Last week, I picked up my friend—I’ll call her Kay—and drove to the Downtown Farmers Market. Hitting the market together early in the morning is the closest thing to hanging out that two overscheduled, 50-something women can muster. We’ve been best pals since eighth grade and have bolstered each other through marriages, kids, cross-country moves and job changes.
Kay is solid in life—the granite rock to my often-crumbling sandstone. I’ve depended on her for calm and assurance when life takes a freefall. Last week was no exception. Kay is an executive at one of the West’s largest banks. I’m not using her real name because the banking business is stodgy, and I don’t want to get her in trouble. Kay has been in the business for nearly three decades. I figured she could tell me how the financial industry melted down before our eyes and assuage my fears about the country’s economic future.
She didn’t. She’s too pissed off. She’s so mad at members of her profession she can barely see the horizon. Now, banking is a huge octopus of a business, with tentacles reaching everywhere. Kay doesn’t work directly with mortgages or risky investments. But, given her work in ensuring the bank’s compliance with the 2002 federal Sarbanes-Oxley Act, she knows something about the effort to restore public confidence in corporations.
Sarbanes-Oxley passed Congress in the wake of Enron, Tyco, Adelphia and other publicly held corporations that tanked under the greedy swines who managed them. The act is meant to increase corporate accountability through, among other things, stricter internal controls of transactions and by monitoring conflicts of interest. Six years later, the players in today’s financial mud wallow are like distant cousins at Kay’s family reunion. She knows their minds.
And on the morning of Sept. 20, as we picked through crates of heirloom tomatoes at the market, Kay was urging me not to believe U.S. Treasury Secretary Henry Paulson, with his plea for an unprecedented $700 billion taxpayer bailout for the banking industry. This was less than 24 hours since Paulson and Federal Reserve Board Chairman Ben Bernanke announced to America that this last resort at saving the economy was do-or-die. They tell us there is little time to debate their pitch, or to argue its merits. The program is laid out in three (!!) pages. Congress, and by extension, the American people, are supposed to trust these guys.
It feels like every one of us who pays taxes in this country has been pasted with a giant “Kick Me” sign on our back.
“Don’t buy it,” Kay told me. She was saying this a full day before any of the Ivy League-educated financial gods would pop up on Sunday morning talk shows. “It’s the Patriot Act all over again. It’s knee-jerk, it’s based on fear and has no provision for congressional oversight.” Congress, she reminded me, bought the provisions of the Patriot Act in an atmosphere of “act now, ask questions later.” We got a pig in a poke.
Four days after our rant at the farmers market, I listened to one of a string of radio talk shows featuring respected economists, financial writers and think-tankers discussing the wisdom of the Paulson-Bernanke bailout plan. The clearest thinker on NPR’s
Diane Rehm Show seemed to be David Wessel, economics editor for
Wall Street Journal. I pulled my car over to the curb to scribble down some of his thoughts.
Wessel said, should we do nothing, the country would certainly see a “loan lag,” with record-setting wait times to secure a home, car or even simple signature loan. There would be no quick increases for any credit lines because credit would be simply frozen. The “lubricant” of our economic system is to constantly move credit, Wessel said. So something must be done—and soon.
On the bailout plan pending in Congress, Wessel was especially grim. “My guess is Congress will pass it because they won’t have the guts to sit on it.” He hopes lawmakers will add restrictions to the measure, such as controls on future Treasury secretaries who are of the mind to rescue the financial industry in a fire sale.
It’s just one more time in eight years that citizens are asked to trust the president’s judgment. George Bush has been seldom seen in the past two weeks, choosing to front his plan through Paulson. And Paulson is a former executive with Goldman Sachs, the last of the floundering investment banks. Not too surprisingly, given the revolving door nature of his career from big banking to Washington insider, Paulson has been tepid on whether CEOs of failed banks should be compensated with ungodly salaries for their screw-ups.
We’re supposed to trust the people who work for the man who gave us a war based on nonexistent weapons of mass destruction. Who gave us “yellow days” and “red days” in the name of securing us from possible terrorist acts. Like about 90 percent of this country, I know just enough economics to balance my checkbook. I’m dumb and stunned and simply longing for someone to trust. Wait a minute while I spin around. Put the “kick me” sign right here.