“You can’t handle the truth!” Col. Nathan R.Jessep in A Few Good Men
After his election President Obama had the opportunity to educate the public on the causes of the financial crisis and the necessary steps to help us emerge from it. Over this past year, he has squandered this chance, and in so doing has created the political backlash that is occurring today.
Policy Making and the Truth
With great fanfare, we inaugurated President Obama against the backdrop of the greatest financial crisis since the Great Depression. In any new Administration, policy making is never easy and advisors at times seem to operate in virtual echo chambers, hearing only themselves. They presented Obama with a range of options: nationalize the banks; let them fail and let the bankruptcy courts sort it all out; continue the Bush/Paulson bailout policies. From the beginning, Obama advisors took the middle of the road policy to continue the bailouts. As voters and participants in a democracy, we can now see the missing piece in this scenario. President Obama owed the public an explanation of this policy choice. My guess is that his advisers warned against candor. I would further conjecture these advisers felt that candor would have made the crisis worse. Elites always worry about scaring the masses. This was confirmed at today’s Congressional hearings on AIG. AIG was viewed by both Timothy Geithner and Henry Paulson, as the “end of the financial world as we knew it.” The Administration and we are now suffering the consequences of this subterfuge.
Back to the Future
President Obama could have made a few simple points that would have educated the public, built a consensus for his policy choice and left open future policy options if the bailout approach failed.
President Obama could have made these simple and direct points:
- We are facing the greatest financial crisis since the Great Depression
- We got into this problem by borrowing too much, and producing and saving too little
- At the center of this crisis are the large money center banks and Wall Street investment firms
- Using inappropriate levels of borrowing and creating non-transparent products, derivatives, which could not be accurately valued or traded, these banks and firms gambled with our money.
- Banks, however, are the transmission mechanism for getting money into the economy through check clearing, making loans and other services.
- We are going to provide enough support for the banks to continue their necessary and transparent functions.
- There will be a consequence to any bank for needing this ad hoc and unusual government support.
- Shareholders and creditors of the banks must share in some of the losses.
- Bank employee bonuses will be severely limited or eliminated until the banks recover.
- The government will take part ownership in the banks until they return to financial health.
- I have asked my Attorney General to investigate whether these institutions committed any crimes. I will ask him to hold indictments in abeyance until we are on our way to recovery.
- Let me assure you that the government will punish wrongdoing.
We Build Prisons of our Own Making
We know this fictional address to the public did not take place. The Obama Administration now owns the policies of failed bailouts. The recovery is precarious and now the government asserts that the health of the stock market hinges on re-appointing Ben Bernanke as Federal Reserve Chairman. The Massachusetts senatorial election was a wakeup call that the middle class is “mad as hell and isn’t going to take it anymore.” See The President Wakes Up and Smells the Election Results.
In tonight’s State of the Union Address, President Obama scratched the surface of candor. He stated that he hated helping the banks, but that failure to do so would have led to greater unemployment, business closure and lost homes. President Obama, it is not too late for complete candor. It is not too late to commence investigations and prosecutions.
Col. Jessep was wrong: the American public can handle the truth!
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