Freak out Eric Earling:
Government Response to Financial Crisis A Test of Character
For instance, saying “I need a time out; I’m going to go to Washington, have a photo-op with the President and then not do anything else” is true leadership.
You run for Congress, you accept a Cabinet post, you take a senior position in the federal bureaucracy and you never actually know what you’re going to get. Most of the time it will be run of the mill politics and policy. Serious stuff at times, but not earth shattering. Sometimes, however, the ground shakes.
The second person is strange here (although my all time favorite short story -Graffiti by Julio Cortazar - is in the second person). I have never done any of the things Earling is mentioning.
The Founding Fathers faced it in stitching together our government on the heels of the Revolution and the disaster that was the Articles of Confederation. Statesman like Henry Clay held the country together in the early 19th Century as the political impact of slavery threatened to tear the nation asunder.
The Articles of Confederation weren’t actually a disaster. I mean they were the instrument that won us our independence, and that’s kind of neat.
Abraham Lincoln met it head on, holding the Union together by at times simply the sheer force of his will. FDR was the public face of American stoicism to survive the unexpected and sustained domestic hell of the Great Depression. And we gritted our way through World War II, a titanic, exhausting struggle almost unfathomable to us a only a rough seventy years later. The tension of the Cold War was a tea party by comparison.
Lincoln and FDR had actual policies to back those up. Some were good and some horrendous. I mean “fear itself” would have been meaningless without the legislation backing it up. The Gettysburg address wouldn’t have worked if we’d have lost that battle.
The point being that the course of human history means sometimes things go south - and fast. The people sitting in government positions are who they are, and whatever their strengths and weaknesses, it’s time to step up and do everything in their power to cope with a mortifying crisis.
Not really. Going into Iraq has made the crisis of international terrorism, that it was ostensibly a response to, worse. People are rightly judged by how they respond to a crisis, not if they do.
That’s what faces Members of Congress and key members of the federal government at this time. The mess has many causes, as rrecounted succinctly by Rich Lowry. Blame is to be shared by many.
Yes, blame is shared by Republicans who deregulated the shit out of everything, and by the Democrats who went along with them far too often. The solution to the problem is not more of that!
In the long-term, one task of government will be to assess where it was a positive and negative actor in all this. As such, the distortion of the housing market and related spread of now troublesome mortgage-backed securities under Fannie Mae and Freddie Mac must be seriously revisited. An exceptionally good case (or two!) can be made that as far as federal government culpability goes, the GSE’s rank right up there.
Oh Jesus. the Republicans have been in charge. They’ve been deregulating like mad. They’ve been watching the store while the crooks were taking everything in sight. But the Democrats had wanted some regulation, and had passed some regulations a long time ago so it’s all the Democrats’ fault right now. Do Earling or the people writing those op-eds actually believe that?
For now, just as Lincoln had to be creative at certain junctures to maintain the Union, crises like these require thinking outside the ideological box. Robert Samuelson is right: this is all about confidence right now. If Congress doesn’t act in substantive and reasonable fashion - regardless of whether Treasury Secretary Paulson’s proposal is the ultimate vehicle - to address fundamental confidence in financial system then we’ve got problems more serious than we can probably articulate.
Blah blah blah. If we don’t take out Saddam, then there will be problems in the Middle East. We have to give the President the power to bail out Fannie and Freddie, so hopefully we’ll never have to use it. We’ve heard this too many times before.
We simply don’t have to act. If banks fail it will be sad (and I say this as someone whose still with WaMu, but well below the FDIC insured amount). But that’s how capitalism is supposed to work. Bad policies have to have consequences for businesses and for the government. And if we spend three quarters of a trillion dollars to on helping people avoid those consequences then hopefully we’ll have the good sense to vote out some of the people who bring it to us.
Look, I’m not saying we have to do nothing, but what I am saying is doing nothing is preferable to doing anything that I’ve seen on the table. Also, if we have $7,000,000,000 kicking around and our goals are to protect people who lose their jobs or have trouble with their loans there are a hell of a lot better ways to spend it: help people who are losing their homes directly instead of their banks. Lengthen unemployment so that those who lose their jobs in the crisis have something to fall back on.
For all the ridiculous Democratic talk in recent months of already living in a Great Depression-type mess, the stakes are now actually that serious. This isn’t a good time for political grandstanding, this is an abyss. Act prudently and our financial system as we know it can recover. Fail to act with prudence, and the odds of total failure are alarmingly high.
But plunging us another $7,000,000,000 into debt won’t have any consequences.
Sure, there are doubters out there that things are truly that serious. Sadly, such talk comes from those, like many in Congress, who don’t fundamentally grasp the magnitude of what just happened - since working knowledge of economics seems a lost art to even many college graduates in America - in the last couple weeks and how dangerously close we are to 1929 thanks to circumstances not a lot of people understand in full. We can seriously say this is the “The End of Wall Street” as we knew it (which is a must-read piece…follow that link).
Sure things are bad, but running around with our hair on fire isn’t helpful. It’s kind of what Paulson has been doing for a while now, and it, um, hasn’t worked at all.
More importantly, those on Capitol Hill left unimpressed - or transparently unable to comprehend the situation - are playing with fire. Paulson’s actions last week were necessitate by the financial system arriving at the precipice of disaster: the near cessation of market liquidity.
