, has been assiduous in talking to the Prime Minister's office and his co-architect Joshua Gans in talking to the Treasurer's office, even though the Treasury was pooh poohing the idea and even though Joye was close to Turnbull.

It was such a good idea (I described it as a nobrainer) that it won out.

Swan and Rudd are to be congratulated for putting politics last.

Joshua Gans outlines what happened here.

As he told me, it doesn't really matter now who talked to who - good policy won.

There is hope for us, and the United States, after all.

I am very, very happy!