Friday, September 19, 2008

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."

1 comment:

Anonymous said...

The market crashed in 1929.

In 1933 there was a run on the Ford family owned banks in Detroit. Roy Chapin, Sr. , Secretary of Commerce under Herbert Hoover asked Henry Ford to cover the banks, he refused and the Great Depression began.

Or so I was told.

Maybe we will have a 4 year grace period before we have to start riding the rails.