By BRAD WARTHEN
EDITORIAL PAGE EDITOR
We all have our ways of escaping when the world is too much with us. Some find that “reality” TV serves. Others have football. I’ve been rereading the seafaring novels of Patrick O’Brian.
In the one I’m on now, there is an enduring image that has stuck with me this week: a frail wooden ship, its sails reefed to the minimum, riding an enormous swell in the chilly latitudes far south of the Cape of Good Hope. Each wave is higher than the masts, and the crew scrambles from moment to moment to keep from being overwhelmed by wind and water.
Following the crisis on Wall Street has been like that, except that the ship’s crew could do something. Watching the unbelievably high waves of financial news breaking, I felt more like a passenger who doesn’t know port from starboard. I suspect I’m not alone in this.
In fact, I know I’m not. What I’ve read in recent days has caused me to beware anyone who sounds too glibly sure about how we got where we are, and what we should do next.
Early in the week, I was glib myself, on my blog. I complained mightily that my worst fears (first voiced in January) were being realized, that this would end up being an election about the economy. My whole career, I had considered a newspaper front page that led with economic news a dead giveaway that nothing interesting was happening in the world. But by the end of the week, the sheer scale of what was happening shut me up on that score.
The Wall Street Journal played the turmoil on its turf across six columns at the top of the front page, five days in a row. Rupert Murdoch or no Rupert Murdoch, that just doesn’t happen. And a smaller headline on one of those same pages proclaimed the “Worst Crisis Since ’30s, With No End Yet in Sight.” A terrorist attack on the U.S. embassy in Yemen got pushed to an inside page, and not even I scoffed at the editors’ judgment.
The Washington Post’s Robert Samuelson, usually a mortal enemy of hyperbole, wrote that “Wall Street as we know it is kaput.” I did not doubt him.
The fall of giants of high finance, from Lehman Brothers to Merrill Lynch to AIG, seemed less significant than the fundamental, systemic changes that happened in reaction — reinforcing the metaphor of a deep ocean swell as opposed to mere whitecaps. The Federal Reserve teamed up with other nations’ central banks to “improve the liquidity conditions in global financial markets.” The U.S. Treasury secretary and chief of the Fed huddled repeatedly with other major players — in not only New York, but London, other foreign capitals and right up the road in Charlotte — to reshape the U.S. financial system.
The phrase “on the fly” would appear in report after report, giving the impression of erstwhile Masters of the Universe scrambling like common sailors between the waves washing over the deck, desperately trying different combinations of sail and rudder.
Amid all this, some pundits would air their erudition regarding such affairs, but what certainty they were able to muster seemed to arise from their own political prejudices. On the facing page you see that Paul Krugman notes with satisfaction that “much of Washington appears to have decided that government isn’t the problem, it’s the solution.” Mr. Krugman is a professor of economics at Princeton. But other smart people wrote the opposite. George Will grumbled about the rapid increase of “government entanglement with our less-and-less-private enterprise system,” and a member of the Journal’s editorial board flatly said, “Government largely created this mess.”
Ignorant as I am, I strongly suspect that the best way through this storm will thoroughly please neither supply-siders nor the acolytes of John Maynard Keynes.
So it is that, perhaps paradoxically, I was reassured to see just how uncertain the two candidates for president were in the face of this unexpected challenge.
They, too, started the week glib. As late as Tuesday, John McCain was blithely expressing his opposition to the AIG buyout, and Barack Obama was responding with the usual comfort that Democrats feel with pocketbook issues, pontificating that “John McCain cannot be trusted to re-establish proper oversight of our financial markets for one simple reason: He has shown time and again that he does not believe in it.”
But the next day, Sen. McCain more humbly acquiesced to the necessity of the bailout, saying “there are literally millions of people whose retirement, whose investment, whose insurance were at risk here.” On Friday, he tried to put his views in a coherent context with a speech to a Chamber of Commerce in Wisconsin, while Sen. Obama said his own more extended proposals would be forthcoming once he had met with his advisers later that day.
In this kind of environment, with each news cycle bearing down on us like a wave that seemingly could, in Bob Dylan’s words, drown the whole world, I find greater comfort in such humble confusion than in the positive tones of those who are too sure of their analyses.
As The New York Times noted, “The actions of both men captured how they were being forced to make policy proposals and pronouncements on the fly, from one campaign rally to another, as each day’s developments in the financial markets and in Washington were overtaken by new ones the following day.” The campaign had become an “audition for who could best handle a national economic emergency.”
At some point we’re going to need some FDR-like self-assurance mixed with pragmatic solutions. And in this election that is suddenly about the economy, it’s unclear which candidate will pass that part of the audition.
Go to thestate.com/bradsblog/.
