Timothy Geithner, American Hero?

Regardless of what you think of Timothy Geithner, you have to feel sorry for the guy. There is no shortage of self-proclaimed pundits around the world who have beat him like a piñata. Cruelly, unjustifiably, and without offering a single alternative solution bigger than a sound bite.

So it is remarkably refreshing to read the advice of Hernando de Soto in Newsweek (March 2, 2009). First he says, back off. Speaking from his experience with third-world economies, de Soto says that Geithner is right to focus on trying to get the toxic paper out of the banking system. We need to restore faith in credit.

Second, and this will be surely give one pause and hopefully shut up a few blowhards, we have cleaned up toxic paper many, many times before. Specifically de Soto urges us to look at how:

…in the past U.S. and European lawyers and bureaucrats have proved brilliant at sorting out toxic paper whether it referred to bad debt, confusing claims or opaque legislation. In doing so, they have untangled claims after the California gold rush, picked up the pieces of Europe’s crumbling precapitalist order, converted Japan’s feudal enclaves into a market economy after World War II and reunified Germany after the fall of the Berlin Wall. That’s the process of capitalism: continuous detoxification.

Wow. We’ve been “brilliant” before. And we can do it again.
And who is “we?” Timothy Geithner…and the angel on his shoulder.

Just so long as he doesn’t gum up the detoxification with a social goal achievement.