The numbers are there for all to see. On September 15 the McCain/Palin ticket was leading the polls. Then came the collapse of Lehman Brothers followed by credit freez, sharp stock market downturn, credit freeze, 700 billion bailout and the demise of the McCain/Palin candidacy. The American public had enough. Why was Lehman not saved? If the WSJ’s analysis is correct (do ignore the “benign” title - Paulson, Bernanke Strained for Consensus in Bailout ) it was because Paulson and Bernanke were engaged in a series failing games of chicken in the guise of arguments over authority (reminiscent of Katrina).
Paulson and Bernanke agree: there is an emergency.
Bernanke to Paulson - You should go to Congress to ask for a bailout.
Paulson to Bernanke - Congress will say no until matters get much worse. You can do it. The Fed has “broad authority and could possibly take on distressed assets from banks directly without Congressional approval.”
Bernanke to Paulson - No, I do not. The Fed can give emergency loans to healthy institutions not rescue failing ones; it may not buy assets and has no money left to do it, anyway.
Paulson to Wall Street CEOs - You must get together to save Lehman. Believe me, I cannot do it.
WS CEOs - No.
Lehman collapses - emergency worsens.
Bernanke to Paulson - I will back you up with Congress.
Paulson to Bernanke - Yes, the time has come to implement “break the glass” plan. Matters are bad enough. Congress will not dare say no.
Congress to Paulson - Not so fast.
Soros to Congress- Hey, don’t forget me. Insist on direct equity investment.
Paulson - Yes, sirs. By now, things are so bad that I can do anything.
Congress - And so can we. With Obama president and most our dirty work done by a Republican administration, the sky is the limit.
Between Sept. 18 and Oct. 3, when the legislation for government take over of the banking system was approved, the US stock market lost $1.5 trillion in value. Add to it loses of the international stock markets in which Americans were also widely invested and you can begin to estimate the price of these chicken games.
I must ask: Where was Harvard Business school graduate, George W. Bush? Did he want McCain to lose?
Well, Bernanke may be rewarded with reappointment as Fed. chairman and Paulson’s protege Geither is a finalist for the post of Treasury Secretary.