Nice editorial Brad.
The economy certainly is first and foremost due the collapse of the financial institutions. Terrorism would be number one if there were to be another attack on the USA.
There is no way that we are going to pay for all this debt without cutting expenses, earmarks etc and try to budget for our financial future which will have to include tax raises on everyone earning a certain pay. We cannot ad to our misery by more of the same giveaway programs.
When the incentive for the working man comes to be point that he is paying more taxes and decides to join the porch sitters, is when this government implodes.
The working man has to have something to look forward to (as do all of us). It may be just affording to go to the ball games. Is the employed taxpaying individual going to have downsize
his lifestyle to support all the people devastated by the fall of the financial markets?
I just want to add the below taken from an article written by David Prosser 9/22/08.
Up to 10,000 staff at the New York office of the bankrupt investment bank Lehman Brothers will share a bonus pool set aside for them that is worth $2.5bn (£1.4bn), Barclays Bank, which is buying the business, confirmed last night.
Maybe we should let the leaders of the financial instituitions that did know what they were doing lead us in the assessment and necessary steps to correct. I’m talking about the leaders of Wells Fargo, US Bank and the like. Lost in the shuffle is the fact that some companies made sound business decisions and managed their companies properly. That is who we should listen to now.
Here’s a nice article in Bloomberg.com.
Apparently Obama gets it and McCain is playing politics with the financial crisis.
Uh oh. The secret’s out. My real name is John McCain and I just don’t want to be president. Here’s an excerpt from Newsweek:
All the Candidates’ Cars
By Keith Naughton and Hilary Shenfeld | NEWSWEEK
Only the Cadillac is registered in the candidate’s name. Cindy McCain’s name is on 11 vehicles, though not the one she actually drives. That car, a Lexus, is registered to her family’s beer-distributor business and is outfitted with personalized plates that read MS BUD.
Here’s a nice article in Bloomberg.com.
Apparently McCain gets it and Obama is playing politics with the financial crisis.
And who the freak cares how many cars McCain or his family owns? It has no relevance to the questions at hand. Seriously, if someone is going to have their vote affected by the number of cars or houses a candidate owns then they should have their right to vote stripped from them.
By the way, as of April 2006 Jay Leno owned 84 cars and 73 motorcycles. I don’t see anybody complaining about him…
Get a life, bud…
Tim, you completely miss the point. It was MCCAIN who made this big deal that OBAMA was an elitist. Personally I don’t care whether he is or isn’t. Nor do I care how many cars McCain owns, but it smacks of hypocricy when a man can’t even tell you how many houses he owns to accuse others of being elitist. Further, it sheds light on the central tenant of the McCain campaign that he’s a new style maverick. Heck, he’s just another GOP hactchet man.
yada, yada, yada…No, I don’t miss the point because there isn’t one. Obama went to Harvard, was president of the Harvard Law Review, was and is a politician at the state and national level. He doesn’t know what the price of Arugula lettuce is and Michelle is buying $600 earrings with her reimbursment check. If that’s not a receipe for elitist then I don’t know what is. Face it, they’re ALL elitists. I think it’s a rather looooong stretch to see either of your two points. Fact is, you’re in the tank for Obama and would refuse to look at anything about McCain objectively in the first place. Same as Lee with his right-leaning rants.
What makes Obama an elitist, not an elite, is his attitude that his vision is so pure that it gives him the right to use the armed force of government, rather than intellectual persuasion of ideas, to make others conform to his will.
Actually, I am a liberal, a genuine one liberal, not a socialist like Obama.
It would only be relevant because of the elitist accusation and McCain’s I only buy american statement that proved false. If you live in glass houses, it’s best not to throw stones.
Now today we have oil being manipulated by the same group of experts in the financial markets trying to get rich quick yet another way. Are we going to allow these experts to gamble on oil futures as they did mortgages?
In the end, one candidate has consistently been for deregulation of a number of industries which is consistent with his party. The other has consistently advocated greater regulation of industry which is consistent with his party. The fundamental question facing voters should be which position is aligned with their best interests.
mccain has been getting paid by the federal government for 50 years and counting, including being paid to be nearly thrown out of public trough college-thank you admiral dad for the save. he has been “inside the beltway” for 30+ plus of those years as a navy lobbyist and then elected official. how is he a non-elite outsider-because we taxpayers paid every dime for his education and a salary to boot?
