David Brooks is as frustrated as the rest of us that we find ourselves in this painful fiscal crisis. The credit markets are not operating because the basics of credit and risk have been ignored by the financial titans. Now they have no confidence and no solutions outside of massive government intervention to right their balance sheets. Brooks is not right in all respects, but this nugget should be heeded by people who consider themselves leaders (Many in Washington's leadership positions are anything but.).
We’re living in an age when a vast excess of capital sloshes around the world fueling cycles of bubble and bust. When the capital floods into a sector or economy, it washes away sober business practices, and habits of discipline and self-denial. Then the money managers panic and it sloshes out, punishing the just and unjust alike.
What we need in this situation is authority. Not heavy-handed government regulation, but the steady and powerful hand of some public institutions that can guard against the corrupting influences of sloppy money and then prevent destructive contagions when the credit dries up.
The Congressional plan was nobody’s darling, but it was an effort to assert some authority. It was an effort to alter the psychology of the markets. People don’t trust the banks; the bankers don’t trust each other. It was an effort to address the crisis of authority in Washington. At least it might have stabilized the situation so fundamental reforms of the world’s financial architecture could be undertaken later.
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