Genii Weblog

Leadership (I wish) we could believe in (updated)

Tue 30 Sep 2008, 06:43 AM

by Ben Langhinrichs
These are scary times for all of us.  Scary not just for those of us in the U.S., as the global economy is highly interwoven these days.  But here in the U.S., we are in the middle of an election campaign.  Barack Obama and John McCain are vying for the leadership of the U.S., and this is the great real life chance to prove their stuff.  So far, I'd give a slight edge, but only slight, to how Barack Obama has handled the crisis, because he has mostly stuck to trying to calm people down while still emphasizing the seriousness of the situation and letting the people actually in charge do their job.  But things have changed now.  The people in power have pretty much failed to either convince the rest of us that they know what they were doing, or to even agree amongst themselves of a single flawed plan they could stand behind.

We now face a leadership crisis.  The existing leadership, especially that of President George Bush, has demonstrated its inability to cope or handle the crisis.  The potential leaders, Barack Obama and John McCain, now have their chance to show their stuff in a real debate that matters.  I wish one, or preferably both, would stand up and promote an Obama Plan and a McCain Plan that would:

a) clearly explain to the people why this was a crisis we must face now;
b) describe in three to six pages an actual plan with specifics;
c) accept the full responsibility for the plan.

This would be politically risky, especially for Barack Obama who is currently well ahead in the polls and could just avoid the risk.  He shouldn't.  

It would be difficult, especially for John McCain who would have to convince a majority Democratic Congress to allow him the leadership credit.  He could do it, but it would take great force of will and an openness to truly understanding and accommodating both sides.

It would be scary for both men to accept that they could be forever associated with the success or failure of their plans by intentionally naming it after themselves.

It would show true leadership.  The time is now; the opportunity is here.  Who will seize it?  Will anyone?

Update: While neither Barack Obama or John McCain has gone as far as I suggest, both seem to have recognized more fully the necessity of getting strongly behind a bail out rescue plan.  For example, Barack Obama has taken to actually trying to educate people about the issue, and it appears that both Barack Obama and John McCain have gotten behind the idea of raising the FDIC limit to $250,000, which would make a lot of people with small businesses or ad-hoc retirement accounts rest more easily.  Both are still trying to pin the blame for the crisis on the other, but I think both have at least kept that at a low key and turned up the effort to actually get a bill passed.  Let's hope that the bill they pass is a more reasonable alternative, probably phased in at lower amounts and with more oversight.  A guy can hope, as least.

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What has been said:

713.1. David Jones
(09/30/2008 06:34 AM)

I agree with you Ben on that it would be awesome if both would outline a plan like that and agree with you that the current Congress has no idea what they are doing.

Unfortunately I don't think either Senator will do anything near your idea.

713.2. Dave Armstrong
(09/30/2008 07:36 AM)

I disagree, respectfully.

True leadership includes understanding all aspects of a situtation possible, and selecting the best option for your people. It involves not just coming up with a plan, but knowing who can complete it, and delegating appropriately. And it involves working with your people as problems arise both to guide their decisions and keep their morale.

A 3 to 6 page plan published to the world is not leadership. Those two have been too busy to truly analyze all options. A plan from them at this stage would be folly.

713.3. Craig Wiseman
(09/30/2008 07:41 AM)

Yes, it's scary, but I agree with you.

W is not a leader and never has been. He's a manager, and there's a far far difference between the two. Just as a simple example, when Betsy hit New Orleans in 1965, LBJ was in NOLA .the. .next. .day. with a flashlight in his face talking to the camera saying he stood with and would help. W's hands off approach have bitten him, but more importantly - us in the arse repeatedly.

We probably disagree on this, but I'll say it anyway: My take on the current situation is that Obama last week decided to take the 'less-risk' path and stay mostly out of it, while McCain dove in. I think he dove in for the right reasons, and that's why he didn't slam Obama in the debate Friday night over Obama's "call it in" approach - precisely because that's the partisan thing and he want's a solution to the crisis. I DO think he didn't understand how much his presence would cause trouble with the Democrats not wanting him to have anything to do with a solution. But his initial call for everyone, including Obama to come to the table and agree on a solution would work.

If Obama and McCain would agree on a plan, I'm sure they could pull enough votes to make it work. But (my take) is that Obama values the Presidency more than that.

713.4. Richard Schwartz
(09/30/2008 10:08 AM)

I have to disagree.

