Are you reading all the fuss and fury about the debate in Congress over financial regulation reform? It is a blatant, pandering, shameful display of Congressional “bring me someone to hang” behavior. It makes me want to join the nearest TEA party rally—come to think of it there is one nearby for Tax Day.
But this is not a rant about TEA parties or Congressional pandering. The TEA Party members, from what I can see, are just a bunch of folk like the rest of us only more pissed off. And Congress will get what it deserves in the November 2010 election which, no doubt, accounts for many of the speeches blaming someone else for the mess. No this is not about any of that.
Celebrating Our Economic Spring
While the National Bureau of Economic Research has not yet called the official end of the Great Recession, it seems imminent and probably ended months ago. High unemployment, weak access to capital and other traditionally lagging indicators of recovery still hang in the air like dark clouds hiding the sunshine.
But the signs of economic spring are popping up as reported by Well Fargo Economics.
- Businesses inventories grew for the second month in a row in February, making Q1 inventory growth positive, which will push GDP higher.
- Consumer Price Index rose just 0.1% in March. Excluding food and energy prices were flat and are down 1.1% from March 2009 levels easing inflation fears.
- Philadelphia Fed Index was at 20.2, the consensus expectation, suggesting growth in manufacturing with new orders and inventories indexes up.
- Industrial production increased only 0.1% in March—below the 0.7% gain expected due to a warm March curtailing utility demand affecting overall production.
- Foreign investors bought U.S. Treasury securities in February. The meltdown in Greece has a double bonus effect reminding Americans we could be like Greece if we don’t get our Government under control and reminding the rest of the world that even weakened by recession America’s economy is not such a bad place to invest.
Confessing Our Economic Sins
Instead of looking for some scoundrel to hang, Congress would do the country a greater service by holding up a mirror and inviting confessions from all who contributed to this near death economic experience. There are plenty of sins to confess and not just from bankers.
- How many of us took out home equity loans betting that our home values would keep going up long enough to repay the loans?
- How many of us used that HELOC money to do something other than remodel the kitchen?
- How many of us flipped our mortgages and took those teaser rates thinking we’d just do it again when the loan was about to reset betting that current conditions would continue?
- How many investors including banks bought securitized mortgages because they were AAA rated and thus were safe?
- How many loans did Fannie Mae or Freddie Mac make that they should not have made because Barney Frank or Chris Dodd (or add your favorite Congress person here) hauled them up the Hill and beat them up for being mean to poor people or scrooges by not giving loans to those with weak credit or no down payments?
- How many Congress members hauled Alan Greenspan up to the Hill to berate him for keeping interest rates too low too long? Until this week!
You see where this is going don’t you?
We were all living the good life as long as we could get away with it. We were all working the system, playing by the rules, taking care of ourselves, living the good life. Now we know that we were living in a bubble and when it burst it splashed everyone.
Counting Our Leadership Lessons
As bad as this recession has been, a candid study of history tells us it could have been worse—much worse. The good news is our financial system did not collapse like it did in the Great Depression because we had a financial infrastructure and leadership that could act—and more importantly DID act to stabilize the crisis.
A good assessment of this dodging the bullet can be found in a blog post by Bob McTeer. His assessment of the leadership skills of Ben Bernanke and then Treasury Secretary Paulson in taking the actions that prevented the crisis from getting worse is a sobering read. I recommend it to you.
What counts is that our system actually worked to avoid the abyss we all were told we faced. The Bush Administration decision to bet the farm on a crisis management plan of action was, in hindsight, both prudent and effective. I recognize this is not the good news the Democrats in power today want to hear but it is the gut check intuitive conclusion that most Americans, I think, are beginning to realize.
There but for the Grace of God and the actions of a few scared, smart, decisive and resourceful men and women. . . . (fill in the rest of the story for yourself.)
What does this mean for us now?
Having dodged the dooms day bullet and with signs of economic spring on the horizon what do we do now?
Americans are worried and losing confidence because of the orgy of spending that feels to many like a national replay of the HELOC experience we just went through. We are spending money like we had it to burn. And we are not just remodeling the national kitchen with it either but earmarking all manner of things large and larger that create few jobs, are one time banquets of calories our national waistline does not need, and leave no lasting asset—only debt.
Soon the national mortgage interest rate is going to reset. Out payments are going to skyrocket in both taxes and inflation. We know this will not work and we are growing worried about what it will do to our economic spring—and the autumn of our old age, and the inheritance and national future we leave our kids.
This is the Waterloo facing President Obama. Does he press ahead with his agenda of change knowing he likely has one chance to get his program adopted before losing his Congressional majorities and the public support—or, what? That is the problem—having worked so hard for ‘change we can believe in’ the President cannot imagine that we do not believe in it.
The Greek tragedy in this is that we so wanted, as Americans, to believe in him and we saw in him an opportunity for a fresh start with a fresh face and a symbol of American values, freedom and reinvention so powerful that the world would not doubt our sincerity or resolve. But the mandate we gave President Obama was the ‘change we can believe in’ not the changes he wants to make. And that will make all the difference between ‘great job’ or ‘gone’ when his contract comes up for renewal.