Two issues related to the financial crisis have caused limitless confusion and anger throughout the country. Both problems were easily avoidable. The first is that Washington focused on a bailout as the immediate response rather than focusing on ending malpractice.
The second problem flows from the first – the growing debate over who is responsible. It was the effort of politicians to try to spend (the taxpayers’) money to overcome the crisis that generated the debate on responsibility; throwing money at the problem without doing anything to correct it was an obvious dodge by guilty politicians and their corporate buddies to evade responsibility.
Bush instantly reacted by trying to convince the country that a financial fire that could only be put out by money was threatening to burn the U.S. to the ground. His approach was that “we are all in this together – guilty and innocent alike.” By implication, only a traitor would stop to ask who actually was guilty and, God forbid, actually try to punish the guilty. Just as with the Neo-Con reaction to 9/11 that “terrorism came out of the blue” to strike innocent America, Bush’s tactic was to pretend that instant retaliation was the only way to survive. Well, he had a point…it was, perhaps, the only way for him personally to survive a problem he had done much to create.
But neither 9/11 nor the current financial crisis was a fire requiring instant doses of water to enable the country to survive. The 9/11 horror was a one-shot deal: bin Laden did not have a follow-up; he was not invading. After all, it took weeks to put together the invasion of Afghanistan – not exactly an instantaneous reaction, and leaving plenty of time for any analysis of the situation that a calmer, more professional, more honest leadership might have wanted to do. In fact, there was time to consider police action against the international criminal gang that was guilty, not to mention long-overdue adjustments to American foreign policy that could have undercut, rather than enhanced, al Qua’ida’s appeal.
Similarly, the financial crisis did not require instant reaction. It has now been a week, and the U.S. economy continues to function. More seriously, the politicians’ (for Democrats largely jumped into Bush’s arms and echoed his Chicken Little screams) panic-stricken claims that an immediate bailout was the only way to survive just deepened the sense of doom at precisely the time we all needed to calm down and think.
What the American people needed to hear was not that Washington would instantly reward the guilty Wall Street executives whose greed tempted them to the near criminally risky gambling that created this crisis but that Washington would clamp down on the guilty.
At a minimum, Washington should:
- Create new oversight measures and tighten regulations to prevent the mindless exploitation of bubbles. As everyone but the experts are well aware, bubbles—by definition—are short-term phenomena. Betting that they will last is simply stupid. The betters who lose get what they deserve. When the betting is done with other people’s money, it is “near criminal” behavior.
- Make it clear that no Federal assistance whatsoever will be allowed to the individuals guilty of such behavior.
Can we afford to wait that long? Well, yes, I suspect so. Given the enormous underlying power of the American economy, a message from Washington of clear apology to the people for its part in allowing Wall Street’s misbehavior plus absolute commitment to significantly tighten regulation, seasoned with steps to punish corporate leaders would reassure everyone about America’s long-term prospects.
And no, I am not advocating tossing any Wall Street pin-stripe in jail. No, I think six months of 80-hour-weeks without pay working in a soup kitchen would send just the right message about the value of other people’s money.