The Meltdown- A Decade Later

9/11 exposed our defense vulnerability.  The housing crisis exposed the fragility of our financial system.  This week, the shooting in the Pittsburgh synagogue and the sending of bombs to Democratic leaders highlighted the frailty of our social fabric.  It’s hard to feel solid and secure at this particular moment in history.

Last week I attended a program put on by the Becker Friedman Institute at which former Treasury Secretary Hank Paulson and former Senator Chris Dodd spoke about the financial crisis as we are now a decade past the crash (although still feeling economic and political ripples from it).  Paulson and Dodd were two principal architects of the stabilization and recovery efforts undertaken by the government to pull us back from the edge of the abyss.   While there was a great deal of pain suffered in the U.S., and some may never fully recover, the efforts of people like Hank Paulson, Chris Dodd, Ben Bernanke and Tim Geithner undoubtedly rescued us from something much, much worse.  And both agree that the regulatory scheme put into place makes it less likely that we will have another fire like the one we had in ’08 following the collapse of Lehman Brothers.

Paulson admitted he had a lot of sleepless nights with visions of breadlines throughout the crisis, with the worst moment coming when he knew that Lehman would fail.   He asserted that panics by definition are unpredictable and both he and Ben Bernanke underestimated how badly this one undermined the financial system.  Never before had the U.S. experienced a general decline in home mortgages.  Ben Bernanke missed the level of contagion that the crisis caused.

He bemoaned the lack of authority that he had to manage the crisis, but credits the fact that he had built relationships on both sides of the aisle before the crisis hit.  He also was able to stabilize Fannie Mae and Freddie Mac before Lehman failed as they were the only source of mortgage credit at the time. He said that they were able to use the authority they had imaginatively by guaranteeing funding for Fannie and Freddie rather than injecting capital directly.  In the U.S., putting public money in a private company is a “red line.”

The TARP program, while unpopular, was sophisticated and successful.  They were able to persuade 700 banks to take TARP money, thereby avoiding singling out the weaker banks which would have exacerbated the crisis.

Interestingly, both Paulson and Dodd defended their actions during the crisis.  Paulson said, “Even if I were omniscient, I don’t know what I would have done differently. I didn’t have all the authority I needed.”  Likewise, Chris Dodd asserted that, “I will go to my grave believing we did the right thing at that moment.”  Both are probably correct.

Paulson in particular made two comments that leave large unanswered questions.  First, Paulson said that he would rather have a lot of authority and a high bar for using it rather than have to go back to Congress.   Secondly, he regretted that they were not able to communicate to the public and create a better understanding of why it was critical to save the financial system.  Indeed, the presentation itself was interrupted by a single protester (that was escorted quickly out of the room) who screamed at Paulson for not doing enough for “the people” and that they had bailed out the banks.

As to the first issue, I understand that as in war, a financial national emergency requires the granting of authority to the government and flexibility to use that authority that it would not ordinarily possess in normal times.   Still, Paulson’s blanket statement leaves open many questions.  What type of authority?  To do what, exactly?  What would the triggers for granting such authority be?   How long would such authority last?   Paulson seems to argue for the ability under certain circumstances to at least dictate “curfews” if not financial “martial law.”  Exactly what would that authority look like.   As with the “red line” of putting public money into private enterprises, Americans are loath to grant blanket, unlimited, unaccountable authority to any one person or even a committee.

I am much more sympathetic to his second point concerning their failure to communicate adequately to the American public.  First, they did not want to spook the public and make a liquidity run worse.  But second, it may be that, like “Sully” landing his flight in the Potomac that same winter, we had just the right people in the right positions to deal with the emergency.  The skill set needed to fix the problem is not the same as communicating a complex idea to the public.  None of Paulson, Tim Geithner or Ben Bernanke will ever light up a room with their public speaking skills.   But all were calm, collected and focused at a time we most needed them.  In fact, Paulson commented that early in the crisis, Ben Bernanke in a meeting of treasury officials and congressmen calmly said, “If you do not act within days, the entire financial system of the United States, and much of the rest of the world will melt down.”  If I had to choose between great orators and adept problems solvers at that time, I would go with the latter.

