Finance, the Economy, and the Campaign

Let's make some things clear, briefly and SWNIDishly, about Wall Street and November 4.

First, the present crisis is one of finance, not the economy. Those are different things. Pillars of finance, the companies that keep money flowing to businesses and so to individuals so that commerce--production and consumption--can take place, have been hit hard. The "bailout" is not happening to save fat cats (though it could do that as well) but to keep money flowing so that the economy doesn't seize up.

Second, neither presidential candidate is quitting himself with dignity this week. When not exaggerating the significance of the other's statements and record (and we aren't especially interested in deciding which one has done that more egregiously, though we'll aver that Obama does it with a Democrat's greater sense of entitlement to do so), both have made absurd statements about what's wrong and what ought to be done.

Third, in such hysterical times, we note the positions of the parties in general on such matters, as the candidates seem consumed with the next soundbite, knowing that when they assume office, things will have moved along. The Dems have solons among them who know how this stuff works. Robert Rubin, Clinton's Treasury Secretary and now chairman of Citigroup, is one. Obama seems to be saying that he'll surround himself with such folk. The GOP consists almost entirely of such solons, as Henry Paulson, Bush's Treasury Secretary and former chairman of Goldman Sachs, illustrates. Said solons will likely proceed on similar paths regarding crises like this one.

But the difference comes in the larger economic and fiscal paradigms of the parties. We won't belabor the point because Mike Ramierez, cartoonist for Investors Business Daily, makes the point so well above. Obama's policies look dismally like the mix of Republican and Democratic mismanagment that yielded 20% unemployment for a decade in the 1930s. For more on that historical perspective, we defer to Amity Shlaes, who in today's WSJ summarizes her historical work on policy, finance and the economy in the Great Depression, with disturbing implications for both candidates' current rhetoric and one candidate's current policy positions.

More could be said about how the last spasm of regulation, the Sarbanes-Oxley accounting rules, have exacerbated this crisis, or the way that heavy regulation can create the very moral hazards that lead to crises like this one. Something could be said about how the Fed's policy of extremely low interest rates fueled the housing credit bubble that, like all bubbles, has now burst. Further, we could discuss that the issue is not whether the government ought to regulate markets, as government always creates the rule of law that makes markets possible, but what kind and how much regulation. We could even discuss the hypocrisy of those politicians who point fingers at their opposite numbers, accusing them of having taken no action to anticipate and deflect this crisis, when said politicians were themselves in office, even as committee chairs in Congress.

But life is short and filled with more important things than blogging. For now we leave this much to the consideration of our gentle readership.