The Failure of "Because I Say So"

LONDON -- Over dinner last night, i was trying to explain to a British friend why the majority of House Republicans fled the bailout bill compromise. Reading the polls, it's easy to understand why those with the most hotly contested elections this November were the least eager to sign up for the bill. But, in surveying the wreckage, one fact became clear: the credit crisis was exacerbated by a credibility crisis.

It's easy for Americans to look at President Bush -- he of the 935 lies in the Iraq war runup--and Henry Paulson, the Goldman Sachs-bred Treasury Secretary -- and say, "prove it" regarding the dire predictions of doom if a bailout doesn't occur. As an American typically ignorant of the arcane ways of the financial wizards, what was missing for me in the scare talk last week was somebody who could put the danger in concrete terms: a businessman, say (as opposed to a financier), who could tell me how lack of credit would prevent him from stocking up on new inventory or meeting payrolls. An administration marked by profound arrogance (hello, Mr. Cheney) sent a financier to Congress to demand unprecedented power for a financier, and the scare talk sounded familiar and empty. It's the boy who cried Wolfowitz.

Somehow, if the danger is that real and that near, somebody with a shred of credibility and some real skin in the game has to stand up and tell us exactly what's in the alleged abyss. The administration's failure to understand that fact is telling and profound.

Comments

[Currents]

Bravo for the piece. A lot of pundits, analysts and Congressional leaders are speaking about various 'reasons' or theories as to why the bailout measure failed. Special agendas on the outer reaches of the right and the left are asserted, but no one seems to be attributing anything to the electorate - to the people themselves.

We saw news articles telling us that calls and email messages to Congress was running 30-1, 60-1 or even 100-1 against the bailout, but I am not seeing anyone in Congress or the MSM saying, "It died because constituents did not want it."

Harry's article sums it up for the people. Regardless of whether one leans to the left or the right, this package had no appeal because there was no credibility behind it. People have stopped believing Bush and they damn well don't trust Congress.

[research]

Rescue Main Street, not wall street.

[ladydriver]

Is anyone else watching the senate proceedings right now? They are talking about this very thing.

I'm no economic genius, but it seems to me that the CEOs of these failing institutions, who have been making millions of dollars a year, who have made the decisions that tanked these institutions and got our country into this financial crisis, should take pay-cuts and let that money be put into solving their mess.

I have a full-time job. I've got two kids to feed, a mortgage, utility bills, and I'm wondering right now how to keep my gas service (heat for those two kids) turned on through the coming months. Do you think I have the money to bail-out these idiots who make more in one year than I will probably make in my lifetime? Why should I? They haven't done anything to help me out! Let them come up with the money out of their pocket, not mine.

I agree with Sarah Palin on one thing...th­is makes me ill.

[paixa3]

There is no reason....­the greedy just want a free gift, again.

NO BAILOUT, NO RESCUE.

[jeffrey678]

These are the same people that said outsourcing and free trade are good for Us! These are the same people that wanted to put the social security surplus into the stock market! Since they could not deceive us, now they use extortion! They just want more money before the flee the country. GIVE THEM NOTHING!

[zitlight73]

They also said Hussein had WMDs and that the Iraqi War would pay for itself and our troops would have candy and flowers thrown at their feet as liberators. We've seen who profited for that debacle and Katrina and it will be the same with this $700 billion. TYehy are thieves and liars period.

[discretionaryincome]

This is like buying a pig (with lipstick) in a poke!!

[Mildmannered]

Yes, no political official (not Bush, Paulson, Bernanke, Obama or McCain) has explained in terms which those of us on Main Street can understand what the problem is and how the bailout bill would solve it. Nor have any of the politicians who oppose the bill clearly explained what the problem is, why the bailout bill would not solve it and how they would solve it.

Sort of frustrating that everyone is talking down to us.

(At least now I understand that a WMD is something which Iraq did NOT have.)

[LouisvilleLiberal]

They aren't talking down to you. They don't understand it either. I watched the testimony on CSPAN and Paulson and Bernanke were frightenly vague about what they were going to do with all this money. They acted like it wasn't really that big of a deal....th­ey expected to get their blank check with little explaination to the people.

