When I find myself in times of trouble
Mother Mary comes to me
Speaking words of wisdom, let it be
And in my hour of darkness
She is standing right in front of me
Speaking words of wisdom, let it be
“Let it Be” – The Beatles
Over the years, I led or was a member of the inner circle of many high level corporate crisis teams. A problem or crisis challenges many a senior business leader to immediate action. Enshrined in books on leaders is the leader who embraces action rather than “thinking more and reacting less.” The unfortunate corollary ethic is that inaction is weak, unmanly, lazy or worse. Even more dramatically, many times, a problem creates an adrenalin rush that is antithetical to rumination or reflection.
An entire lexicon fuels this response to problems and crises. The language itself has military connotations: we are calling general quarters; battle stations; red alert; the bunker mentality. We need to deploy our troops, plot a strategy or prepare a measured response. We applaud bold action and deride thoughtfulness.
Rarely does a leader publicly pause, reflect, and ask: “What if I do nothing…what if I let it be?
Reaction to the Financial Crisis
Both the Bush and Obama administrations overreacted to the financial crisis. In short order, they created TARP and an alphabet soup of borrowing programs. The government then impulsively guaranteed close to $23 trillion of debt. Compounding the folly, the government became a partner in GM, Chrysler, AIG and Citicorp. Stimulus programs barreled through Congress bringing us first time home buyer credits, “cash for clunkers,” and interest rates at or near zero.
What If?
What if the government had done nothing when the crisis exploded into the public’s conscientiousness? We purport to be a capitalist economy whose basic tenet is simple and understandable: reward risk that succeeds, punish risk that fails. The necessary adjunct to this tenet makes perfect sense: punishing failure encourages the capitalist to be careful with his assets, thus limiting misallocation of funds. Unfortunately, what has happened in the US economy is not capitalism: successful enterprises are forced to compete with failed, government propped up ones. And new capital will not be available for new enterprises.
If we did nothing it would be painful for a short period of time. Yes, there would be hardship, unemployment and business failures. However, the self correcting nature of capitalism would mitigate the length of the hardship, as capital would rapidly re-deploy to successful and new enterprises: an economic version of “no pain, no gain.” Instead we have persistently high unemployment, “zombie banks” afraid to lend and, compared to prior recoveries, sub optimal economic performance.
Legislative Reform
In response to problems in health care the current Administration rammed through a complex, little understood health care proposal. We know taxes will rise dramatically. We have no idea how costly, efficient or effective the new health care system will be. Given typically heavy handed government involvement, I am not optimistic. Nancy Pelosi’s comment that we need to pass the bill so we can find out what is inside is not exactly a confidence builder.
Similarly, the Administration is trying to pass another gargantuan and little understood financial reform bill. I have been critical in other essays about the financial institutions that got us into the financial crisis, but there are laws on the books right now that would go a long way to curbing some of the excesses. We simply have to enforce them. Another simple fix: reinstate Glass Steagall, which separates commercial banking from the securities business.
Stop the Committees Who Saved the World
In 1999, Time Magazine featured Robert Rubin, Alan Greenspan and Lawrence Summers as the Committee who Save the World from a global financial meltdown. What if there had been no Committee to Save the World? A smaller failure in 1999 might have led to a more chastened financial sector. Perhaps sub-prime lending, overbuilding in residential housing and commercial real estate, the 2008 stock market meltdown and now the potential for sovereign debt defaults in Greece, Spain, Dubai and other countries would not have taken place.
Our current “Committee to Save the World” (Geithner, Bernanke and Summers) is certainly falling short of the mark. Perhaps our bold men of action should be a lot less bold, a lot more thoughtful, reflective and yes, inactive. Might we all be better off? In the immortal words of the Liverpool Philosophy Society (AKA the Beatles) could we not just “Let It Be?”
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