The Democrats could pass an "Obama plan" in the House. They can't pass one in the Senate. They don't have a majority. Remember: their majority status exists only because Lieberman is counted for them, but he is campaigning with McCain and would not back an Obama plan. Even if he would back an Obama plan, remember that it takes 60 votes for cloture before a vote on a bill can even be taken, and there is no way that would happen for anything with Obama's name on it.

McCain has even less of a chance of getting something with his name on it approved. Wishing it were not so will not remove the fact that this is a charged political issue that has come up in the home stretch of an election year.

The only way Obama and McCain could possibly contribute to a solution is if they published a joing "Obama/McCain Plan". (Or vice versa. Can you even imagine the arguments about that!?)

And @Craig: McCain dove in? Other than the White House meeting, which Obama also attended and which was called by Bush, not McCain, what exactly did he do? He wasn't in the room. He didn't have any input to the plan -- and that's according to the leadership on both sides. And he didn't swing any votes -- not one single representative from his own home state voted for the plan, and not one single representative, as far as I know, has gone on record as saying "I voted for the plan because John McCain asked me to". He was out making a speech taking credit for passing the plan at the very time when the vote was failing. His next speech blasted Obama for "phoning it in", when in fact the only thing anyone can point to that McCain actually did was to make phone calls to the leadership.

713.5. Craig Wiseman
(09/30/2008 10:46 AM)

Er, that would be "Mr. Schwartz"

Duh. I cn't spel. SOry.

713.6. Andrew Pollack
(09/30/2008 11:57 AM)

Repeat after me:

* There is no six page plan for a fix.

* There is no one person or small group to blame.

* This too shall pass.

Say that three times, please.

By removing too much regulation, we opened a system of capitol in such a away that we created incentives for small brokers to make loans and then sell those loans up the line to for aggregation with many others, then mixed all the loans together and sold pieces of the mix in order to dilute any bad ones.

This had the combined effect of removing any liability for repercussion from the originator of the loan, while providing a market for bad loans and thus encouraging more of them to be made.

By removing regulation on outrageous fees, overly complex fine print in credit contract documents, and the right to change credit terms without recourse on the part of the lender for unsecured debt, we have created a system that provides incentives for Banks to TRICK people into taking more credit out or types of credit terms they cannot afford.

The market, given these incentives, did what markets do best. If filled absolutely all of the available niches -- including those we consider morally bankrupt.

How many times have you opened what looked like an important bill, to find it was a credit card offer? The bank proved they can TRICK you. That is not the basis on which to do business.

The profit on the good and services sold to homeowners with huge equity loans has kept the economy falsely positive for years while we spend billions and billions of dollars every week dropping bombs and shooting people in Iraq.

So, now the chickens come home to roost.

The money sucked out of inflated home equity and used to fuel an economy that could not otherwise afford to spend hundreds of billions of dollars in Iraq is gone.

That money doesn't come back. It never really existed. It was really just the PROMISE of money against the value of houses that weren't really worth what people thought.

The profit on the loan sales has been realized and spent by the brokers. Its gone.

The profit on the crazy, usurious interest rates to the banks is gone. It paid crazy salaries and investors, and artificially inflated the value of financial company stocks. More money was borrowed against this false value and the cycle continues.

So why the bailout? There only one way to re-create the wealth needed to continue the lifestyle our economy affords. Wait for it to happen through the normal growth of an economy.

You can wait for it to happen in crisis and poverty, in which case it will get worse before it gets better. To do that, simply allow the banks to fail, the economy to fall back on itself, and then wait ten years for it to build back.

The alternative is for some entity to come along and "make" a whole bunch of new -FAKE- money to replace the -FAKE- money that was lost. That way, the system keeps functioning and over time the real money generated by a healthy economy has to be used to replace the -FAKE- money until or most of the money is real again.

Its a good alternative, but for one problem. Creating all that -FAKE- money is risky as hell. Its a lot of money, and for the 10-20 years it will take to put back and replace with real money, it will be a massive outlay of cash with little hope of serious profit.

There is only one entity which can afford to take this step. The Population as a whole, acting through the Government.

Thus, the bailout.

So, its your choice boys and girls. We, as a population, extend enough money through our government to continue the _FAKE_ economy long enough to fix it and replace the imaginary money with real money; or we let the market deal with it, while poverty and crime rise, quality of living falls, and all forward motion stagnates over the course of the years it takes to catch up.

Pick one, and lets move forward.

