WASHINGTON—The Democratic presidential candidates squabble over real or imagined racial sensitivities, the Republican presidential candidate stages photo opportunities with the troops in Iraq, and meanwhile the financial system is coming apart at the seams.
Would someone please tell Barack Obama, Hillary Clinton and John McCain that here in the real world, we have what looks like a real problem. It would be nice if they’d pay attention and maybe, you know, come up with some ideas for getting out of this mess.
You’d think that when former Federal Reserve Chairman Alan Greenspan predicts that the deepening financial crisis will be “judged in retrospect as the most wrenching since the end of the Second World War,” the candidates might take note—if only in self-interest. How are Obama and Clinton going to pay for universal health insurance if billions of dollars keep evaporating in this overheated “crisis of confidence”? How does McCain intend to fund his Hundred Years’ War in the Middle East if Wall Street is in ruins and the economy is slogging through a deep recession?
To be fair, the presidential contenders haven’t been entirely silent. Clinton, for example, did speak on the financial crisis Monday, criticizing George W. Bush for not being presidential enough in his leadership and saying she would have begun more intensive oversight of Wall Street a year ago. But that’s not the same as charting a path out of this mess.
Bush, at least, is finally engaged in the crisis. Sort of. “We’ve taken strong and decisive action,” he said Monday. “We obviously will continue to monitor the situation. ... In the long run our economy is going to be fine. Right now we’re dealing with a difficult situation.”
“Difficult situation” is an incredible understatement, given that the Fed is employing gambits it hasn’t used since the Great Depression to prevent a domino-effect collapse of big Wall Street firms.
The weekend bailout of investment bank Bear Stearns—and that’s what it was, really, a bailout wrapped inside a sale—was probably a diving catch that had to be made. This is how bad the crisis has gotten: In January 2007, Bear Stearns had a market value of $20 billion. Now, the company has been sold lock, stock and barrel to J.P. Morgan Chase for just $236 million—but only after the Fed essentially guaranteed up to $30 billion of Bear Stearns’ dodgy mortgage investments.
There went the fifth-largest investment bank in the country. Poof.
Meanwhile, the mortgage crisis continues unabated. I suppose we shouldn’t be surprised that when millionaire Wall Street professionals get in trouble after making investments they didn’t really understand, they get saved from bankruptcy at the last minute—whereas first-time homebuyers who get in trouble after signing mortgage documents they didn’t really understand are left to fend for themselves.
The dollar has become so weak that it’s worth less than the Swiss franc. Oil has passed $100 a barrel. Investors are turning to gold, which now costs more than $1,000 an ounce. With food and energy prices rising sharply, home equity shrinking and the economy apparently sliding into recession, consumers are caught in a vise.
Barring some sort of miraculous turnaround, the next president’s ability to pursue any kind of agenda is likely to be constrained by the economy. And what about those vying to be sworn in as president next January? McCain’s admission that “the issue of economics is not something I’ve understood as well as I should” casts a very different light on the whole issue of experience, doesn’t it? McCain added that he is reading Greenspan’s book. Maybe he should try spending a night in a Holiday Inn Express for good measure.
There’s every reason to believe that Clinton and Obama, given their wonkiness, do understand economics better than McCain. Now would be a great time to display that wisdom. A good start would be to acknowledge that putting the economy back on a sound footing is likely to be the new president’s first task—and then to begin laying out some ideas for how that might be done. A little honesty would be preferable, too—an admission that no president will be able to turn around the economy overnight.
I realize that’s heresy. Presidential candidates like to tell us about all the largesse they’re going to provide. They like to invite voters to envision the sunshine of happy days, not the gloom of an economic slump. But real leadership involves dealing with the economy as it is, rather than as we would like it to be.
Eugene Robinson’s e-mail address is eugenerobinson(at)washpost.com.
© 2008, Washington Post Writers Group