Pulitzer Prize-winning author James Stewart's 19,000-word, 24-page article, "Eight Days," appearing in today's edition of the
New Yorker, provides us with extensive, new details and insights regarding events that occurred on Wall Street and within our government during the week-and-a-day that comprised "the most difficult moment for our economy"--at least if you accept this semi-hyped statement leading up to its publication as being valid--"since the Great Depression." (
NOTE: You'll need a subscription to the New Yorker to view the whole piece, however you may buy the current issue at your local newsstand for five bucks. If you do a search online, right now, you'll find snippets from it, such as this one: here. So, in the meantime, if anyone finds a way of accessing the entire story, please provide a well-highlighted link headline in the comments, below. In advance, I'm sure the entire community will thank you.)
But, in many ways and in the opinion of many others, the current global economic downturn is even more ominous--at least with regard to this country's future--than that which the world experienced back in the 1930's.
In fact, Stewart's latest work is a sprawling milestone of a piece that--
if you read between the lines of the story and review other facts not presented in it, as well as reviewing it within the context of where we are today--leaves us with even greater questions about our future than answers. Perhaps more importantly, again, due to many
other widely-reported events at the time that were
not touched upon in the article--and adding them to the overall history as recounted in Stewart's tome--it is a stark reminder of how little ground we've made up, economically, as a society on the first anniversary of Stewart's eighth day (September 21st, 2008), itself.
In glaring fact, and indeed, our economic downturn has ended up being significantly worse than even the folks that were leading our economy at the time, exactly a year ago, envisioned. This must be the resulting conclusion one reaches after reading the article--and particularly one quote in it from none other than Federal Reserve Board Chair Ben Bernanke--if one is to accept their (i.e.: Paulson, Geithner, Bernanke and SEC Chair Cox, et al) competency and intentions as "givens."
The only other conclusion one could draw from the following comment by Bernanke, made almost a year ago to the day, was that virtually everything that's been "accomplished" over the past year has had little or no effect upon our economy, at least as far as Main Street's concerned, since the patient was first diagnosed. (At least if you accept the truth that what we're now witnessing, 365 Groundhog Days later, is "A Recovery In Name Only.")
From "Thursday, September 18th, 2008"...
Eight Days
James Stewart
The New Yorker
Monday, September 21st, 2009
At 7 P.M., Bernanke, Paulson and Cox met with congressional leaders in Speaker Pelosi's conference room, overlooking the Mall. After photographers and press representatives were asked to leave, Paulson addressed the group. "We are in danger of a broad systemic collapse, and action needs to be taken urgently to head it off," he said. "We need the authority to spend several hundred billion."
Cox invoked his former colleagues' memories of September 11th. "We did extraordinary things then for the good of the country," he said. "This is what has to happen again, even if it is just weeks before an election."
Bernanke pointed out that he was a historian and a student of the Great Depression. "The kind of financial collapse that we're now on the brink of is always followed by a deep, long recession," he said. "If we aren't able to head this off, the next generation of economists will be writing not about the thirties but about this."
Someone asked what the scenario looked like.
Bernanke was cautious. He didn't want to be accused of exaggerating the danger. "You could see a twenty-percent decline in the stock market, unemployment at nine to ten percent, the failure of G.M., certainly, and other large corporate failures. It would be very bad."
Bold type is diarist's emphasis.
I don't know about you; but, I've read the last paragraph in this blockquote many times; and, each time, I end up shaking my head.
Then there was this repartee, between Barney Frank and Henry Paulson in the same meeting...
"...You've got to understand, Mr. Secretary," Barney Frank said. "This cannot be seen as just a Wall Street bailout." He said that executive compensation and foreclosures needed to be addressed. "There's too much anger out there," he added.
--SNIP--
"Without a functioning banking system, things will get much worse on Main Street," Paulson countered. He also stressed that congressional action had to be taken before the markets opened on Monday, or more major institutions might collapse...
Over the past year, the stock market tanked much more than Bernanke's ominous warnings to our congressional leadership, a year ago. Unemployment is projected to pass well beyond ten percent in just the next few months, and to remain there for at least a good portion of 2010. Both G.M. and Chrysler went bankrupt, along with many other lesser names. (I could continue on about poverty, the housing sector and other realities, but I don't think it's necessary.)
Our current situation is beyond "very bad." (At least if you accept the reality that we're in "A Recovery In Name Only." See link, a few paragraphs above.)
And, where are we a year after Barney Frank voiced his concerns to Hank Paulson (see blockquote, above), et al, about executive compensation and foreclosures?
From Paul Krugman at the NY Times: "Reform or Bust"
Reform or Bust
By PAUL KRUGMAN
Published: September 20, 2009
In the grim period that followed Lehman's failure, it seemed inconceivable that bankers would, just a few months later, be going right back to the practices that brought the world's financial system to the edge of collapse. At the very least, one might have thought, they would show some restraint for fear of creating a public backlash.
