No Love for Ben
It was not too long ago that our economy seemed to be at the brink of collapse. Just about a year ago, last March, Bear Stearns was the first to fall. A few short months later, in September, another Wall Street financial titan, Leahman Brothers, crumbled under its own weight. We were at war and we had two Generals, Ben Bernanke and Henry Paulson, and neither disappointed. The U.S. was lucky: with a academic who has an affinity for Depression-era economics (Bernake) and a brilliant Wall Street mind (Paulson), we had a fighting chance. But to my surprise, as soon as things start to calm down, our lawmakers are beginning to seem a bit unappreciative.
Right next to Michael Jackson's picture in the Wall Street Journal this morning was this article (abridged online) detailing Ben Bernanke's contentious hearing in front of Congress Yesterday. The purpose of the hearing was to examine the decisions made during our time of war, with particular attention to the BofA takeover of Merrill. These hearings are missing the big picture, not looking at the cause for instability, but instead trying to answer the thousands of what ifs.
Our economy, at its core, is based on a single concept...confidence. Everything revolves around trust. Trust the dollar I put into a bank today will be there tomorrow, trust that I have the ability to purchase things today because I will have a job tomorrow, trust that if I make a loan to the government they will honor it tomorrow. Even our use of dollars is an inherent trust that our government is supporting our currency as legal tender. Breaking this trust has more dire consequences than any Bernie Madoff, Enron, or a dot-com bubble. Without trust nothing works. As the pillars of the economy started to wobble, and doubt filled the minds of every person around the world, Ben stepped up and reestablished our trust.
It is popular opinion (if not fact) that the major error of fiscal policy during the Great Depression was to allow banks to fail. Possibly the only thing worse than the failure of a financial system is the nationalization of one. The ripple effect that follows the loss of confidence in an economy is an irreversible fear that can bring any country to its knees. One only needs a refresher on any monetary crisis (don't have to go too far into history, just look at Iceland) to see how this break down of trust can destroy an economy. Merrill, and many other banks, were going to fail; the foundation was cracking. Our generals used everything at their disposal to hold it all together. From where I sit today, it looks like the worst is behind us and we should thank Ben for his help.
Instead Democrats feel he was too secretive (must have forgotten to write up enough memos as he was saving the world), Republicans think he has too much power (maybe we should have waited for them to vote on it, that worked really well when the house rejected TARP... 777 drop?). At the end of the day the world was in panic mode, faith in the economy was at one of its lowest levels, and I do not think we made it through by accident.
Ben used his brilliance, and all the leverage he had. He may have used brute force to hold things together, but during a time of war there is a need for action. There were definitely some casualties, but the flag still stands and now the general deserves a medal, or at least a full night's sleep!