any money immediately spent on retail purchases using the economic stimulus checks, which i believe would have been $1200 not $600 for the Obamas, met the purpose of the stimulus. the idea was not that people should pay down debt-which i did by the way-but put the money into circulation immediately. mrs obama did not spend $5000 to learn how to drift drive race cars as mrs mccain did for herself and one of her kids as she talked about on espn motor sports last week. i guess she thought that showed she was not an elitist since everybody has 5k for a new hobby. of course she is entitled to spend her inheritance to buy and own as many homes and cars as she likes, but the man who dumped his first wife to marry her cannot be anti-elitist unless he hates his wife. that is unless you think not getting paid by the taxpayers a salary and all the costs of your college education is the only definition of elitist; if that is the case then pretty much everyone i know except taxpayer academy graduates is an elitist because we paid or are paying for our educations through loans,
scholarships, jobs and, the lucky ones, mom and dad not favorite uncle sam.
am i an elitist because my wife and i eat mainly bib and iceberg lettuce and neither of us knows the price of arugula?
Obama and the Democrats are proposing a lot more than regulation. They are talking about seizing the oil companies and making them state-run enterprises, on the fascist model.
They want to seize control of the 42% of medical care that is still private. The only medical care with increasing costs is the 58% controlled by the government.
Their government mortgage programs for junk loans to minorities went broke, so they pump another $700 BILLION into the government “corporations”. But they don’t demand any accountability from the Democrats running these derelict enterprises, like Louis Freeh and Jamie Gorelick, who paid themselves $76,000,000 in bonuses.
There’s big money in socialism, for some people.
Obama has over 30 K-Street lobbyists running his campaign, including oil lobbyists. He has the heads of Fannie Mae, Freddie Mac, and Lehman Brothers raising money for him.
Lee, you got Obama and Dubya confused. It’s Dubya pumping in the money and the Dems that want control over the next actions and compensation. McCain has the $30K a month guy running his campaign. And higher taxes on profits that aren’t re-invested does not equate to socialism.
No confusion, FACT. I already listed the names of Obama’s K-Street lobbyists here months ago. He has former Bill Clinton cabinet members as advisors. Obama has execs from Lehman Brothers, Fannie Mae and Freddie Mac donating money and raising money for him.
And Tim C, your comment about “taxes on profits which are not reinvested” shows you have no basic knowledge of business. Businesses have to pay taxes on profits whether they reinvest or not. That is the basic rule, so the higher the taxes, the less after-tax money businesses have to invest.
What socialists have done is create thousands of targeted exceptions for businesses to avoid the basic tax rules. Most of these are for big businesses, who have used lobbyists to buy influence in Congress.
Small business profits are taxed to the owners as personal income. If they are lucky, they can take advantage of some deductions created for big businesses.
Obama knows nothing about business, and he knows that most of his worshippers know even less, so he can sell them any manner of BS.
Threatening to seize the oil companies, as Pelosi has done, IS SOCIALISM.
Threatening to seize control of medical care, as all Democrats do, IS SOCIALISM.
A graduated income tax IS SOCIALISM, right out of Karl Marx’s book.
Inheritance taxes ARE SOCIALIST.
Any program to redistribute wealth IS SOCIALIST, from Food Stamps to Social Security.
Uh oh Lee, your bigot excuse just got a big whopping hole in it.
“An emerging meme on the right, one that’s being championed by the likes of Neil Cavuto and others, is that the mortgage crisis happened not because of deregulation, but because brokers were pressured into making loans to “minorities and risky folks,” as Cavuto tastefully put it.
But guess who actively sought to boost minority homeownership? John McCain’s campaign manager, Rick Davis.
As The New York Times reported today, Davis was president for several years of the Homeownership Alliance, an industry advocacy organization formed mainly by Fannie Mae and Freddie Mac. The Alliance’s core mission is to boost the number of mortgages granted.”
Don’t you just hate it when the truth comes out and bursts your fantasy bubble?
Time to go back to the cave and draw up a new excuse.
A lot of Republicans went along with lowering the requirements for mortages. President Bush made a speech supporting it. They were afraid of chilling the construction market by saying, “No.”
They were wrong to go along with Democrats, who were just trying to buy the black vote.
Affirmative Action lending is what got the banks into trouble.
Affirmative Action operates on what principle? RACISM.
It promotes less qualified individuals based on their skin color.
It sets them up to fail.
Affirmative Action mortagaes set up millionsn of blacks to buy too expensive house and lose them. That didn’t help them.
It helped the developers sell houses at high profit margins.
It helped builders build more houses than they should have.
It helped mortgage brokers make big commissions.
It helped home inspectors, FHA, Fannie Mae and Freddie Mac employees make big salaries.
If the GOP had stopped all new social welfare spending from 2001-2008, and cleaned up Fannie Mae and Freddie Mac over the objections of Democrats, there would have been no deficits, no problems in the financial markets, and no Obama.
