The missing bridge
This past week began with the details of the U.S. government's latest rescue of Citigroup. It progressed — if you want to call it that — with the announcement that the Treasury would be sliding $30 billion more over to AIG, the insurance giant that, when initially bailed out last fall, brought the phrase "too big to fail" into daily use. Too big to fail, apparently, because it's got its fingers in so many financial pies, though the Treasury and the Federal Reserve Bank have yet to tell taxpayers — that would be those of us ultimately footing the bill for these bailouts — just which pies those are.
And there, at midweek, was British Prime Minister Gordon Brown addressing a joint session of Congress to make the pitch for what he has called "a global New Deal."
Seeing a head of government stand in front of Vice President Joe Biden and House Speaker Nancy Pelosi and talk about the need to commit to new energy technology and create green jobs induced a certain degree of déjá vu — didn't we see this just last week? The effect was heightened by the sense that Prime Minister Brown has been studying President Barack Obama's rhetoric: "There is no old Europe, no new Europe," the prime minister told Congress, "there is only your friend Europe." There is not a red America and a blue America ...
The British prime minister sent a message that the U.S. and Europe are once again on the same page, and that both need to "seize the moment" (echoes of Mr. Obama's "Now is the time") provided by the global economic crisis to unleash "the biggest expansion of middle class incomes and jobs the world has ever seen."
It might be an auspicious moment, this confluence of domestic, economic and foreign policy goals between America and her strongest ally. And in our current 1932 mind-set, it's good to see the kind of optimism that looks straight ahead to what might be our own version of the 1950s, skipping past all that nastiness about dust bowls and world war.
But there's something about the Brown and Obama visions that puts one in the mind of a big house being erected on the spot where another house is still burning. And that's how it will likely continue to feel, unless and until the Obama administration comes forth with a clearly articulated (including an honest accounting of the likely astronomical costs), broad-based plan to put our financial system on sound footing.
Or, to use another metaphor, the recently passed "stimulus" bill, Mr. Obama's budget proposals and Mr. Brown's concomitant vision can all be likened to major economic surgery; surgery performed while the patient's heart — the organ "too big to fail" — requires periodic defibrillating shocks. If the heart gives out, all the other surgery will be for naught.
Until we treat the institutions at the heart of our financial system in a more sustainable way — with a comprehensive, long-term plan that would be the equivalent of a pacemaker — the rest of the work we're doing and plan to do for the economy and for the people who depend on it will be welcome, but is unlikely to generate much optimism.
Last fall, Prime Minister Brown won praise from some economists for pointing the way forward with direct cash injections to troubled institutions. Now old Europe, new Europe and the world look toward the new American administration to come up with a systemic plan that will move beyond ad hoc measures. There's a vision for the future, and there's anxiety in the present — a real plan to deal with our imperiled banks is the bridge without which we cannot get from here to there.