Well, this should be an exciting week. I’m going to run the half marathon in Akron Saturday. And members of Congress will be racing all week to enact the Bush administration’s Wall Street rescue plan before adjourning Friday. Both should be interesting.
There are stories galore today and over the weekend about the actions now under way to prevent Great Depression Two. And the amount of taxpayer money involved — billions and maybe trillions of dollars — represents such a sweeping intervention in our economy that I certainly don’t understand all of it. Probably nobody does.
So here are a few of the things I was thinking about while running this morning: trust, confidence and communication.
Clearly something has to be done to prevent a financial meltdown. But do we really have the confidence — and trust — in the members of the Bush team? Remember. These are the guys and gals who brought us the Iraq debacle by running around yelling “weapons of mass destruction.” Not! By the way. That’s another $700 billion expense and still growing. If anyone is still counting.
Here’s from a post this morning by Glenn Thrush on Politico, “Dems say they won’t get fooled again.”
But the current generation of Democratic congressional leaders feels burned — and not a little humiliated — by the Bush administration’s use of the 2001 attacks to justify both the speedy enactment of the controversial and complex USA Patriot Act and congressional authorization of the resolution authorizing the use of force in Iraq.
“They can’t get away with what they did in 2001,” Leahy [Sen. Patrick Leahy, D-VT] said. “This will be ‘trust but verify.’ The biggest mistake they can make is holding a press conference while we’re negotiating to say there’s going to be a worldwide depression if Congress doesn’t do exactly what we want them to.”
I’m not convinced that it takes all that much to fool the current group of Democrats in Congress. But that’s a post for another day. So let’s hope they do pay attention — and let’s hope they stick to their positions on a key point that many members want included in the rescue package: reduce executive salaries and severance payments to the captains of industry who caused this debacle. Here’s from a Washington Post article:
Democratic leaders have broadly embraced the administration’s proposal to spend up to $700 billion to take troubled assets off the books of faltering firms and are not questioning the need to give the Treasury Department expansive authority to halt the meltdown in world markets. But by attempting to limit executive pay, they risk alienating key Republicans who object to such restrictions and delaying passage of the rescue plan, which in turn may stir renewed fear in the markets.
“They risk alienating key Republicans who object to such restrictions…” If that statement is true, then this country is in deep doo-doo. A Republican administration — closely aligned with Wall Street — has presided over the greatest economic meltdown since the Great Depression. And they have completely moved away from the idea of small-government, free-market conservatism. Yet Republicans are going to argue that the executives of the firms responsible have no risk or responsibility. Give me a break.
Even Lanny Davis, one of Bill Clinton’s chief apologists during an administration that was — thankfully it turns out — more preoccupied with sex than greed, has it correct — writing in the Wall Street Journal online today: “The GOP Leads a ‘Socialist’ Bailout.”
If a liberal Democratic administration had put hundreds of billions of dollars of taxpayer money at risk by bailing out Bear Stearns and nationalizing American International Group (AIG), Fannie Mae and Freddie Mac, wouldn’t conservatives accuse Democrats of “socialism”? Can Mr. McCain now square a circle by calling himself a conservative while favoring increased regulation?
In fact, Mr. McCain championed financial deregulation for years. In 1999, he supported legislation crafted by Phil Gramm, then a senator from Texas, that removed Depression-era walls between banking, investment and insurance companies — allegedly to make the country’s financial institutions more competitive and free to take entrepreneurial risks in the marketplace. (Many Democrats, including Sen. Joe Biden, the party’s vice presidential nominee, supported this ill-considered legislation as well.)
The result was the creation of a free-market free-for-all of banks approving home mortgages to people who clearly couldn’t afford to repay them if real-estate values stopped rising. It also spurred investment banks to buy and sell packages of mortgages after they had convinced themselves that by “spreading the risk,” bad loans could become less-bad loans. Then they bought insurance contracts from gargantuan insurance companies like AIG to spread the risk even further. Investors banked on the fact that if real-estate values stopped rising (impossible!), and more and more people defaulted on their mortgages, Fannie and Freddie would pick up the tab. And, if Fannie and Freddie went down, there would be — The-Ultimate-Bearer-Of-All-Risks — the lowly taxpayers.
And at some point, both McCain and Obama are going to have to communicate honestly with the American public about what all this means to us in terms of higher taxes — and reduced expectations for solving the problems facing us in education, health care and a host of other areas.
Something tells me the half marathon Saturday is going to be a lot easier and a lot more pleasant than that discussion.