Interestingly, having just seen Gordon Wood, Wood noted in his book, “Friends Divided” ’s recent book on Jefferson and Adams, Jefferson scorned paper money and banks.  Jefferson agreed with the French Philosopher, DeSutt de Tracy that “all paper money was a frenzy of despotism run mad.”   And Jefferson proclaimed that, “We are undone, my dear Sir, if this banking mania is not suppressed.”

How prophetic.

Back to Our Roots

At age 84, Gordon Wood is still doing book tours.  As the nation’s foremost living historian of the Revolutionary period, Mr. Wood is out lecturing on his new book, “Friends Divided: John Adams and Thomas Jefferson.”  Wood is the winner of the Pulitzer Prize and the Medal of Honor.   He is mentioned in the same breath as Page Smith and Samuel Eliot Morison.  His writing is clear, readable and accessible.

And in these tumultuous political times, he is just the sane voice the doctor ordered.  With a swath of the country convinced that America is a colonial, dominant power that is a source of evil and discord in the world, Wood reminded me of our glorious heritage through his latest book, contrasting two of our most important Founders.   Wood’s mind is still crisp.  Although academic looking, he moves with the body of a man thirty years younger.  His presentation was organized, methodical and he steered completely clear of our modern day politics, even in the question and answer.

Gordon would could have entitled his book “Frenemies.”  Jefferson and Adams represented two polar aspects of the young nation, and their views echo to this day.  Jefferson was optimistic about human nature and confident in the future.  Adams had a much more cynical nature about the human condition.  Jefferson thought people were blank slates and were created equal.  Adams was on the opposite pole of the nature/nurture continuum.  Jefferson was a Francophile.  Adams admired the English constitution.  Wood asserted that Adams was as important to the American Revolution as Jefferson, but their political struggle (and Jefferson’s eventual victory in it) shaped the nation forever.

People took it as providential that the two men died on the same day, July 4, exactly 50 years after the signing of the Declaration of Independence, a document that Adams lamented that he had not written.

As many other historians have, Gordon Wood found it miraculous that these intellectuals came together in one place at one time.  But Wood has noted that “clusters” of genius tend to occur.  Scotland had Adam Smith and David Hume.  Ireland has a long history of great literary genius.  Wood might also have thrown in the economics department at the University of Chicago in that crowd with its 9 Nobel Prizes.

Two things struck me about Wood’s talk and book.  First, our seemingly rancorous time is not unprecedented.  As early as 1790, there were concerns that the South might secede.   Bitter partisanship is not new.  Name calling, the partisan press, the fight over the size and reach of the federal government have been with us since our inception.  In fact, Alexander Hamilton wrote a pamphlet decrying the “eccentric tendencies” of Adams and said he had an “ungovernable temper,” “vanity without bounds,” “extreme egoism” and was “unfit for office.”

Sound familiar?

It all helped give a little perspective.

In addition to their genius and devotion to the Republic, the Founders were also known for something else—they knew when it was time to quit.  Washington retired to Mount Vernon.  Jefferson also tried to retire from public service before being pressed into service again, “No state,” he said, “had a perpetual right to the services of its citizens.”   How refreshing an attitude.  Today, it’s almost impossible to get rid of the bastards.

Up, Down, and Out

Now that we are headed into the 4^th quarter of the year, the Kavanaugh saga is behind us and the midterms are just ahead, let’s take stock to see who is up and who is down and who is out.

Donald Trump- Trump is definitely up.  The Trump economy is rolling.  He nudged over the 51% approval rating in the most recent Rasmussen poll.  While Trump’s mocking of Ford near the end of the process turned off several of the independent Republicans, he largely stayed out of the process. 

Michael Avenatti- Down.  Without corroboration, Ms. Ford’s only other hope of tanking Kavanaugh would have been for other women to come out of the woodwork and accuse Kavanaugh of the same thing.  What Avenatti dredged up was so unbelievable that many began to see the entire thing as a false, political ruse.  Like a contaminated piece of real estate, Julie Swetnick’s outrageous story began to leach into the whole process.   Now, even Democrats and the MSM are starting to turn on Avenatti.

