That is not a sarcastic title. Mr. Friedman does not always get things right in my view but I have to commend him on this Op-Ed piece. In a valiant stab at public service, he tries to explain in terms even a Republican could understand just exactly why so many people think there is a problem:
And I particularly enjoy Friedman's turn of phrase, blunt as a 2X4 up side the head:
This is a credit crisis. It’s all about confidence. What you can’t see is how bank A will no longer lend to good company B or mortgage company C. Because no one is sure the other guy’s assets and collateral are worth anything, which is why the government needs to come in and put a floor under them. Otherwise, the system will be choked of credit, like a body being choked of oxygen and turning blue.
Well, you say, “I don’t own any stocks — let those greedy monsters on Wall Street suffer.” You may not own any stocks, but your pension fund owned some Lehman Brothers commercial paper and your regional bank held subprime mortgage bonds, which is why you were able refinance your house two years ago. And your local airport was insured by A.I.G., and your local municipality sold municipal bonds on Wall Street to finance your street’s new sewer system, and your local car company depended on the credit markets to finance your auto loan — and now that the credit market has dried up, Wachovia bank went bust and your neighbor lost her secretarial job there.
David Leonhardt, a NY Times reporter on finance, gives a more thorough if less ringing lesson on the nature of the problem. That confidence as much as palpable cash is at the heart of the matter became apparent to me last week, Friedman has said it in just so many words and it is looking at us from between the lines of Leonhardt's article:
I’ve always believed that America’s government was a unique political system — one designed by geniuses so that it could be run by idiots. I was wrong. No system can be smart enough to survive this level of incompetence and recklessness by the people charged to run it.
This is dangerous. We have House members, many of whom I suspect can’t balance their own checkbooks, rejecting a complex rescue package because some voters, whom I fear also don’t understand, swamped them with phone calls. I appreciate the popular anger against Wall Street, but you can’t deal with this crisis this way.
As a young academic economist in the 1980s, Mr. Bernanke largely developed the theory that the loan officers’ lost knowledge was a crucial cause of the Depression. He referred to this lost knowledge as “informational capital.” In plain English, it means that trust vanished from the banking sector.
I must repeat this question until somewhere I hear the right answer, on many lips: If it was so well understood that trust and faith that deposits were safe is what really makes the world go around, why for goodness sake, would the government eject the minimum regulation needed to maintain that trust? "Greed is good" never impressed me as the lone and sufficient maxim to rule the management of trillions of other people's dollars. But that is all Gramm, Donaldson, Bush or any other Neoconservative has given us.
So, there we have it. All the right things have been said and written...often...and not just in the last week. Will any of that soak in?
The problem here is that I am reading this Op-Ed and you may have, but the constituents of the congress critters [left and right populist wings] who knocked over the hard fought improvements over Paulson's original ransom note...they are not reading. Are those the congress critters that have gained congress a 15% approval rating this afternoon, or is it the ones who voted for the so called bailout. After FCC deregulation and the '76 ruling that money can talk, tox radio and Reagan's cheer leaders have managed to make education synonymous with "elite", any recitation of degrees or non-business accomplishments synonymous with "elite", "intelligent" synonymous with "elite" and finally, "elite" so dirty a word [despite the fabulous financial power of those who have crafted this shift] you can affix to any enemy of conservatism. Obama may break that spell...I fevently hope so. They try to make wealth a mark of elitism but it has backfired at last in the case of McCain. I think it is time that the standard for expert and professional services this country desperately needs be faced up to: we cannot have another administration that bypasses the best candidates for appointment to regulatory jobs based solely on a few litmus test questions or Old Boy connections. It is not likely the protofascist constituency will quickly mend its ways. Still, I hope that a sound drubbing and the spread of actual financial pain to the stiff necked rabble that simply have not learned where their bread is buttered may reduce that constituency, may make a few percent more realize they should have been reading at places like the NY Times and disabuse them of the false comfort of their jingoism in favor of a broader attention to real news. The best elites, of course, are not exactly what the name, or the connotation of class distinction it has been laden with, imply but a wish to do better rather than to be better that has come true by some effort and which invites others to follow and to join.
The rapidity with which poverty trickles down, as compared to the tax gifts to billionaires most of which never trickled down, is stunning. Speaking with Barney Frank this evening, Anderson Cooper asked whether the bailout might pass the house on the second try. Frank answered by saying that reality had bitten share holders, in their retirement accounts almost instantly on Monday and that reality might soak through the skulls of the hold-out republicans who had seen the tax consequences as real and dismissed the economic connectedness we all suffer and occasionally benefit from. CNN reported in that same segment that in a week's time the 55+ demographic, one eye on their shriking 401K acccounts, moved from net approval of McCain to the utterly unlikely stance of favoring Obama slightly...that demographic has never moved for any reason but percieved security. The "socialism" against which the Republican purists were holding out is the security play at the moment, and more comfortable territory for Democrats.
BTW, liveblogginly speaking, Bill Clinton is on CSPAN, stumping for Obama before a crowd in FL and man, are they loving that. He has great delivery and I am pleased at the points he is making.