Tuesday, November 16, 2010

A Comment on the U.S. Treasury Department’s PR

I have never liked what has commonly become called “spin.”  For me, detecting spin is tantamount to detecting an insult – how stupid do they think I am? Whether or not to call people on spin when that is possible is a judgment call.  Sometimes it seems not worth it and, letting it pass noncommittally, may leave the spinners wondering whether or not their message has been accepted in its entirety.

Given my attitude towards spin, I have not been happy to come across incidents of – how can we say this nicely?  – the Treasury coloring or sometimes obscuring the facts.  Readers of this blog know that I have criticized Treasury from time to time for this.  (For a specific example, see my first post to this blog.) 

I do admit to some sympathy to Treasury Secretaries who have to reaffirm that the U.S. has a “strong dollar” policy while at the same time encouraging certain countries to let their currencies appreciate.  Everyone knows that there is little meaning to this statement and that, in this context, the meaning of the word “strong” approaches infinite elasticity.  But if the Secretary tries to say something with more meaning, as I recall Paul O’Neill tried to do, then foreign exchange traders go berserk, acting as if something fundamental has changed.  Treasury Secretaries seem compelled to repeat periodically the “strong dollar” mantra.  (For an example of a recent incantation, click here.) 
I am less forgiving of spin than that when Phyllis Caldwell, the Treasury’s “Chief of the U.S Treasury's Homeownership Preservation Office,” said at a recent hearing of the TARP Congressional Oversight Panel:  “At this point in time there is no evidence that there is systemic risk to the financial system.”  (Click here for quote.)  In fact, there is no point in time when there is no systemic risk; the question is how much risk there is.  If the risk is deemed to be too high, then the task is to identify and to take measures to reduce it.  Despite pleas from one of her questioners to modify her statement, since such statements may look particularly bad in the future, Ms. Caldwell refused.  She was clearly uncomfortable, but probably felt she could not go beyond what she had been authorized to say when she was preparing for her appearance back at the Treasury.

I am also less understanding of another apparent PR maneuver of the Treasury Department.  Recently, I was searching the Treasury’s website for information about the Office of Financial Stability, which administers TARP.  I was particularly interested in finding out who had replaced Herb Allison as Assistant Secretary for Financial Stability.  I searched in vain for a press release announcing Herb Allison’s resignation or about his replacement.  Also, the Office of Financial Stability had disappeared from the Treasury’s website, even though the Office reports (or reported?) to the Treasury Under Secretary for Domestic Finance.  Finally, in reply to my inquiry, a reporter I know directed me to another government website, FinancialStability.gov, where one can find that Tim Massad is Acting Assistant Secretary for Financial Stability and Chief Counsel.

While the TARP program has ended in the sense that no new money is being committed, there are existing investments to manage as the program is wound down. What is the point of trying to hide the existence of this office?  It is almost as if someone wants to dump it down an Orwell memory hole.  

These are perhaps small points, but they do not provide any confidence that the Treasury currently possesses the PR savvy to deal with what will be a much harsher political climate for it next year.  While senior Treasury officials no doubt believe their harshest critics on policy issues are wrong, they should not leave themselves open to charges of prevarication.  It is much better to have good policies you believe in and then to tell that story.

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