Susan Collins—Major up.  Derided as a RINO by hard core conservatives, Collins delivered a reasoned, statesmanlike speech supporting her decision to support Kavanaugh.   Collins’s speech was written as carefully and thoughtfully as if it were a judicial opinion.  Most notably, she said she found Ms. Ford’s testimony to be sincere, painful, and compelling, but conspicuously omitted the word “credible.”  That told me she though about every word in her speech.   She was overtly gracious to Dianne Feinstein, and accepted Feinstein’s claim that she did not leak Ford’s letter.  We need Senators like Collins and less of them like Booker.

Pope Francis—Major down.  Francis stonewalling on the sex abuse scandal and demonizing his critics have left many of the faithful wondering whether they can even be Catholic anymore.   He speaks in the language more often used by Central and South American communists.  His deal with the Chinese that gave the Chinese government input on who can be Archbishop in that country was abhorrent.  His handpicked Cardinal Cupich in Chicago brushed off the sex abuse scandal with, “We can’t get distracted by this. We’ve got a bigger agenda.”  Francis could conceivably lead the Church into the biggest schism since Martin Luther.

Robert Mueller—Who?

Jordan Peterson—Down.  The warrior against Social Justice Warriors tweeted that Kavanaugh should withdraw, and thereby vindicate himself and preserve his reputation.  Huh?  Peterson failed to see that the attack on Kavanaugh was motivated in part by radical feminists trying to get Title IX sexual codes adopted by society writ large (burden of proof on the accused, limiting rebuttal proof, broadening the definition of “assault”).   His stance on Kavanaugh dealt him a major setback as a public intellectual.

Lindsey Graham--- Big up.  Like Collins, Graham has been derided by the right.  Mark Levin often has referred to him as “Goober” but Graham stepped up at just the right time and delivered a fiery, impromptu speech that summed up the Democratic antics and character assassination of Kavanaugh.  Graham, along with Collins, closed the deal.

David Hogg—Who?

China—Down.  Thanks in part to Trump, we are seeing what the Chinese regime is all about—theft and bullying.  Stealing intellectual property or coercing out of our companies, dumping products, hacking into government and corporate systems, manipulating their currency, spying either through our universities, or, as was disclosed last week, by planting chips in circuit boards, the Chinese regime has revealed itself.   I grew up on the religion of free trade.  But good trading partners don’t steal each others' stuff.

Nikki Haley- Out.  Her sudden departure tears a significant hole in the Trump foreign policy team.  The abruptness of it all left pro and anti-Trumpers speculating as to the real reason for her resignation.   She was one person who seemed to be able to both push Trump’s agenda and push back at him when she believed she needed to. 

MSM—Way down.  They gave Julie Swetnick and her icky lawyer plenty of airtime.   CNN’s Kaitlan Collins was discovered to have made homophobic tweets.  The New York Times hired Sarah Jeong as an editor despite her racist and anti-male tweets.  The Late Show Colbert writer Ariel Dumas tweeted out “Whatever happens, I’m just glad we ruined Brett Kavanaugh’s life.”  The New York Time did a special section on the tax schemes employed by Donald Trump’s father to shelter wealth (but did no such expose on Barack Obama’s communist parents).    It’s hard to imagine the MSM falling farther in trust and esteem, but it has.

Truth—Modestly up.  “Hands up.  Don’t shoot.” became a mantra although it NEVER HAPPENED. The Left attempted the same with Christine Blasey Ford.  Ford couldn’t corroborate anything and couldn’t establish a pattern of behavior with Kavanaugh.  Similarly in Chicago, despite a vigorous defense and a “code of silence” a jury found Jason Van Dyke guilty of 2^nd degree murder of Laquon McDonald. 

In the end, facts do matter.

Bent, Not Broken

I know this week didn’t feel good.  The intense partisan fight over the Kavanaugh nomination reached a fever pitch this week, as did the trial in Chicago of Jason Van Dyke, the Chicago police officer that shot Laquan McDonald.   Almost as if decreed by Providence before the weekend was out, the outcomes were announced 15 minutes apart, and I am exhausted.   On the surface, the Kavanaugh nomination fight and the Van Dyke trial are completely unrelated dramas.   Yet these two cases represent a stress test of our system—and, in my view, we passed.   The system was stretched, pulled and dented, but in the end, it held together.  

