I was in Washington, D.C. when our nation’s financial system hit the sidewalk like a giant water balloon.
So, I thought, this is what history looks like.
In this case, history chose a string of remarkably beautiful days to do its work. It seemed everybody was talking about how great the weather was, but there was worry in their eyes and you got the sense that making small talk about the lack of humidity and good sleeping weather was just a way of giving the mind a chance to breathe.
I was raised on a version of history that featured (for the most part) heroic men doing dramatic things in the great outdoors. Washington crossing the Delaware. Pickett’s charge at the battle of Gettysburg. Lindbergh’s flight to Paris.
But in Washington I found history revealing itself in a wide, high-ceilinged room where the House Financial Services Committee holds its hearings. When you walk in, it’s like being confronted by the ship of state itself -- a multi-tiered prow of dark wood that runs from one side of the room to the other, and behind which sit the congresspeople, whose job it is to make sense of how the nation manages its money. It’s a pretty imposing scene.
The congresspeople face – and for the most part look down on -- those who are called to come and testify or report. These folks sit at a table and speak into microphones so that everyone can hear them. On one of the days that I was there, the people giving testimony included representatives of the Security and Exchange Commission and the Treasury.
Everybody else tries to find a seat in one of several rows along the back wall of the room. Otherwise, you can press yourself against the wall.
I’d like to be able to tell you that I saw and heard our elected representatives getting to the bottom of what’s gone wrong with our economy. That I left the hearings with a sense of clarity about what might be done to make the situation right.
But I can’t.
Stories were told in that big room about how people sold financial notions they said were good as cash to people eager to believe this must be true. It appears doubtful that many of the sellers fully understood what they were selling. And there is no doubt at all the buyers had little or no idea what they were buying. As to the members of congress now trying to sort through this mess, well, they appeared flummoxed.
“You mean the American people were lied to?” a member of congress asked the person from the SEC.
“The American people were lied to,” was the rueful response.
Americans being lied to is no longer a headline in this country. What amazes, though, is the extent to which Americans have accepted this. A certain war comes to mind. You will recall that we were told, in no uncertain terms, that it was necessary for us to attack Iraq because they had weapons of mass destruction. There were no such weapons. America went to war anyway.
Anyone who was paying attention knew this by 2004. It should have been enough to impeach the president, but no. A lot of Americans decided honesty didn’t matter and elected George Bush to another term.
When he finally chose to address the country about our economic debacle, President Bush said that a $700 billion bailout would make money easier to borrow. In a weird kind of symmetry, that $700 billion is roughly what the five-year war in Iraq has cost so far. At this point, the national debt is the highest it has ever been.
According to President Bush, loosening up credit will put “…the American financial system back on track.” But real American salaries and wages haven’t increased since 1979. Instead of raises, Americans have settled for easy credit and bought ever-cheaper products made in places like China. It’s what they used to call “a fool’s paradise.”
The problem with a bailout, as many financial observers have noted, and as was evident in the Financial Services Committee hearing room, is that no one really knows what anything is worth anymore. Just a few weeks ago, in July, it was estimated that subprime losses could total $100 billion. We’ve added another $600 billion since then; you have to wonder if anyone knows how much further we have to go.