Watching Barack Obama orate on the disintegration of the U. S. economy gives me an unique shiver of pleasure that (pace Chris Matthews) runs down my leg. The only way this Harvard and University of Chicago faculty lounge denizen cum community organizer can capture the presidency is NOT through a crisis. Give us a small scale dash of unemployment and the right concoction of events, well, possibly in a stretch yes. But not what some say is an economic meltdown. Any more than he can triumph from a terrific foreign policy crisis.
The American voter was entranced with his coolness (although that is fast fading with his hot anti-McCain rhetoric), wonders how it would be to have him as president in the same way it fantasizes over how it would be to have him as a son-in-law…but definitely does not want to take a chance when the economy is supposedly going down the chute or we are eyeball to eyeball with Mahmoud Ahmadinejad. And no, it’s not because Obama is black. Gen. Colin Powell running on either party label could easily win against McCain or anyone else hands down. It is the callowness of this young half-first termer that denies him a huge bump—the public realizing …as the mainstream media do not…that his resume is thin because he hasn’t done much in his 47 years to show he can run anything except to gin up the motor on his unbridled ambition for elective office.
What is being brayed by Obama as an economic crisis isn’t. Sure Wall Street is scared witless. Sadly, both Obama AND McCain are touting awful populist bromides. Obama the opportunist can’t be expected to use restraint but, frankly friends, I thought McCain was above this stuff.
The crisis goes essentially like this. Suppose a family wants a $100,000 mortgage. It goes to the bank and gets the $100,000, naturally. But in the financial world, the same family would borrow its $100,000 from Western Global Insecurities. Global Western Insecurities sells $100,000 bonds to Horrid, Gamble and Squeeze Brothers which would by it with $100,000 loaned from Jitters & Tremble, the prime broker which would raise the dough through Venal & Gobble Interbank…and so on. In that way a $100,000 mortgage has created $500,000 of new debt.
Assuredly a collapse would mean the system would contract like an accordion but not so and all those dependent jobs are vanishing like a snow-cone in July. We can see already…past Monday…that nothing remotely like what Obama is touting happened. The Dow rose, did it not. Hank Paulson, having saved Bear-Stearns and bailing out Freddie Mac and Fanny Mae, hunkered down and said no to Lehman Brothers. But he and Ben Bernanke have agreed to keep the Fed window open so anemic banks can get a transfusion. He muscled a group of 10 unwilling banks to cough up $70 billion to keep clients afloat and the SEC is handling transfer of customers’ assets to other banks from Lehman. The lesson is not populism of lectures from McCain or Obama on Wall Street “greed.” Treasury has already served notice that banks piling up $30 of debt per $1 of equity can’t count on Uncle to bail them out anymore.
So it is time for the newly heated up man (once cool), Obama to return to his original temperature. Growth in the second quarter was 3.6; there are signs the housing market is finding its level (Greenspan talking of its bottoming out by year’s end); prices are falling less drastically, some are even rising in certain cities; sales of new homes are—lookit here—exceeding rate of new construction.
In short: Time for Obama to lighten up and McCain…whose initial reassurance that the fundamentals of the economy are sound (a correct and courageous call) to stop trying to counter Obama by putting on a bad impression of William Jennings Bryan.
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