Today as they woke up, Americans were treated to some of the direst financial news in memory: Lehman Brothers Holdings would file for bankruptcy, and Bank of America would be buying out Merrill Lynch.
The effect on Wall Street was immediate. Bloomberg reported that "Stocks erased more than $600 billion in value as financial shares in the S&P 500 decreased the most since at least 1989." Stephen Wood, a senior portfolio strategist at Russell Investment Group in New York, said, "It'll be one of those days where people say in 10 years, 'Do you remember where you were?'"
Another Bloomberg story reported that "the Federal Reserve added $70 billion in reserves to the banking system, the most since the September 2001 terrorist attacks, to reverse a surge in borrowing costs sparked by the collapse of Lehman Brothers Holdings Inc."
Six months ago, the Federal Government bailed out investment bank/brokerage firm Bear Stearns. Just eight days ago, the Federal Government had to step in and seize mortgage behemoths Fannie Mae and Freddie Mac. But this time, when Lehman Brothers asked for a bailout, Secretary of the Treasury Henry Paulson said no.
Former Federal Reserve Chairman Alan Greenspan has called this a "once-in-a-century" financial crisis. Thank God it's a new century, because I'd hate for him to be comparing this to 1929.
I don't have to tell you that it's rough out there. We've all got friends and family members in every skill set who are unemployed, from mechanics to factory workers to technicians to engineers to retail employees to lawyers. The unemployment rate rose to 6.1% last month nationally, and the rates in heavily industrial, down-home states like Ohio and Michigan have ranged as high as 7.7% to 8.5%. Thinks of that: millions of the best fruits of the American workforce are rotting on the vine.
You would think that if little ol' you and I could figure out that there's a problem with the economy, the politicians could figure it out, too. Greenspan realizes it's bad. Paulson realizes it's bad. Bloomberg realizes it's bad. Paul Krugman realizes it. Even Matt Drudge broke out his giant font sizes and red font colors to emphasize the point: the economy is in crisis.
But John McCain still hasn't gotten the memo. Just this morning, he repeated the line for which he has taken so much exasperated criticism already: "the fundamentals of our economy are strong."
On Sunday, one of McCain's economic advisors wrote an 1800-word essay in the Washington Post that seemed frighteningly reminiscent of Phil Gramm's July 2008 pronouncement that we were "a nation of whiners." Donald Luskin wrote Sunday, "We have surely become a nation of exaggerators." According to him -- and I'm not making this up, I swear -- "Things today just aren't that bad."
Folks, the barn of the American Economy is in flames around us, and the McCain campaign doesn't even smell the smoke!
What has caused the blaze? If you'll bear with my metaphor, the chickens of unregulated greed are coming home to roost, and, like Mrs. O'Leary's cow, they have turned over the kerosene lanterns of speculation and junk mortgages on the economy.
Not two weeks ago, the Republican Convention was brimming with declamations against government oversight, regulation, and "bureaucracy," which of course is just another word for order. Cindy McCain received thunderous applause when she said, "Our hearts are still alive with hope and belief in our individual ability to make things right if only the Federal government would get itself under control and out of our way."
This is their answer to everything: government is bad, and if we just dispense with the rules and regulations and let everybody do what they want, America will be a better place. This is their theory, and after eight years of Bush sowing exactly this wind, we are now reaping the whirlwind in spades.
How selfish, how greedy, how petulant are these people, to simultaneously deny that there is a real problem, and then to blame the problem on government? Wall Street has run amok for years engaging in speculation and risky investment behavior so reckless it's criminal, and yet nobody has wanted the government grown-ups to come in and lay down rules for making sure that banks and investment firms are solvent; that risks are properly assessed; that small, middle-class investors are protected; and that people don't believe they can lustfully chase after more and more and more profit, without regard for the risk, because the government will bail them out.
Obviously, bankruptcy and failure hurt the economy and hurt the people who work for these banks and firms. But buyouts might even worry me more. When the government bails them out, the American taxpayers -- you and I -- have to foot the bill for the unbelievable greed of hedge fund managers and investors. And when the government doesn't bail them out, foreign entities such as the China Investment Corporation have the chance to buy the failing businesses. So think about that: just because of pure greed, not only would China continue to hold a staggering amount of our national debt, but Chinese companies could hold the private mortgages and debts of the American people.
Is that the kind of "America First" John McCain wants?
There have been times in our history when government has become too repressive, the burdens of overregulation weighing down on the American people. This is not such a time. This is a time like 1932, like 1992, when events cry out for a Democratic president to clean up the messes left behind by a decade of corpulent excess. If Carter's America faced a crisis of confidence, the Bush/McCain America faces a crisis of competence.
I don't know whether John McCain wants to keep up these Republican laissez-faire policies so that Republican donors and cronies can continue to gorge themselves at the public trough, or whether he just doesn't understand how big this crisis is.
But I know that, once upon a time, Herbert Hoover called a disastrous economy "fundamentally sound." And I know that it took a grown-up, a great American, to brew the American people a pot of strong black coffee after a decade of drunken speculation: FDR.
In FDR's First Inaugural Address in March 1933, he uttered words sadly as relevant today as they were 75 years ago: "The rulers of the exchange of mankind's goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.
"[...] Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.
"The money changers have fled from their high seats in the temple of our civilization. We may now restore that temple to the ancient truths. The measure of the restoration lies in the extent to which we apply social values more noble than mere monetary profit."
Though those words should inspire our next president, FDR was obviously faced with greater crises than we face today. But if Sen. Obama is not running for FDR's fifth term, I think Sen. McCain is clearly running for Herbert Hoover's second.