My efforts to understand the economic meltdown have led me through a maze of articles with lots of people willing to point the fickle finger of blame at different people and agencies. And I have come to understand the economic crisis in terms of two analogies, mixed metaphors to be sure: a home alone teen party and an implosion to demolish a building.
One factor that many point to is during the Clinton administration of the 1990s, policies were enacted to push the banking/lending industry into sharing the good times and the wealth with people who normally didn’t qualify to get the big loans to buy homes, cars or other big ticket items. This according to the NY TIMES seems to have been the particular brain child of President Clinton’s HUD Chief Henry Cisneros, who admits that many blame him for the crisis, but who like many of the big names in the financial collapse deny that their role was the key role. From what I can tell, if one wants to find a “beginning” of the problem, Cisneros’ policies are as good as any place to start. But like with the demolition of any huge structure using implosion, it takes more than one charge to bring a building down – and those charges must be strategically placed for the collapse to be successful. This certainly is the case of the U.S. and global economic collapse. Alan Greenspan is another key player who comes to mind: he too denies he is to blame for the collapse, though his policies certainly were a key to shaping what happened – he strategically planted some of the charges, though he acknowledges only one “mistake” in an assumption he made.
If the encouraging or forcing (as some charge) of banks to make riskier loans is to be blamed on Cisneros, Clinton and the Democrats, it also seems true that President Bush not only did not stop this program but expanded it. In fact Bush made the “ownership society” a key part of his 2004 election campaign and Republicans voted for Him and his policies. What the Democrats began, the Republicans expanded and even made a cornerstone of their own policies (at least in as much as Republicans these days claim Bush’s policies as their own – the McCain campaign is certainly trying to distance him and the party from Bush).
My analogy of what happened would be something like this: ever hear about a teen being at home, knowing the parents are gone away, and invites a couple of friends over for a party? And each friend invites a friend, and pretty soon the house is filled with party goers, and the original teen no longer knows who all has joined the party, or how many have joined, and certainly has no control over what is happening. And the party gets out of control as the revelers get increasingly drunk and do more outrageous things because it gets harder and harder to entertain the growing mass who want the party to really rock. The partiers consume everything, and before long their consumption becomes destructive and party becomes a riot.
And some would say it was the fault of the parents for not being home in the first place to exercise supervision of their teen. For had there been more oversight from the beginning, the riot police would not have been needed to bring the situation under control. And as often happens in those situations the parents have to go down to the jail to bail their kids out.
Well, that’s my analogy. There were plenty of people who were more than willing to join this party. In fact it was the one party to which both Democrats and Republicans were willing to belong. Talk about bipartisan co-operation and reaching across the isle! And whatever force was used to get people to join the party, quite a few quickly became revelers as it all seemed to be part of the ever growing and expanding U.S. economy. And why not? If people could keep getting richer – main street got more home owners and wall street got more wealth to speculate on and gamble with. And whatever the fault of these riskier mortgages was, they soon got swallowed up in Wall Street leveraging and derivatives, bundling huge amounts of loans into products that apparently no one could control or understand.
And the charges were all being placed into their strategic locations, and the implosion occurred as one might expect, and suddenly all the big name participants denied they had been laying the charges and everyone began looking for ma and pa (more affectionately known as Uncle Sam) to bail them out.
All of the economics and finance people could write a better explanation than I, but I have to write by analogy because the reality of American economics is too great and too marvelous for me. And the revelers are all now feeling hung over, and like alcoholics are shocked and dismayed by the damage they have left in the wake of their party. (I would also like to say shamed, but alcoholics feel shamed, brokers and CEOs seem only to register dismay and shock not by what they have done, but at what has happened).
So what’s the bottom line? I think in the same way that many joined this profligate party, many are going to be needed to fix it. The aftermath of the party-become-riot is serious devastation. Strangely two men – McCain and Obama – want to become responsible for the clean up (well to be honest it is not exactly why they sought out the presidency, but it is what they are going to step into). It seems doubtful to me that either Democratic or Republican ideologues will fix the problem. This seems to me to be a situation where truly co-operation of all parts and parties of the U.S. are going to be needed. Partisan politics will be nothing more than a divorce occurring at the teen’s home at the very moment when parental intervention is needed. It is not the candidate who can polarize who is going to be the best man for the job, but rather the one who can form a strong parental coalition to deal with the mess. The economic problem is a real ongoing crisis – the next president is not going to have to wait for his first crisis to occur, we are already in the middle of it. And this crisis is not one to be resolved by the military or by the president reducing his role to Commander in Chief. This time the president’s role is going to be to insure domestic tranquility, not to declare war, but to find the way back to peace and prosperity for the entire nation by restoring order to the family, getting all the family members to cooperate, and getting all the members to shoulder their share of the chores that need to be done for the good of the nation.