713.7. Ben Langhinrichs
(09/30/2008 12:22 PM)

@Andrew - Of course there could be a six page plan. There could not be a six page bill, but a plan needs to be digestible. Aside from that though, there is a huge assumption with your logic, which was the basic problem with the bailout plan that just failed.

Let's assume that your analysis of the economic issues is completely accurate. Let's even assume that you are correct that what is needed is all that -FAKE- money. Let's assume that the population as a whole puts up that money.

What's to stop the people who have had no cumpunction about pillaging our coountry for many years from pillaging this money too? That is the assumption. Let's imagine you have a house payment due, and you have the money available. You would probably plan to use it to make the house payment. Now, let's assume that a guy shows up on the street outside your door and says "YOU HAVE A HOUSE PAYMENT DUE RIGHT NOW! Give me the money and I'll run it down to the bank and if you don't give it to me right now, you'll lose your house! RIGHT NOW! EMERGENCY, EMERGENCY!" Let's assume you recognize this guy as a guy who stole your wallet a year ago.

Are you going to hand over the money just because you know the bill is due and you know you have the money? No, because you don't trust the guy who is screaming and has his hand out. That is the problem. We, the people, know we are going to have to put up the cash, but we don't want to hand it to the people screaming "EMERGENCY!" with their hands out. They have proven they don't care enough to spend it wisely, and that they are willing to pillage at will. It would be nice if we had some assurance built in that they wouldn't simply do so again.

713.8. Andrew Pollack
(09/30/2008 05:38 PM)

Of course that's true as well, @Ben -- The bill that was proposed dolled out funds with some of the controls you'd expect.

What's to stop future repeats? At present, absolutely nothing. This is a funding bill, however, not a new regulation set. Paying money is easy when you compare it to create a new regulatory system after the previous one was tossed in the trash years ago. That will take time, and a different crop of idiots.

713.9. Andrew Pollack
(09/30/2008 05:40 PM)

By the way. Your comment system doesn't notify me of new responses no matter how many times I check the box. I tried 273 times. I started with trying once. Nothing. Tried twice. Nothing. Tried three times. Nothing. You get the point. I'm up to 273 now. Unfortunately, like getNthDocument, I have to start over with number one each iteration.

713.10. Richard Schwartz
(09/30/2008 06:44 PM)

Ben, no matter how much you distrust the guy shouting "emergency", if you can see that there really IS an emergency, and if you can see that he's the only one who can fix it, what do you do? You hold your nose, you give him the money, you make sure that someone follows him, and you assure yourself that you will not forget to take the steps necessary to avoid ever having to be in that position again. And you might also remind yourself that even if this guy is a crook, a nice part of the money in your wallet today is there as a result of (FAKE) economic prosperity that his criminal enterprise has been bringing into your community for the past so many years.

Not that I believe your false analogy. As Andrew said, no one party caused this problem. The government didn't cause the problem. Henry Paulson and Ben Bernanke didn't cause it. The congressional leadership didn't cause it. McCain and Obama didn't cause it. Bush didn't cause it. Each might have played a bit part, or a couple of bits, in allowing it to happen... but that's the extent of their culpability. But at this point in history, they are the ones who can lead the effort to put us on the road to fixing it.

The banks didn't cause it either. They played their part, but so did their shareholders who demanded the best short-term returns that could only be achieved by pushing the envelope to out-compete others in the credit business. And so did all the borrowers -- not just the high risk ones, who benefited from even more favorable rates due to the fact that the securitization of mortgage debt reduced everyone's rates, not just the sub-prime borrowers! And so did all the home-buyers, and not just the sub-prime buyers, who benefited from the boom in building that was facilitated by easier credit. And so did all the home-sellers, who benefited from the fact that buyers were bidding up prices.

713.11. Richard Schwartz
(09/30/2008 07:01 PM)

Oh, BTW: there might have been one other way that McCain and Obama could have facilitated a solution. They could have offered "political cover" to members of their parties involved in tight races -- who voted "no" in overwhelming numbers due to fear of losing the election. They could have each offered to do joint appearances and run joint ads with eight or ten such representatives in each of their respective parties. They could have also gotten senior party members to agree to do the same, and they could have offered to mobilize each of their local campaign organizations to do joint fund-raising and step up the campaigning. I think, however, that the tremendous negativity that has been injected into this campaign stood in the way of the kind of cooperation between their respective organizations that would have been required for this to happen.