11:52 am
A Crisis in Confidence, Not Liquidity
Three observations about the current mess.
1. Last night, Bush looked scared, lost, and out of place. As my wife Molly put it, he was reading words put into his mouth rather than expressing his own thought. For all our mocking of Al Gore as Mr. Roboto eight years ago, no President has ever looked as wooden as Bush did last night.
But it was not merely a question of performance. Bush looked small — a sad little man out of his depth, more Willy Loman than Atticus Finch. It was a pathetic exercise in ass-covering and special pleading. Where others have risen to an occasion, Bush sank into the depths of his own failure.
2. It is easy to regard our current mess as a question of insufficient liquidity. Although the past two weeks’ event are clearly the product of the current Administration’s disastrous economic policies, what we’re really facing is a crisis in confidence. That’s why the Paulson-Bernanke decision to turn this into one of the biggest crises in American history was so devastating: it created the conditions for a collapse of confidence in the American economy.
If bankers continued to believe the economy was sound, they would lend. If foreign investors still thought the United States as a good place to put their money, the failure of a few large firms would do no more harm to our economic prospects than the Chrysler bailout, the collapse of the savings and loan industry, or the Enron meltdown did.
Credit isn’t drying up because there’s no money; it’s disappearing because people are afraid — scared to lend, scared to buy, scared to do much of anything at all. In the end, the Paulson plan (or the Dodd plan or any other proposal for that matter) will succeed or fail not because it pumps money into the system, but because it restores confidence.
What is required of leaders in times like this is not merely policy prescriptions, but also reassurance. Think about 9/11. For all we may despise him now, Rudy Giuliani — not Bush, I would note — demonstrated that kind of leadership. For about a week, Giuliani became almost a second President, offering Americans the comforting words they so longed to hear — words that Bush, whether unwilling or unable, never himself got around to saying.
In the current crisis, we have yet to see anyone play a similar role. Bush has been a disaster. McCain’s abrupt decision to “suspend” his campaign looked more like political panic than economic stewardship. Obama has been so cool, calm and collected that he looks detached. Paulson and Bernanke have turned into the Panic Twins, and no one in Congress has stepped to the plate.
3. I could not help contrasting Bush’s speech last night with one delivered during an even greater crisis. On March 4, 1932 (the official date of Inauguration Day had not yet been moved to January), Franklin D. Roosevelt gave his First Inaugural Address, three years after the Great Crash of 1929 had plunged the United States into the Great Depression. It was a desperate time, far worse than what we face now (at least as of now), the country teetering on the edge of chaos, despair, and the collapse of democratic government.
In response, Roosevelt gave what is one of the greatest inaugural speeches in American history (surpassed, perhaps, only by Lincoln’s Second), helping to calm American fears and start the long hard road back to prosperity — a process that lasted until the end of the Second World War, nearly sixteen years after the Great Crash.
Despite the fact that it would take over a decade for the United States to recover fully, Roosevelt’s speech that day was a turning point, if not in terms of economic growth, then in terms of Americans’ willingness to bear down and try to fix what was ailing the country — and in terms of saving our democratic form of government.
In this environment of fear and political posturing, I think it would be useful to recall what real leadership looks like. The following are excerpts; you can read the entire speech here.
I am certain that my fellow Americans expect that on my induction into the Presidency I will address them with a candor and a decision which the present situation of our people impel. This is preeminently the time to speak the truth, the whole truth, frankly and boldly. Nor need we shrink from honestly facing conditions in our country today. This great Nation will endure as it has endured, will revive and will prosper.
So, first of all, let me assert my firm belief that the only thing we have to fear is fear itself—nameless, unreasoning, unjustified terror which paralyzes needed efforts to convert retreat into advance.
In every dark hour of our national life a leadership of frankness and vigor has met with that understanding and support of the people themselves which is essential to victory. I am convinced that you will again give that support to leadership in these critical days.
In such a spirit on my part and on yours we face our common difficulties. They concern, thank God, only material things. . . . Yet our distress comes from no failure of substance. We are stricken by no plague of locusts. Compared with the perils which our forefathers conquered because they believed and were not afraid, we have still much to be thankful for. Nature still offers her bounty and human efforts have multiplied it.
Plenty is at our doorstep, but a generous use of it languishes in the very sight of the supply. Primarily this is because the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. . . .The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit.
Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.
Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing. Small wonder that confidence languishes, for it thrives only on honesty, on honor, on the sacredness of obligations, on faithful protection, on unselfish performance; without them it cannot live. . . .
If I read the temper of our people correctly, we now realize as we have never realized before our interdependence on each other; that we can not merely take but we must give as well; that if we are to go forward, we must move as a trained and loyal army willing to sacrifice for the good of a common discipline, because without such discipline no progress is made, no leadership becomes effective. We are, I know, ready and willing to submit our lives and property to such discipline, because it makes possible a leadership which aims at a larger good. This I propose to offer, pledging that the larger purposes will bind upon us all as a sacred obligation with a unity of duty hitherto evoked only in time of armed strife.
With this pledge taken, I assume unhesitatingly the leadership of this great army of our people dedicated to a disciplined attack upon our common problems.
Action in this image and to this end is feasible under the form of government which we have inherited from our ancestors. Our Constitution is so simple and practical that it is possible always to meet extraordinary needs by changes in emphasis and arrangement without loss of essential form. That is why our constitutional system has proved itself the most superbly enduring political mechanism the modern world has produced. It has met every stress of vast expansion of territory, of foreign wars, of bitter internal strife, of world relations. . . .
For the trust reposed in me I will return the courage and the devotion that befit the time. I can do no less.
We face the arduous days that lie before us in the warm courage of the national unity; with the clear consciousness of seeking old and precious moral values; with the clean satisfaction that comes from the stern performance of duty by old and young alike. We aim at the assurance of a rounded and permanent national life.
We do not distrust the future of essential democracy. The people of the United States have not failed. In their need they have registered a mandate that they want direct, vigorous action. They have asked for discipline and direction under leadership. They have made me the present instrument of their wishes. In the spirit of the gift I take it.
So how about it Senator Obama? If John McCain does not show up tomorrow night, it’s your chance to give a speech that could reassure the nation, one that would match if not surpasses the best you’ve given in the past. It might do more to restore confidence than anything that’s happening in Washington.
And if that isn’t enough incentive, it also just might win the election for you.
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