A Delicate Balance
By Steven Pearlstein
Friday, July 11, 2008; D01
You know something’s up when both the secretary of the Treasury and the chairman of the Federal Reserve
give speeches calling for a new mechanism to allow them to manage the orderly liquidation of a major financial institution.
You have a sense that things are getting desperate when General Motors
has to offer six-year loans at zero-percent interest to unload its gas-guzzling trucks and SUVs, and people openly speculate about how long it will be before the automaker runs out of cash.
And you can feel the foundation shaking under Wall Street
when Fannie Mae
and Freddie Mac
have to pay three-quarters of a percentage point more to borrow money than the U.S. Treasury
, which implicitly guarantees their debt, and top government officials feel compelled to reaffirm their support.
We’re nearing that delicate point in the cycle when even the usual cheerleaders have hung up their pompoms, consumer and business confidence has disappeared and investors are driven mostly by fear rather than greed.
. . . A financial crisis is not a morality play. What matters most isn’t the precedents that are set, the amount of taxpayer money that’s implicated or whether people are made to suffer fully for their financial misjudgments. In the end, what matters most is that we get through it as quickly as possible with an economy and a financial system intact.
Steven Pearlstein is one of the reasons (that can be counted on one hand) for even bothering to read the Washington Post. He’s brilliant.
I have a problem with Pearstein’s last paragraph. I absolutely agree that the financial crisis is not a morality play, but Band-Aiding our way through the present turmoil is not a goal he and I share. I don’t so much care that the top investment bankers rake in major dough from throwing monkey-wrenches in the gears. I’m not even all that outraged by $5 million birthday parties or $50 million severance packages.
What I am scandalized by is the money that has been made available from Wall Street and the business community to pay off the most corrupt Congress in memory (and my memory extends through eight decades).
- Hedge funds are totally unregulated because they lobbied their way past regulation.
- Military contractors regularly commit fraud against paid-off Pentagon administrators, protected by paid-off Congressmen and Senators.
- Earmarks are such a source of mutual profit between crooked representatives and their equally crooked constituents, that they threaten government iitself.
- Healthcare is hostage to the whim of pharmaceutical companies, doctors, insurance companies and third-party profiteers.
- Congress is so swamped by bribery that the likes of Blackwater and Halliburton have burst the dam of public intervention.
Money, in quantities unknown to prior generations has served to buy every special interest, confound every legal recourse and overwhelm every civic responsibility. If we ignore what Pearlstein calls ‘an economic morality play,’ we will have lost perhaps the last chance to regain control of our basic ability to self-govern.
A financial crash of epic proportion–a ’29 style meltdown–would cause absolute havoc over the lives of the nation’s mostly innocent populace. But what has been raised as tribute to our ‘consumer economy‘ over the past thirty or forty years is a death-by-a-thousand-cuts to traditional American progress and prosperity. We are bleeding and helpless as Wal-Mart destroys our Main Streets, the insurance industry destroys our healthcare and off-shoring destroys our job base.
Welcome to the ‘service society.’ If your life seems less productive, your family needs two (or three) jobs to survive, your kids get a crappy education and you reach for Valium and Viagra to get through the week, dial 9 and stay on hold for 40 minutes while you are assured your business (or problem or potentail suicide) is very important to us.
Compared to where we are, Mr. Pearlstein, a morality-play would be a snap. In the absence of morals, an economic meltdown might be the best medicine.