December 7, 1941

Each year there are fewer of us to remember and bear witness to the day the Japanese attack changed us from children of the Depression to what Tom Brokaw called the Greatest Generation.

On the anniversary this year, Americans are thinking more about the hard times of the 1930s than World War II, but with the terror of Mumbai fresh in our minds, the shock of Pearl Harbor has resonance as well.

I was 17 that day, standing next to a young man with a dazed grin, staring through the picture window of a hospital nursery as a nurse in white mask held up a sleeping baby. A minute later, she drew the curtain.

Newborns were kept isolated then and, as a college student, my part-time job was to hand the new father a hospital gown and lead him to the window. The babies all looked alike. The real show was on our side of the glass: a man’s eyes flooding with pride, wonder and worry.

But then sudden death six thousand miles away shattered those tableaus of new life. Happy faces at mothers’ bedsides turned to stone, nurses and doctors looked lost behind their masks of composure.

The next day, I was in the Great Hall of City College of New York, my eyes on a huge mural, a black-robed graduate amid flying cherubs and, in togas, the figures of Wisdom, Discipline and Alma Mater pointing to a bright future.

From a loudspeaker the voice of the only President I could remember (FDR took office on my ninth birthday) was telling of a day that will live in infamy and saying we are at war.

There was no 24/7 news but every night at 8:55, the chilling radio voice of Elmer Davis told of battles in Europe and the Pacific. We saw and heard so little news then, but we never for a minute forgot that our young people were dying in distant places.

A 21st Century "New Deal"

George W. Bush is going out as Herbert Hoover with last-minute efforts to save the financial system, but who will voters ask to play FDR and offer them a New Deal?

The Administration is asking Congress to enact what, according to the Wall Street Journal, may look "like the Reconstruction Finance Corporation, a Depression-era relief program formed in 1932 by President Hoover that tried to inject liquidity into the market by giving loans to banks and other businesses."

It didn't work back then until after Democrats won in a landslide and took more drastic government action. In that crisis, politicians stopped worrying about socialization and stepped in to save the economy.

The ideologues now will be howling, but John McCain and Barack Obama have to stop talking about tinkering with the "fundamentals" and start offering reality to the people they are asking to vote them into the White House.

The first worldwide reaction to today's news is encouraging as stock markets in Europe and Asia are posting "huge gains" in response.

But the devil will be in the details, as Paul Krugman observes: "Today’s U.S. political system isn’t going to follow Andrew Mellon’s infamous advice to Herbert Hoover: 'Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.' The big buyout is coming; the only question is whether it will be done right."

Money Under the Mattress?

Childhood nightmares of the 1930s Depression are back today with the fall of Lehman Brothers and Merrill Lynch as the unthinkable becomes the possibly avoidable in a national economic meltdown.

"Will the U.S. financial system collapse today," asks economist Paul Krugman, "or maybe over the next few days? I don’t think so--but I’m nowhere near certain."

As a small-account holder at Merrill Lynch, my antennae went up after a phone call from someone there this weekend trying to sell me a certificate of deposit--an unprecedented pitch for cash to bail out the huge investment house.

Where did all the money go? "To understand the problem," Krugman writes, "you need to know that the old world of banking...has largely vanished, replaced by what is widely called the 'shadow banking system'...(M)ost of the business of finance is carried out through complex deals arranged by 'nondepository' institutions, institutions like the late lamented Bear Stearns--and Lehman.

"The new system was supposed to do a better job of spreading and reducing risk. But in the aftermath of the housing bust and the resulting mortgage crisis, it seems apparent that risk wasn’t so much reduced as hidden: all too many investors had no idea how exposed they were."

So do we withdraw whatever money we have and put it in The First Bank of Sealy Posturepedic and start looking forward to former stockbrokers selling apples on street corners?

Not quite yet, but extreme caution is in the air. Krugman says "the system has been experiencing postmodern bank runs. These don’t look like the old-fashioned version: with few exceptions, we’re not talking about mobs of distraught depositors pounding on closed bank doors. Instead, we’re talking about frantic phone calls and mouse clicks, as financial players pull credit lines and try to unwind counterparty risk. But the economic effects--a freezing up of credit, a downward spiral in asset values--are the same as those of the great bank runs of the 1930s."

To put it in terms of the presidential election campaign: Are you feeling better off than you did eight years ago?