As in the final reel of the old-fashioned Hollywood cliffhangers, it’s a race against time. Will Congress stiffen its spine, face down Paulson’s blackmail and tell him there’ll be no $700 billion on his terms?
Will a decisive chunk of the American electorate decide that between a half-mad former POW tormented with PTSD and dying of melanoma and a stable, centrist, Harvard-educated half-black man, they’d better trust their basic instincts and go with the all-white nut who might well blow up the planet? Rush Limbaugh’s line, also featured on the Wall Street Journal‘s September 22 editorial page, is that the real culprits in this crisis are the blacks. You see, the Community Reinvestment Act, designed in the Carter era to encourage minority homeownership, was pushed by Clinton, who coaxed into being the necessary subprime loans. The blacks took the subprime loans and then couldn’t make the payments and set Wall Street on course for disaster.
People say hopefully that Obama is sharpening up his game. It’s partly true. We’re getting less of the high-flown paeans to hope, a bit more pith amid the wind. But since things are breaking his way, at least in these predebate days, he’s a lot more demure than the edgy popular mood.
Americans have been living in a casino economy for years. It’s a style of life ingrained in the national psyche. But at the prospect of a long-term losing run they are getting frightened and angry, fast. Congress knows it could be facing voters who can see what’s coming over the horizon when the Treasury bails out Wall Street. The shriveled health benefits they now have will shrivel further. Their 401(k)s are shot to hell. Pretty soon they’ll be told that the trillion or so going to Wall Street means that taxes will go up, that the Social Security trust funds are the target of renewed attack.
Prudence aside, how can Obama set his match to the tinder of popular rage and fear when he has Robert Rubin and Lawrence Summers standing beside him, rage-and-blame extinguishers at the ready? True, at his elbow McCain has Phil Gramm, an altogether nastier human package. Gramm–a former Democrat, be it noted–was the prime Republican force pushing through the Gramm-Leach-Bliley Act in 1999. It repealed the old and admittedly leaky Glass-Steagall Act, passed during the Great Depression, which prohibited a commercial bank from being in the investment and insurance business. President Clinton cheerfully signed Gramm’s act into law.
A year later Gramm, chairman of the Senate Banking Committee, attached a 262-page amendment to an omnibus appropriations bill right before a recess. The amendment received no scrutiny and duly became the Commodity Futures Modernization Act, which OK’d deregulation of investment banks, exempting most over-the-counter derivatives, credit derivatives and credit default swaps from regulatory scrutiny.