By BRAD WARTHEN
Editorial Page Editor
KILLING TIME during my too-short stay at the beach over the summer, I flipped on the tube and vegged out briefly over an episode of “The Beverly Hillbillies:”
Granny became suspicious of banker Milburn Drysdale. To reassure her, Jed accompanied her to the bank and asked that Mr. Drysdale show Granny her money. Mr. Drysdale sputtered that he didn’t have it, that it had been invested, that it would take weeks to gather that much cash. Jed, deeply disappointed, soberly told him he’d best do so right quick; Granny felt bitterly vindicated in her lack of trust.
Oh, those silly, unsophisticated Clampetts! What a laugh! They thought those millions were in actual notes and coins in the vault! What rubes.
Too lowbrow for you? Consider Shakespeare’s Polonius, who advises Laertes:
Neither a borrower, nor a lender be;
For loan oft loses both itself and friend,
And borrowing dulls the edge of husbandry….
Oh, that silly, pompous old windbag and his cliches! If he’d minded his own business, “Hamlet” wouldn’t have turned out as a tragedy.
Of course one cannot have a modern economy without a whole heap of borrowing and lending — only the richest of us could own homes, or go to college, or drive cars; businesses couldn’t grow; factories would shut down for the lack of raw materials. No one could trade in stocks or commodities.
And all wealth is based on the sort of trust that Granny was so reluctant to extend to Mr. Drysdale. Most who have achieved middle-class status seldom hold in their wallets an amount equal to even a single paycheck. If you do direct deposit, your compensation consists of 1s and Os transferred from one financial institution to another, and the only reason your debit card works at the grocery store is that everyone involved, from your employer to your bank to the store, plus various middlemen, trusts that those blips of data represent something of real and quantifiable value.
And yet, it seems that on some level, the crisis on Wall Street that so threatens our entire economy is the result of major financial institutions not having sufficient assets to balance their debts — no cash to show Granny, even given time to gather it, in terms I can understand — leading the normally trusting Jeds of the world to say “Hold on!” to such an extent that Secretary of the Treasury Henry Paulson and Federal Reserve Chairman Ben Bernanke saw all borrowing and lending about to come to a screeching halt. In the prosaic wording of The Wall Street Journal over the weekend, what those officials saw was “the circulatory system of the U.S. economy — credit markets — starting to fail.”
So it was that Messrs. Paulson and Bernanke went to Congress late last week to ask for a $700 billion bailout of our financial infrastructure.
Congress was at first deeply impressed. Speaking of a presentation by Mr. Paulson, Sen. Charles Schumer, D-N.Y., said, “When you listened to him describe it, you gulped.” Over the weekend, though, the usual sorts of reflexes kicked in, questions were raised, and more than one voice said, “Hold on.”
As one who would have trouble coming up with $700 on such short notice, I find myself wondering whom I trust in all this. And I wonder that even as I remain convinced that I must trust someone. In fact, the restoration of a healthy state of affairs seems to my mean understanding dependent on a multilateral restoration of trust throughout the system.
On Monday morning, I read everything I could get my hands on trying to decide what I think Congress should do. Unfortunately, everything I read caused me to question whether I trusted the source.
If Mr. Paulson and Mr. Bernanke know what they’re doing, how did things get this bad? Congressional Democrats make sense when they say the bad behavior of executives at these failed financial firms should not be rewarded by the taxpayers, but how much of that is populist demagoguery? And conservatives are right to say that there are limits to the extent that government can shield us from risk and consequences, but at what point do their objections become mere ideological pedantry in the face of a crisis of this proportion?
Consider the piece on the opposite page by Paul Krugman. I chose it because it broke down the situation into elements even I could understand. But given his oft-demonstrated animus toward the Bush administration, am I at all surprised that he concludes that he doesn’t like its plan?
The really awful thing is that it was trusting the experts — from the Masters of the Universe on Wall Street to an administration headed by, as Gail Collins of The New York Times wrote over the weekend, “the-first-president-with-an-MBA-and-a-lot-of-good-it-did-us” — that got us here.
The even awfuler thing is that our only way out of this mess is to trust. We have to rely upon the “experts” in the administration, and members of Congress and their staffs, to draft the right plan and make it work. And then we have to trust our bankers and brokers and each other going forward, or nothing the government can do can get our economy back on its feet.
That means we’re going to have to hush up the Granny within us, and given present circumstances, that’s not going to be easy.
Go to thestate.com/bradsblog/.