The fact that Congress would buy into the panic and rush out a bill without hearings is the problem. They are used to tossing around Billions of taxpayer dollars every day too....so they didn't really think the voters would rise up against it the way they have.

The fact is that to our government, this isn't that much money. But, it's money we don't have and have to pay back on the sayso of an Administration that has lied to us too many times. It seems like a grab for cash as they head for the door and I suspect that is what it is. They thought the public would be relieved becasue the market didn't crash and feel like it was money well spent....w­e would never know what would happen if the bill had passed.

[fuel4thefire]

They both avoided specifics so as to keep massive runs from happening. ( They happened anyway at Wamu with $16 billion being withdrawn over 10 days). Chuck Dodd on NPR let slip that the current foreclosure rate was 5-6000 per day, then Bernanke during the House hearings said 10,000 per day. If you do the math 10,000 x avg home loan made, approximate value would be around $325,000 and that adds up to a whole lotta loss for banks that do not have the capital to balance off those losses. That tightens up credit. The private mortage insurance that should have backed those losses are the real story as AIG and all the rest did not have enough in capital reserves to back the insurance they sold to the lenders. Read my other blogs about CDS market: Credit Default Swaps and it will explain alot about how we got here and what we will have to do to provide a "floor" for housing values and clean the books to enable credit... which affects ALL businesses to make payroll, fund inventory, etc.

[mydzl6]

"The administration's failure to understand that fact is telling and profound." A profound comment -- except maybe you're giving the administration the benefit of the doubt. The fact is, there is NO ONE in the administration who could have delivered a believable message. Maybe he should've asked Laura.

[cornflower]

A little crow eating wouldn't hurt either. Would it kill George effing Bush, after all the ways he's screwed us, to say, "I'm sorry. We have messed up bigtime and you have to pay to fix it!" The utter shock alone might drive people to embrace the plan.

[cornflower]

You are right - this was a failure of political communication on many levels. One level, which shows how out of touch they are, is the simple progression of anger, denial, depression and acceptance. Yes, the four stages of dealing with death, or any other kind of bad news, e.g. folks, we've driven the economy into the ground and now it's gonna cost you $800,000,000,000. to fix it!!!! They want us to go from anger to acceptance and do that within 5 days. Not gonna happen. Also, from Bush to Pelosi to McCain to Obama to House Repubs to a million radio talk show hosts and the esteemed of the main stream media, our leaders have not explained what is wrong and why this plan is the way to fix it in terms that the average person can understand. I thought Nancy Pelosi's insistence on insulating Main Street from Wall Street was particularly bad. The point is that they are inextricably entwined and cannot be separated so disaster on Wall Stree IS disaster on Main Street. Big time failure in communication.

[darthdarcy]

Think of it this way Harry...

"The Spice, Must Flow..!"

See what I mean..?

[MagisterLudi]

I do not support the Paulson Marshall Plan. But... and this a big but... will a deep recession result, all over the world?! This would make 700 billion look like chump change. Let's see.

[Aurin]

Hey Harry, Love the show!!! KCRW is the Best
Here is an article from Yahoo today.

Herd mentality rules in financial crisis
http://news.yahoo.com/s/nm/20080930/lf_nm_life/us_financial_psychology

[MagisterLudi]

You mean LE Show. Great stuff!
KCRW WAS best until they decided to enter pop music A&R field. If I never hear another earnest 3-chord band from UK it will not be soon enough.

[nanners0808]

bush has cried wolf so many times that he has no credibility even with his party

[JohnShank]

Precisely nanners. I wonder if Bush thinks about that. His failed administration. How people don't trust him and never will again. He's a failure. Complete and total. I've never seen such a failure in all my years. Save for perhaps Nixon, the Bush administration will go down in history as the worst ever! Reagan, when he was running against Carter famously asked if we were better off than we were four years ago. All Obama need ask is are we better now than we were in 2000? The Republicans have managed to just decimate this country. I mean it is unprecedented. These d irtbags have gutted the country at home and abroad, and the sad thing is, thanks to the Democratic Congress none of them will ever have any sort of repercussions. They walk...sco­t free.

[SoonerThought]

Great points, Harry. Love Le Show. Never miss a podcast episode. Thank you very much, uh-hmmm.