Although the late Johnny Cash was no economist or even an economic prognosticator, he certainly knew how to get your attention and get his point across. The “Man in Black’s” rendition of “How High’s the Water, Mamma” in which he learns that his home is flooding and realizes there’s no end in sight paints a vivid picture that requires no expert interpretation.
Such might have been the feeling of many Americans over the past several days. Reports from myriad quarters kept coming in labeling the financial crisis the nation has recently been experiencing as the worst in most people’s lifetimes; some say since The Great Depression.
Almost daily, news of the failures of major banks and other historic financial institutions have flooded over the landscape tearing apart the hopes of people reminiscent of the onslaught of the waves of Hurricanes Gustav and Ike that invaded our shores only days earlier.
Although the nation did not panic, there was undoubtedly great anxiety, and perhaps even some fear that the situation was doomed to keep getting deeper with each sunset. But just when it looked like gloom and doom would prevail, things turned around (at least in the stock market), leaving many investors feeling whipsawed as a result. Of course, this burst of relative optimism was based on the notion that Congress would surely end up doing what it couldn’t manage to do the first time around.
The degree of attention to economic matters on such a wide scale was quite unusual. People were seeking answers to both the causes and remedies. The media tried to assuage the situation by enlisting financial analysts and economists to explain what was happening and what might be the end result. I was inundated with calls from radio, television, and print media to share my take on the matters.
Both elected and appointed officials got into the act. Plans were proffered from various fronts ranging from the White House to Capital Hill. Presidential campaigns were adjusted so that the contenders could play a role. Wall Street responded both negatively and positively depending on rumors and anticipated solutions.
Was it time to take money out of bank accounts and put it in a sock or hide it under the mattress? How high was the “water” going to rise?
I pictured in my mind the scenes that blanketed our television screens of people being rescued by boats and helicopters during the recent storms. Was this turmoil going to cause similar financial rescues, and, if so, by whom?
We didn’t have to wait long before motor boats and helicopters arrived on the scene in terms of avenues of approach for rescue, or as it became known, the government, aka, taxpayer “bailout.” The first and biggest (among many) marketing mistake in the whole process was probably that name. The actual proposal is an asset purchase that may ultimately even make a profit for federal coffers and certainly will cost nowhere near the initial outlays. Also, although the initial purchases will be with government dollars, nobody is talking about raising anybody’s taxes to pay for it. There will be consequences to all of us no doubt, but they are much less severe than the alternatives.
Deadlines were given and then extended. Warnings came that if the situation was not fixed over the past weekend, it might not ever be accomplished. Working agreements were announced and hope looked to the House of Representatives to be the first step on the course of resolution.
Monday was the line in the sand for moving forward with the Senate to take up the matter a few days later. However, something happened as noted by the famous English poet Robert Burns who wrote, “The best laid plans of mice and men go oft astray.”
The bipartisan bill, hammered out over long hours of discussions was narrowly rejected by House members. The President and his advisors were disappointed. Wall Street experienced its deepest drop in history. Politicians began to point fingers. The public quickly changed from adamantly opposed to realizing that the situation couldn’t go on. And the water continued to rise.
So what now?
There is no doubt that a solution must be found. Liquidity is being drained from the financial system, and small businesses and consumers will not be able to function without credit availability.
As I write this column, our national lawmakers are back at the drawing table. We await what they will produce. By the time you read it, I suspect something will have happened. It won’t be perfect, but most solutions passed by Congress are not. However, almost any workable and realistic plan will free up some funds and allow us to get about the business of consuming, investing, and growing.