These two cases represent very tough issues that have been highly politicized.  Sexual assault cases are difficult when they are resolved contemporaneously (see, e.g. the case of Patrick Kane, which took months to resolve http://www.chicagotribune.com/news/ct-patrick-kane-rape-case-decision-20151105-story.html).  Cases that are decades old, with no corroborative evidence whatsoever are nearly impossible.  Likewise, the issue of the use of appropriate deadly force by law enforcement is also very difficult.  The presumption of innocence must go to the defendant in criminal sexual assault cases.   In the case of the application of deadly force in the face of a threat most often goes to law enforcement.  Both of these cases challenged presumptions, and because of the particular facts involved, came out in the right place I believe.

As I discussed in my post last week, the Kavanaugh nomination was about much more than Kavanaugh.  I do not know whether or not he is the best choice—I had not read any of his opinions, although his ruling on the Consumer Finance Protection Bureau warmed me to him.  What was at stake here was due process and the presumption of innocence.  Radical feminists had been successful in using Title IX to upend those fundamental cornerstones of our judicial system upended in higher education, and part of their goal was to get them adopted by our society writ large.   And they were willing to utterly destroy the life and work of an otherwise exemplary man to do so, and tear up his family as well.

Nothing quite captured the unhinged rage of the Left quite like professor C. Christine Fair of Georgetown (who sadly, obtained her undergraduate and graduate degrees from my alma mater) who tweeted that GOP Senators deserved “miserable deaths” and hoped that their “corpses would be castrated and fed to swine.”

But despite the abuse of the system by Ms. Ford and her attorney and the Democrats, despite the abuse of free speech by ugly, hate filled people like Ms. Fair, despite the waffling by Jeff Flake and the grandstanding by Kamala Harris and Cory Booker, Kavanaugh got confirmed.

Had Ford come up with a single verifiable corroborative witness, the result would likely have been different.  But she did not and our society withstood this test.  We simply cannot permit a single old, unverifiable claim to disrupt our entire republic.

A mere 15 minutes before Sue Collins announced her decision, the jury in the Van Dyke case read its verdict.  Van Dyke, you will recall, shot the knife wielding and PCP crazed Laquan McDonald 16 times in an incident that made national headlines, cost a police superintendent his job and was a factor in Rahm Emanuel’s decision not to seek re-election.

As with the Kavanaugh case, the Van Dyke case presents very tough issues and has ramifications well beyond this particular case.   In this case, the police officer was being prosecuted for first degree murder after arriving on the scene at which police were already present and pumping 16 shots into McDonald.  Worse, it was all captured on film. 

My own bias generally lies with law enforcement, and believe that the benefit of the doubt should be given to the police officer.   There were some bad facts on the McDonald’s side as well.  He had PCP in his system and was supposed to be on antipsychotic medication.  He was warned to drop the knife.   He had slashed the tires of a squad car.

Yet, my old high school football coach told me often, “Film doesn’t lie.”  And in the Laquon McDonald case, the film was damning.   The film together with the fact that there were already officers on the scene that didn’t shoot were enough to overcome the presumption that Van Dyke had acted appropriately.    Van Dyke’s actions stood in stark contrast to the incident at the University of Chicago last spring in which a rageful University of Chicago student was shot after he attacked a cop with a two by four.   That incident was also caught on cam and the officer repeatedly told the student to stop and then shot him once.   That officer was exonerated.   The jury in the Van Dyke case returned its guilty verdict the very next day (I thought the most likely outcome was a hung jury).

In the end, despite the passions and politics surrounding these two cases, our system held together and we obtained the right outcome.  The jury system works most of the time.  Although it is rare to convict a police officer for a killing in the line of duty, this is a special –and I hope rare—case.  In the case of Kavanaugh, the presumption of innocence prevailed despite all the noise.

In both cases the losing side used the word sham to describe the process.  The police union said this was a sham trial.  Corey Booker claimed the confirmation process was a sham.  Nonsense  In the end, a just result was reached in both cases, and Friday left me a little more hopeful for the future.