Meh. The markets will tighten up for a while, it happens. We should protect people from the worst of what’s happening, but we should also do it in a way that doesn’t reward megacorporations and the very rich for getting us into this situation in the first place.
For the lay person: the equivalent of what almost happened to our financial system was similar to what would happen if you drained all the oil out of the engine of your favorite sports car. Then try to gun it onto the freeway for a drive down the Interstate. The whole damn thing will freeze up, leaving you in one helluva pickle, and with one very grumpy (and one very unusable) vehicle. Now imagine that’s the financial system through which all money in our economy flows.
Communist.
Gulp.
Seriously, is there anything that doesn’t get the Republicans to wet their pants? Yes, times are tough. Yes, there are things that can and should be done. Panic isn’t among those things.
Certainly there are valid critiques of the proposed solution currently on the table. Those criticisms come from the right and left and have many fair points. Yet, they would have more value if the situation weren’t so dire and urgent. Note this from Federal Reserve Chair Ben Bernanke yesterday:
Yeah there are critiques of the proposed system: it’s shit. It puts us further in hock to China to help out our billionaires and the companies that got us into this mess.
“If financial conditions fail to improve for a protracted period, the implications for the broader economy could be quite adverse.”
Sure, but doing something might also make things worse for the broader economy if that something isn’t well thought out and targeted at the right people.
Given the obtuse and measured language that is standard issue with senior Fed officials, allow a me a translation: “if the federal government is unable to calm the markets and provide a measure of stability, we will have that Great Depression that our politicians keep talking about on our hands.”
The day-to-day fluctuations of the market just aren’t that important.
More bluntly: “quite adverse” = we’re screwed.
Yes, time to bring back penny auctions. Or as Hillary was talking about during the primary, put a moratorium on foreclosures.
That is not an environment for Congress to play its usual game of pandering, patty-cake, and press conferences. Lowry summarizes the problem:
But it seems to me people opposing it have to do two things: 1) Explain why they think a financial meltdown in which the credit markets freeze up either wouldn’t be as bad as most everyone thinks, or explain why the resulting mini-depression would be a lesser evil than the Paulson plan (personally, I can’t see it); 2) If they aren’t willing to do 1), explain what their alternative plan is to stem the financial panic. If they aren’t doing either of these two things, opponents of the plan are just blowing smoke.
Well, off the top of my head, here’s my alternative plan: first off, make the pool of money much smaller. Maybe 50 billion, at the most 100. That way you’ll only bail out the firms that actually need it. But to make sure that firms that actually need it are the only ones that take the money instead of the most politically connected, we’re going to need to impose some severe restrictions: limiting executive pay (I’d say to the median in the country, but whatever, something low). The US gets 25% of profits up to the amount we bailed the firms out annually for 99 years up to the total of the risk we took per year. In theory we could make back 99 times the money we put in over the long run, in practice it would be a lot less, and maybe even a loss. The money we make back can go to debt service up to the cost we’ve been paying out, after that we can either do more debt service or we can put it into the FDIC, or somehting else to help people bailed out. If no firms are willing to take these terms, then they didn’t need to be bailed out anyway, and the crisis of confidence is still averted.
Of course there is a lot of free stuff we can do: put back the New Deal era regulations, make transactions more transparent, etc that will be better in the long term. Also, if we do go with the gigantic bail out, can we at least end the war in Iraq so we’ll have some money to pay for it?
There are reasons not to like the Paulson/Bernanke plan. And less than two months out from a Presidential election is just about the worst time possible to expect politicians to not play politics. But that’s ultimately what this issue demands to some degree, and whatever form of a solution Congress chooses to endorse, inaction is not a viable option.
Sure it is. Hell, for Eric Earling if we put up a plan to devalue the dollar (hey, your student loans and credit cards are basically paid off!) Earling would think it better than nothing. If there was a plan on the table to switch from a capitalist to a communist system, Earling would think it was worth a try, because it’s certainly not nothing.
John McCain’s unexpected move today adds an additional layer of intrigue to matters. A joint statement by he and Obama as well as a kumbaya meeting at the White House tomorrow are unparalleled at this juncture in a Presidential campaign. Perhaps McCain’s move shows leadership and helps prompt a deal on government action to be reached quicker, with greater Republican support than that which seemed otherwise possible in recent days. Or maybe the gambit will be a total bust.
McCain is ducking all other issues. This might be all right if he was ranking member of a relevant committee, or even on a relevant committee, or hell if had a plan. Instead he’s going to the White House for a photo-op that won’t help anyone, and otherwise doing nothing. If anything it’s a distraction that’ll make passing anythig a bit tougher. As Eric Earling called it a few paragraphs ago, “pandering, patty-cake, and press conferences.”
Either way, as Ed Morrissey explained well today, Congress played an essential role in causing this problem. Congress has to do its duty to help fix it. Saying “no” or simply offering up status quo proposals from preexisting economic agendas is not a viable solution to this crisis, regardless of the merits of such already-debated economic policy ideas (yes, that means many conservatives are barking up the wrong tree…just as many on the left are in error with the conditions they propose as well).
If Congress leaves town without doing something reasonable in a timely manner on this subject, then it be almost impossible to feel sorry for any Member who was for doing nothing. And history will be much less kind to those in federal government with the real power to craft a solution if they should fail.
Yes, of course Congress is responsible for its actions or inactions. Alls I’m saying is those actions had better damn well be better than doing nothing.