Just as a reminder, starting in early 2001, Bush has been consistent in his message about Fannie Mae and Freddie Mac in particular becoming a major problem. He has called for regulations and oversight repeatedly because he was concerned about the risks posed by these two and others who were so heavily invested in low interest loans with no real guidelines or minimum requirements for obtaining a home loan. Bush continued his call for action by congress until June of 2008. It was not until July, 2008 something was passed but too little, too late.
I have no problem criticizing Bush on many levels but not on this one. He did see the problem and tried to get congress to do something about it before it was too late. There were too many on both sides of the aisle who were not interested in killing the goose laying the golden egg of campaign contributions or giving their constituients back home reason to vote them out of office.
Some stories are starting to come out of companies like Lehman about a few higher level employees leaving the company several months ago, cashing out their stock. The warning signals have been around for a long time now but no one was paying close attention.
Our state’s most recognized vacation place, Myrtle Beach had become seriously overbuilt early in 2006. Numerous developments were not selling as they had been and there were probably 20 to 30 high rise projects cancelled due to lack of sales. Individual and corporate speculators who bought up blocks of condos at the intial offering prices were counting on holding them until the selling price went up and then flipping the units, realizing a rather sizeable profit. There were many who made millions on their speculative ventures when the bubble was at its apex, but those who got in late lost millions.
For those of us who are involved directly or indirectly in the construction industry, it was not a stretch to see the end coming and coming soon. I tried to tell some of our clients to scale back on expectations and volume but to no avail. Now, some of them are a few million lighter in the wallet while others who were not so greedy and foolish are reaping the rewards of prudent investing.
I share this for a reason. It was not just those at the lower end of the economic scale who wanted to own a home and couldn’t afford it who were approved for a loan, it also included a sizeable number of people who already had a home but wanted to invest and make money in a real estate market that was experiencing an unprecedented financial growth. Investing in a second or vacation home early on, holding on for a year or two and selling reaped some large rewards. Some who had no business becoming involved with a speculative market did so at their own risk and actually contribute greatly to the high foreclosure numbers. We tend to forget, those loans were also made at very low interest rates and the lenders didn’t look too closely at them either. $20K or $100K a year is not enough if your debt load is too great and chances of failure are just as great for either one if there is a serious bump in the economy.
There will be article after article explaining away the reasons for this crisis. Sooner or later, some committee will come out with a report laying blame at someone’s feet so we can get on with our lives knowing justice has been served. Right not, I don’t give a rats behind about blame. Right now, I want the government to show some signs of intelligence in how they approach it and not try to over-regulate with kneejerk legislation that will erode our rights even more than they already have been.
It is disturbing to read about the golden parachutes for executives. Raines is a prime example of incompetence earning unbelievable rewards in the $50m range from FM, then becomes an economic advisor to one of the candidates. Yet, even with his excessive bonus package, I have a problem with some aspects of the proposals coming from the Democrat side that will set salaries and compensation for executives. That is something for private industry to do, not the government.
Other than the concerns about the economy, we need to be just as concerned about the path our elected representatives in DC will follow to try to “fix things”. If we are to enact even more regulations, do so but not to the point of excess. Where is Solomon when we need him?
60% of the mortgages in foreclosure are held by speculators, not homeowners.
I think the government had no choice but to step in and try to stop the collapse created by their own irresponsible lending through Fannie Mae and Freddie Mac.
The executives at those quasi-private corporations should never have been receiving big bonuses, anyway, certainly not now, and certainly not the political cronies like Rahm Emmanuel and Jamie Gorelick who never should have had a job there. They should be facing lawsuits for malfeasance.
There are lots of things that need reforming. One is to eliminate Federal Flood Insurance, which uses tax money to encourage risky development in floodplains and along our coasts.
It is true that the government had to step in and shore up this segment of the economy. Unfortunately, the areas of our economy that remain stable and strong are not enough to offset the subprime market fiasco. As previously mentioned, a social engineering experiment started by Carter, enhanced by Clinton and mainly supported by two government spawned financial entities, Fannie Mae and Freddie Mac both of which went public, had to be protected by the political system responsible for all three.
We can continue to lay blame at the feet of Wall Street and to be sure, they must accept their fair share but at the heart of it all are inept governmental miscues and inaction on regulation and oversight of their own creations. Then, add into the mix abuse by segments of the public, both ends of the economic spectrum and the only logical conclusion is what we are currently experiencing.
Loans were created without validation, targeting high-risk home buyers. This was a situation just begging to be exploited by bankers, mortgage brokers, bond houses, appraisors, developers, builders, speculators, and local governments eager to subsidize growth, because all the rest of them stood to get rich off these unqualified, unsophisticated, naive, mostly minority home buyers.
Fraud and greed are a volitile mix.