But now that we've stepped back a few paces from the brink -- thanks, let's not forget, to immense, taxpayer-financed rescue packages -- the financial sector is rapidly returning to business as usual. Even as the rest of the nation continues to suffer from rising unemployment and severe hardship, Wall Street paychecks are heading back to pre-crisis levels. And the industry is deploying its political clout to block even the most minimal reforms.
--SNIP--
I was startled last week when Mr. Obama, in an interview with Bloomberg News, questioned the case for limiting financial-sector pay: "Why is it," he asked, "that we're going to cap executive compensation for Wall Street bankers but not Silicon Valley entrepreneurs or N.F.L. football players?"
That's an astonishing remark -- and not just because the National Football League does, in fact, have pay caps. Tech firms don't crash the whole world's operating system when they go bankrupt; quarterbacks who make too many risky passes don't have to be rescued with hundred-billion-dollar bailouts. Banking is a special case -- and the president is surely smart enough to know that...
And, on foreclosures: "Housing's `Poverty Effect' Fouls Up U.S. Rebound."
Then there's Naomi Prins' overview of reality--not "gloom and doom," but reality--at Mother Jones: "Obama Tip-Toes Around Wall Street's Looming Meltdown"
Obama Tip-Toes Around Wall Street's Looming Meltdown
By Nomi Prins, Mother Jones.
Posted September 16, 2009.
Obama claims that govt. funding of the banking system saved the economy, but without reform he is playing an expensive and dangerous game.
On Monday-one year after the once-mighty Lehman Brothers collapsed in the nation's biggest bankruptcy-President Obama adressed the state of the economy and again outlined his proposals for what he calls reform. The location-Federal Hall at 26 Wall Street, near the New York Stock Exchange and New York Federal Reserve Bank-was fitting. George Washington took his presidential oath there, a precursor for how intertwined Washington and Wall Street would become. And Obama's speech indicates that he's still making the grave error of mistaking the health of Wall Street for the health of the American economy.
--SNIP--
Here's how the economy is really faring (and how Washington is failing to take adequate steps to fix it):
* National unemployment is at 9.7 percent, higher than last year's 5.8 percent, with double digit jobless rates in 139 metropolitan areas this July, compared to 14 last July.
* The number of foreclosures is greater than last year: nearly 2 million new foreclosure filings occurred in the first half of 2009, up 15 percent from the same period in 2008.
* While homes in some areas have begun to slowly sell again, they are doing so at deeply depressed prices, in many instances below their mortgage value.
* Wall Street bonuses are back to pre-crisis levels. For some firms, such as Goldman Sachs, they are even higher.
* Bank leverage, or excessive borrowing on the back of risky assets-a major cause of the meltdown-is rising again.
* Geithner recently reported that his program to enable private financial firms to buy up toxic assets with government help will wind up costing less than the $1 trillion he had first envisioned. However, he did not mention that there are less toxic assets available to buy partly because the Fed has allowed banks to use some toxic assets as collateral in return for cheap loans.
* Big banks are bigger than they were last year. Since the Fed blessed more mergers last fall, the nation's three largest banks-Bank of America, JPMorgan Chase and Wells Fargo-hold the maximum percentage of legally permissable US deposits or more.
* Mid-size and smaller banks keep closing. This year, the Federal Deposit Insurance Corporation (FDIC) has closed 92 banks and depleted its deposit insurance money in the process.
* We still don't have detailed information on the trillions of dollars of loans the Fed handed out to the banking sector or about the quality of the collateral banks provided in return.
So, again, I ask: Did the folks running our economy then--who are, for the most part, the same people that are in charge of our economy now--grossly underestimate the severity of this downturn? Or, have their efforts to date, simply to stanch the suffering on Main Street, been grossly insufficient since day one? (While these same people have been totally preoccupied with the implementation of the most massive redistribution of wealth, upwards, from the lower and middle classes to the status quo?)
Are we talking about the outright neglect of Main Street by the very same folks who got us into this mess? It's one year and trillions of dollars later; so, now, when I read of Bernanke's and Paulson's "warnings" 365+/- days ago, I have to ask: Where the hell did the money go? Didn't everything get just as bad, if not worse, than we were warned it would be a year ago, if these leaders of our economy didn't receive the absolute financial support of the masses at that time?
Paulson, Bernanke, Geithner and Cox, et al, got what they asked for to "prevent the worst;" but, everything everyone feared would pass--everything that money was supposed to prevent from happening--happened on Main Street, anyway! (And, then some...at least as far as Main Street was/is concerned.)
Then again, what are we doing to prevent this from happening in the months ahead? IMHO, "Financial Reform: Not happening but the need is clear."
In fact, isn't our financial services sector more out of control than ever?
Over the next few days/weeks, I will be posting many more diaries in reaction to the new detail--but with some omitted context not--provided in Stewart's "Eight Days."
# # #
(Hopefully, some of you will have a chance to actually checkout "Eight Days" in the interim. It's not exactly a quick read, but it's loaded with a myriad of new anecdotal, historical content/context. However, I would even go as far as to say that it is somewhat revisionist in nature, more for what it doesn't say--such as the little bit of context that I'm adding even here--than anything else.)