A glimpse behind the walls on Capitol Hill:
It was a room full of people who rarely hold their tongues. But as the Fed chairman, Ben S. Bernanke, laid out the potentially devastating ramifications of the financial crisis before congressional leaders on Thursday night, there was a stunned silence at first.
. . .
“When you listened to him describe it you gulped,” said Senator Charles E. Schumer, Democrat of New York.
I’m surprised they were so surprised. I’m no financial expert; heck, I don’t even subscribe to the Wall Street Journal. All I do is read news headlines and commentary on blogs. And yet even I could see that, in a highly leveraged system, we can’t absorb record foreclosures and companies writing off billions of dollars without serious consequences.
Perhaps these legislators are surprised because, until now, they have exclusively been getting their financial analysis from Treasury Secretary Henry Paulson’s talking points:
“Our banking system is a safe and a sound one,” Paulson insisted on CNN’s “Late Edition.” He had earlier told CBS, the list of troubled banks would grow.
But “this is a very manageable situation … our regulators are focused on it.” Five U.S. banks have failed this year, compared with an annual average of about 250 during the U.S. savings-and-loan industry crisis in the 1980s, Paulson said..
He said about 99 percent of the 8,500 U.S. banks, holding about 99 percent of bank assets, fell into the highest category of capitalization, a measure of financial health.
Perhaps if the only person you listened to told you that banking is “safe and a sound” and that 99% of banks are healthy, then it might come as a surprise to discover that the world was suddenly on the verge of financial Armageddon.
But if that were the case, you should have second thoughts when then came to you asking for $700 billion to “fix” things, with time of the essence. And regardless of what else is in the proposed legislation, anything containing this should raise a red flag:
Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.
Friday I listened to the first half of comedian Rush Limbaugh’s show. It was as if the guy were broadcasting from another planet. Here we were on the heels of the Treasury announcing the biggest proposed bailout in history, along with an unprecedented restriction on short selling. And yet this self-styled “conservative,” who regularly pontificates on keeping government out of the marketplace, only made passing reference to the situation. He spend more time ranting about some inconsequential comment Michelle Obama made than he did discussing a $700 billion intervention.
It boggles the mind that many of his listeners apparently consider him to be a serious issues analyst.