January 21, 2009
Yesterday, Inauguration Day, was a day of deep contrasts. Millions of people turned up on the Mall in Washington, DC to witness our 44th President be sworn in. Hundreds of millions watched from around the world. All looked with hope, joy, pride, and even love. It was a day of tremendous optimism, a day of looking forward.
Yet, these past few days have seen a steep decline in stock prices, though as I write, markets are trading higher. The news of stupendous write-downs by the nation's largest banks hit markets hard, dragging the Standard & Poor's 500 down just over five percent, the worst Inauguration Day results ever. Clearly the Hank Paulson solution to stabilizing credit markets was a complete failure and the news hit investors hard. President Bush oversaw eight disastrous years for investors. During his term, the stock market was down 2.3 percent on average annually.
I am not the first to point out that these desperate times offer a strong leader a chance to alter the future. September 11, 2001, was one such opportunity and it was lost. Now we face an opportunity to re-assess global trade, the social contract with our citizens, the way we use energy, the rule of law, the role of finance, the role of the military, healthcare, education, and a host of other desperately needed discussions. If we are to turn around this situation, we need decisive, action-oriented leadership.
Is the new President such a leader? Weeks ago Senator Obama persuaded then-President Bush to ask for release of the second $350 billion earmarked for settling the banking crisis. This means that the funds will be available quite quickly. At the moment, neither the President nor Congress seem interested in following the plan laid out by the prior Secretary of Treasury, but it does indicate the qualities we are looking for.
There are other indications. Today the new President is assembling his top generals, including Defense Secretary Robert Gates, Chairman of the Joint Chiefs of Staff Adm. Mike Mullen, National Security Adviser Gen. Jim Jones (Ret.) and Gen. David Petraeus, who heads the U.S. Central Command. Joining the meeting via teleconference from Iraq will be U.S. Ambassador to Iraq Ryan Crocker and Gen. Ray Odierno, the top ranking U.S. general in Iraq. Possibly a Secretary of State Hilary Clinton will have been confirmed and will be allowed to join. This war has cost innocent lives, our reputation and goodwill, and billions of dollars. It is urgent that it be addressed immediately and gives me comfort to see that the new administration is doing the same.
Review also President Obama's other first acts. He has called for a meeting today with his top economic advisors as to how to best deploy the Troubled Asset Relief Funds and the Economic Stimulus Package, giving hope that a dramatic and system-wide approach will emerge on dealing with the economy both at the top and on the ground. He took time in his inaugural address to state specifically that the markets need rules. I took this to mean that we will be seeing greater focus on making speculation difficult, on regulating hedge funds, private equity funds, and commodity funds and most importantly, forcing transparency on all who work on Wall Street. As Michael Walzer, a leading political theorist, so aptly stated in a recent New York Times article about the Madoff scandal: " 'I'm a moral philosopher, but I don't think morality is all that important in the way we think about Wall Street and the economy.' The drive to make money is at the root of the business world, he noted: 'We have to assume human behavior is what it is, and that's what you need government for.'"
President Obama's first half day in office also saw attention given to the rule of law. He directed Chief of Staff Rahm Emanuel to send a memorandum to federal agencies and departments, calling for them to halt pending regulations until the Obama administration reviewed them. As we have been reading, the various agencies have been attempting to put into place several midnight regulations to open our parks to concealed weapons, to modify terms for food testing, and a host of other policies. These will be reversed unless they are consistent with the new American ideals. Our President also ordered military prosecutors to request a 120-day suspension of trials during a review of the system used to try suspected terrorists at the Guantanamo prison. This indicates that the rule of law will have a place in America's future.
Congress has moved quickly to confirm the women and men President Obama seeks to serve in the highest positions, dragging their feet only slightly in scheduling a hearing for Hilary Clinton. His nominations were largely non-controversial and where they were controversial, there was clear trade-offs being made. He demonstrated decisiveness.
We have seen the headlines from around the world. President Obama is being hailed as a global leader. We have seen the photographs of the millions of well wishers gathered in the mall. People of all economic status and of every conceivable type have cheered him on as he outlined the first steps his administration will take. There has been a groundswell of support for this man and through him, for this nation.
I know that this is more of a political commentary than an assessment of the market condition. However, I have long asserted that this market is all about Washington. The nation, indeed the world, is looking for a leader. The actions of his first 24 hours indicate it has one.