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Where was Buck during the economic meltdown?

Myers’ Musings

Posted: October 4, 2008 9:03 p.m.
Updated: December 6, 2008 5:00 a.m.
 

Historians certainly like to second-guess the bad thing. The most frequent example revolves around avoiding World War II by subverting the rise of Adolf Hitler.

For students of this history, academics harp endlessly about the collapse of the League of Nations due to American indifference, the punitive provisions of the Versailles Treaty, or even the lack of a visible decisive victory of the Allied Powers in World War I.

Historians like to assert that now-obvious moves at these important points could prevent the death of tens of millions and the virtual destruction of two continents.

Economic historians like to play the same “what ifs” when studying the Great Depression, including the current prime academic historian of the causes of the Great Depression, Federal Reserve Chairman Ben Bernanke.

Most agree the nation, and indeed the world, slipped into the most pronounced economic contraction in modern history due to a shock in financial-institution liquidity that stopped the lending of money and created dire economic domino effects throughout the system.

Bernanke and Hank Paulson, using a computer model developed in the halls of academia, purportedly input the market data that occurred after the failure of Lehman Brothers and the bailout of AIG and concluded the world banking and credit system stood on the brink of a precipice ready to slip into absolute chaos, forcing banks — innocent of any purchase of the “magic dust” instruments based on subprime mortgages — into grave liquidity problems due to a growing distrust of the entire banking system.

That is why they rushed to Capitol Hill with a three-page proposal that effectively granted Hank Paulson the power to recapitalize the entire world banking system in any way he thought necessary with $700 billion in new debt issued on the backs of the U.S. taxpayer.

Now this amounts to poison for Republican lawmakers like our own Howard “Buck” McKeon, who got on the telephone on Tuesday, Sept. 23 with media types from his district including yours truly.
The political calculus works out this way: The American public viscerally hates this bailout and blames the Republican Party — two to one in polls — for the need for the bailout.

Democrats can enact this bill on their own with the help of about 25 percent of Republican senators, and Republicans would like that just fine, thank you.

If the bailout stops the “bad thing” from happening, they can then spend the next 10 years railing against the socialization of the American economy by the evil Democrats and the disgraced false Republican George Bush.

But the Democrats refuse to take the poison by themselves, even though they believe they possess an antidote called “nearly 30 years of deregulation” and “eight years of (primarily) Republican rule.”
They want to see the Republicans flop around when they swallow the poison. And on that Tuesday Buck just came out of a meeting during which Dick Cheney told the Republican House Caucus they would need to swallow the poison, because if the bad thing happened and the Republicans stalled the bailout, that could constitute poison with no possible antidote.

And Buck showed the demeanor on that telephone call of a person told by someone he used to trust that he would need to spin the chamber and pull the trigger of a six-shot revolver with five chambers loaded.

I feel great sympathy for Buck and the other Republicans, though their slavish and dogmatic devotion to deregulation and a kind of awed trust of Wall Street did indeed create the climate that spawned the subprime crisis.

Their alternative that included the issuance of government-backed credit guarantees on bad debt instruments with private insurance premiums similar to the FDIC would deserve due consideration but for the existence of a crisis that required action in days rather than months.

Once again, they found the Bush administration trying to hammer something down their collective throats, and by weekend I saw something that I never thought I would live to see: Republicans likening the Paulson cram-down to the Rumsfeld/Cheney cram-down in the run-up to the Iraq war, painting everything with the broad brush of crisis and emergency to perhaps cut off all meaningful deliberation.

Monday rolled around and we determined that Buck did, indeed, swallow the poison, while two-thirds of his Republican brethren decided to roll the dice with the world economy and the Dow recorded its largest-ever one-day point loss.

This courageous act means that I will mark my ballot for Barack Obama and Buck McKeon, because for me, doing the right thing constitutes the true antidote to poison.

Tim Myers is executive vice president and chief financial officer of Landscape Development Inc. in Valencia. His column represents his own views, not necessarily those of The Signal.

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