Arnold G. York
Is it time to panic yet?
I opened the New York Times this Monday morning and there was an ominous four-column headline on the front page of the newspaper, above the fold, heralding financial crises on Wall Street. Lehman Brothers was unable to make a deal during the weekend and looked to be headed for bankruptcy, Merrill Lynch was teetering and was being sold to the Bank of America in what looked like a shotgun wedding and AIG, the largest insurance company in America, was trying to raise money, I suspect, to survive.
I, of course, took this all with a grain of salt because, as all of my Republicans friends have been saying for months, the N.Y. Times is really just the mouthpiece for the Democratic Party and you really can’t trust a single thing they say.
So, after uneasily drinking my over-priced Starbucks cappuccino, I walked over to the newsstand to get a copy of the Wall Street Journal, because, after all, when it comes to financial news, if there is one name you can trust it’s the solidly Republican, conservative, Rupert Murdoch-owned WSJ.
I looked at the WSJ front page and my knees almost buckled. There, in a six-column headline across the entire top of the front page, was a headline that told it all: “Crises on Wall Street as Lehman Totters, Merrill is Sold, AIG Seeks to Raise Cash.”
Now, to appreciate what this headline really means you have to understand a little about the culture of the WSJ. The WSJ is known as the old grey lady of business and finance. They pride themselves on never panicking and being able to put everything into perspective. A war might get a three-column headline, at most a four-column headline. A six-column headline means that the editors of the WSJ think this economic news is monumental.
My palms suddenly got sweaty. This was big, really big, and I simply didn’t know what to make of it. I struggled to try and figure it out, and make some judgments.
Now, in all fairness to you, my readers, I must confess a couple of things, which I am sure impact my judgment.
First, I am a life-long “tax and spend” Democrat. Sue me. I truly believe there is really no free lunch. If you want to make society a better place, you have to raise the money to do it with taxes. If you want to go to war, you can’t just put three trillion dollars on the national credit card. You actually have to ask the citizens to pay for it with higher taxes. The other thing I have to confess is that I never got more than a “C” in economics. I took an introductory course and was actually kind of interested. I went to class religiously (which for me was unusual), and actually did all the readings and listened very hard. But strangely, the harder I listened, the less sense it all made. It was sort of like trying to hold onto intellectual cotton candy. Whenever I narrowed in on something it seemed to dissolve into a discussion that seemed more theological than financial. I took a second economics course just to make sure the first grade wasn’t just an aberration, but got the same “C.” I finally left economics forever with an uneasy feeling that it was not for me and that a great deal of it was a bunch of bull-pucky, despite all the jingling Phi Beta Kappa keys the professors wore on their vests.
Now fast forward five decades and I’m reading the WSJ with the same cotton-candy-mouth feeling and totally unsure of what to make of all this when I decide to turn to the editorial page for some cogent analysis of events. You should all understand that the editorial section of the WSJ is the bastion of free-market economics. This is ground zero of capitalism. Most of the writers and columnists there believe that the guys and gals who write the front page of the WSJ are a bunch of closet lefties who probably don’t even have a Milton Friedman shrine in their homes.
I looked at the editorial section and I was flabbergasted. There were three editorials and three opinion pieces, including one by that famous economist Arthur Laffer. Of those six pieces, one editorial, the shortest, dealt with the Wall Street crises with a penetrating analysis. I quote, “The only thing that anyone knows for certain is that today will be tumultuous for financial markets, after a historic Sunday that has remade Wall Street.” The rest of this seven-inch editorial is equally as penetrating and analytical. They then devoted 18 inches of editorial space to supporting Bush’s decision in Iraq, and attacking Obama and Bob Woodard. The final 14-inch editorial was about how the speculators were not responsible for the high gas prices at the pumps, from which I deduced the editors of the WSJ editorial page had no more idea of what was going on down on the Street than I did.
Since it was becoming clear that no one seemed to be sure about what was happening, I give you York’s seven-point analysis of what’s happened on Wall Street, bearing in mind my previous disclaimers.
1. No one knows how deep this goes, who was responsible and how long it will take us to get out of this financial crisis. We should all be legitimately and righteously apprehensive and very cautious with our money.
2. Some very smart people, like the CEOs of Lehman Brothers, Merrill Lynch and AIG, are as capable of doing some very stupid things as the rest of us, they just do it with more zeros.
3. A little greed may be good but too much greed is dangerous. Any business like the Wall Street firms that give out year-end bonuses that are so large the Ferrari and Lamborghini dealers run out of cars to sell to the stock brokers is living way over its head. It can’t last. No business, year in year out, makes that kind of money, except perhaps oil companies and dealers of illegal drugs, and both are very dangerous businesses.
4. No country can just run on credit and simply push the costs onto the next generation. If we want something, whether it is a war or national health insurance, we have to be willing to pay for it and that means taxes. It’s not a dirty word. It’s an honest word and it’s how countries pay for what they want.
5. We cannot continue to borrow money from the world and owe money to the world. Every time we do, we become weaker and they become stronger. Power follows the money.
6. We need a plan to get us out of debt and that plan is called leadership, and that’s what the presidential candidates should be talking about. The lynchpin of that plan is a national energy policy to free us from dependence on foreign oil and foreign money; otherwise, we might just as well become a subsidiary of China.
7. Lastly, regulation is not a dirty word. The collapse of Lehman, Merrill Lynch, AIG and Countrywide was a failure of regulation. Regulation just doesn’t protect the consumers. More important, it protects the companies from their own greed. The problem is that if one company steals, they all have to steal to compete or the market punishes them. If tomorrow you could ask Richard Fuld, CEO of Lehman Brothers, “Wouldn’t they have been better off if several years ago the federal regulators had said that all the Wall Street firms could only have 20 percent of their assets in mortgage backed securities?” -What do you think his answer would be?