2/7/2009
In the last few days there have been a number of unusual headlines that have got me wondering what’s really going on in America today. The backdrop of course is the economic “crisis” which if not fixed fast will lead to “catastrophe” which is why we have to give the banks all the money. At least, that’s what I’ve been getting out of the latest talking points.
I could be oversimplifying but I’m probably not alone. In a scathing NYT piece “Slumdogs Unite!,” columnist Frank Rich refers to a “tsunami of populist rage” which is how he described the mood of America with regard to the shenanigans of the rich. Addressing the Daschle debacle specifically, Rich suggests that the Obama administration, as well as most of Congress, is a bit out of touch when it comes to the views of so-called “ordinary” Americans — those of us who don’t have limos and mansions to forget to pay taxes on. And he says that this disconnect could cause trouble for the governing class later on.
If the first stage of economic grief is anger, the second phase must be sarcasm. According to another story, the Obama team was met with derisory laughter from legislators and their aides as they briefed them on the Obama bailout plan. It wasn’t clear what the legislators found so ludicrous about the plan (and to be fair, Republicans are said to have laughed louder). Still, there was something about the proposal that made people snicker in a bipartisan fashion. Newly appointed Treasury Secretary Geithner got to be the whipping boy.
This leads me to an earlier headline which, oddly enough, declared “Geithner the winner” in what was described as a difference of opinion between Geithner and the White House on how tough to be on companies accepting bailout money. According to the article, Geithner opposed more stringent requirements, such as broader limits on executive pay and other more punitive measures which the administration supported. We could take them at their word, but did Geithner really prevail? Or was he merely made the poster child for what the Obama team knew would be an unpopular proposal?
Still, assuming the latest bailout is a more business-friendly plan than might otherwise have been presented, you would have expected it to be welcomed on Wall Street. But no — the market dropped like a rock almost as soon as Geithner started talking on Tuesday, closing down over 4%. One theory has it that investors were disappointed because the latest bailout package wasn’t a complete giveaway like the last one. According to yet another theory (my brother’s actually), Wall Street was bummed because the new bailout was a giveaway and for that reason, would never get passsed.
Either way, Obama has been thinking about the bankers. But is he thinking about the people too? I think it’s significant that Obama delayed the stimulus vote by a day in order to get more people on board. Sure, he was concerned about votes on the floor and bipartisan support and all the rest. But I think he was also concerned about popular support which he must know is lacking. Hence the whistle stop to Indiana and lengthy televised news conference Monday night.
But it isn’t just the Obama administration that’s concerned about public opinion. Even Wall Streeters seem to have figured out that they look really bad to a lot of people. The top headline in today’s Washington Post: “Wall Street Executives To Go On Image Offensive.” It appears that bank execs have been briefed and know what taxpayers think of them. Moreover, they fear their wrath, or to be more precise, any wrath that might lead to regulation. So while they aren’t exactly apologizing for their lavish lifestyles, they are acknowledging that there have been “executives or companies spending money in ways that did not have a direct benefit to the business.” This is a mea culpa with a purpose — to “embrace some degree of regulation” lest Congress come up with stiffer requirements on its own. Which tells me one thing — they must really need this bailout.
Finally, there’s the Great Roubini — you got a love a guru economist with a name like Roubini. It’s too bad he doesn’t wear a turban. But seriously, Roubini gets the last word because so far he’s been right. He says that if the banks are technically insolvent (i.e., can’t meet their obligations without bailout money), they should be nationalized. But he says, the country isn’t politically ready for that yet and so we’ll “waste” six to twelve months with the Obama/Geithner plan. If, by some “miracle,” that plan succeeds, bully for us. If it doesn’t, America will have to nationalize the banks later rather than sooner. Waiting, Roubini says, increases the likelihood that we’ll enter the dreaded “L” shaped recession, as opposed to a briefer down-and-up “U” shaped recession.
So those are some headlines, and you can make of them what you will. Meanwhile, here’s my inexpert, citizen’s summary of what I think is going on:
The economy is like a leaky balloon, listing badly and threatening to crash. The government says: We can’t get a new balloon, we’ll have to fix this one. Quick, pump it back up. Because the economy is not a balloon, we’re pumping it up with money. The hope is that with a few trillion dollars in cash, the system will, like a leaky balloon, right itself and keep flying. But some worry that the hole is too big and that the more you pump in, the more will leak out. The bailout plan is, therefore, a big gamble since no one really knows just how leaky the economy is or what it would take to repair it.
As for the citizens, maybe we really are seething with “populist rage” as Frank Rich says we are. If so, it may have to do with the mind games they’re playing to make us believe that taxpayers need to sacrifice their standard of living for decades to come in order to save the very entities that are foreclosing on their mortgages, charging them usurious interest rates on credit cards, and harassing them night and day over college loans. Clearly, saving the big bankers from their own excesses is a tough sell. Why would we want to save them if it just means more of the same?
Nevertheless, here we are — the government, the bankers and the American people, all in it together on the big wheel of fortune. Around and around and around we go…
