SCOTT SIMON, host:
A hundred thousand more Americans lost their jobs this week. Layoffs were announced from Kodak to Starbucks to Ford. Meanwhile, the House of Representatives passed a stimulus plan and the new Treasury secretary got to work. Joining us now to help us absorb all this news is our friend from the business world, Joe Nocera, who joins us from the Radio Foundation in New York. Good morning, Joe.
JOE NOCERA: Good morning, Scott. How are you?
SIMON: I'm fine, thanks. But this loss of 100,000 jobs in a week - literally staggering.
NOCERA: It's brutal. It's totally brutal. I mean, if you looked at Tuesday's Wall Street Journal, there must have been 50,000 jobs announced in the B section that day alone.
SIMON: Yeah. Well, let me ask you about what might wind up grabbing attention over the long haul, in any case, is the tongue-lashing that President Obama gave to Wall Street executives who got more than $18 billion in bonuses as their companies were being propped up by taxpayers. Mr. Obama called that shameful.
SIMON: You write at some length about this today in the New York Times. So let me put it to you bluntly. Are these executives greedy or stupid?
(Soundbite of laughter)
SIMON: And personally, I am stumped for an alternative word.
NOCERA: Well, you know, they have this mindset that bonuses is how people get paid. And they also have a mindset that this is a - not the top executives, but the top, top executives are not taking bonuses because they understand the symbolism, but everybody underneath it are still getting bonuses. They're smaller than they were, but it's still the sixth highest on record for crying out loud. And it is a cultural thing.
The bonus structure is so powerfully embedded in Wall Street that if you took away all the bonuses tomorrow, A, they'd all go broke because they're all living in the expectation they'll get a bonus, you know. And B, it's almost as if the Wall Street would collapse without bonuses. But having said that, it is ridiculous that they would do this in the face of the tens of billions of dollars of losses they've taken. The fact that the government is having to bail them out, you know, and the fact that frankly, let's be clear here, Wall Street brought down the financial system for the entire world.
SIMON: What's Secretary Geithner's next step? Or shall I put it this way, first steps?
NOCERA: Well, there are two things that they have to do almost immediately, and they're clearly working on both. The first is that they have to find a way to get the banks lending again. And that is, you can't just job(ph) on that. You have to get these bad assets that are on the banks off the banks' balance sheet because as long as they're there, they will continue to drop in value, they will continue to create losses and write downs, and as they do, they create fear among bankers that they can't - that any money they lend is money they should be hoarding as capital so they can remain solvent.
So they've got to figure out a way to do that. And there's a lot of talk about do we set up a government bad bank to buy these assets? Do we nationalize? Do we do an RTC program like the S&L?
The second thing they have to do is figure out a way to stabilize foreclosures on Main Street because as I have said more than once on this show and in my column, the root of the problem is that people are in homes they can't afford, and as foreclosures increase and continue, that goes right up the chain. That not only destabilizes neighborhoods and cities, but it also destabilizes Wall Street because it adds to the losses. So those are the two top priorities for the new secretary.
SIMON: And what about the finger-pointing back and forth between the U.S. and China?
NOCERA: Well, I thought Mr. Geithner was pretty dumb to speak a truth. You know, it's the old story, you know, the mistake is not saying something that's untrue, the mistake is saying something that's true. It is absolutely true that China manipulates its currency and is keeping it artificially lower that it would otherwise be. But it is also true that China is our largest creditor at this point, and if they stop buying our Treasury bills, we're in a heap, a heap of trouble.
And China is so - they get their back up so quickly when anyone criticizes them for, you know, their national policies of any sort that it just was an unhelpful remark. And of course, the Chinese immediately lashed back, both at Davos and then also in China itself.
SIMON: Do you think this represents a new kind of stringency in U.S.-Chinese relations?
NOCERA: It's hard to know. You know, the Chinese loved Hank Paulson, who had been there many, many times, like Goldman Sachs. And I'd like to point out, Goldman is the only investment bank that operates in China. So, you know, he always had that quiet diplomacy, and everything he said was moderated and cautious, and I'm not sure that this new government of President Obama's is going to be quite as cautious.
SIMON: Joe Nocera, thanks very much.
NOCERA: Thank you, Scott.
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