Thursday, March 5, 2009

He's a Good Man--Just Not a Very Good Wizard

As I try to wade through the mountain of lies and stupidity that I hear coming from politicians and news personalities (I'm through calling them "reporters" until they start acting like adults), I think back--as I often do--to that great philosophical movie, The Wizard of Oz.

The world of politics and punditry has become like the Emerald City with everyone scurrying around in a panic and looking to the Wizard of Obama to save us all from the evil supernatural threats that surround us.

My favorite of many great scenes in the movie comes when Dorothy and fellow travelers realize that the Wizard of Oz is not a super hero at all. With tears streaming from her eyes, she rebukes him saying, "You are a very, very bad man."

The non-wizard promptly replies, "No my dear. I'm a very good man. I'm just a very bad wizard."

I have been haunted by Oz-like flashbacks in recent weeks as I repeatedly hear our financial crisis falsely described and listen to liars and idiots blame President Obama for a variety of insoluble problems that are not his fault.

First and foremost, the insolvency of a number of formerly great companies is the result of their use of huge leverage and the fact that they gambled and lost far more money than they actually had. It happens all the time--just not on this scale.

People and corporate executives chose to borrow enormous amounts of money to buy things and make bets that they thought would make them big profits. Instead those bets went against them so the people and/or companies have lost between 50 and 1,000 percent of their equity (or soon will) and their creditors have lost big as well since the borrowers can't pay them back.

A firm can have a hundred year history and great products but if it borrows more than the combined value of those assets and can't pay the money back, then they are insolvent. That's true even if they are named General Electric, General Motors, AIG, Citigroup, or Merrill Lynch.

To be fair, like the frog that is boiled to death in water that heats up one degree at a time, we lived through a 30 year period where people could retire and live off their income, investment returns, and home equity in grand style and actually watch their net worth go up. In real estate and other areas, no level of irresponsibility went unrewarded. When we suddenly realized the water was boiling, we were already pretty well cooked.

The stock market has recently resumed its death spiral not because Obama or Timothy Geithner are doing a bad job or making bad decisions. It's because people are finally coming to grips with the depth and gravity of the situation. Would we be better off if McCain had won and Phil Gramm was Treasury secretary? You remember him--the guy who said a few months ago that the recession was imaginary and we had become a nation of whiners.

General Motors' auditors just announced that the company may be broke. This must have come as a huge news flash to the pundits who have been arguing for months over to whether the government should bail the company out. Of course, the stock market has been telling us for a long time that GM is already broke and that its shareholders will eventually get zero. While the "experts" have been arguing about the wisdom of a bailout, GM's stock price has collapsed from $40 to $2 a share over the last 18 months.

The same is true regarding the nonsensical debate and thousands of hours of screaming on the cable news shows regarding whether AIG or Citigroup should be further bailed out. The argument of course ignores the fact that AIG has never been bailed out. Similarly, the great outrage over Obama's desire to turn our country socialist which, of course, ignores the fact that most of the money directed to AIG and others came at the request of President Bush as well as the fact that none of the $150 billion allocated to AIG has benefited the shareholders or executives.

AIG stock has gone from 60 dollars to 40 cents over the last year. Tens of thousands of employees including all the previous top managers of the company have lost their jobs. So who is being bailed out at AIG?

It's not about AIG at all. It's about the creditors and 74 million customers of AIG who would lose out if the company became insolvent and couldn't meet its insurance obligations. The reasons why Bush's non-regulators looked the other way while bedrock financial services companies were allowed to become highly leveraged casinos and their managers sucked billions out of the system for their personal use is another conversation for another time.

Today's conversation is about what needs to be done now. Unlike his predecessor, Obama has been brutally honest and straight-forward and told the American people how serious the problem is and how hard it is going to be to get things back on track. He has proposed some ideas but he has also made it clear that he's willing to be flexible and listen to anyone who has something constructive to add.

This has been very off-putting to Rush Limbaugh and the GOP leadership as well as the Democratic leaders in Congress. They are used to ideology-based decision making where people who disagree are demonized. Limbaugh has become proudly unpatriotic, stating clearly and often that he wants Obama to fail, even though that would mean complete disaster for most Americans.

Many on Wall Street, who are largely to blame for the crisis, have had the chutzpah to blame Obama for the recent leg of the market meltdown. They claim he hasn't had a clear enough plan and is projecting too gloomy a forecast. Bush and McCain, of course, were cheery and upbeat and assured Americans that the economy was fundamentally strong for a full eight months after the recession started. We have seen how far false optimism gets us.

The fact of the matter is that the economic downturn and asset value destruction at a time when most people and companies owe tons of money is the harvest of many years of national self-delusion. The idea that the Wizard of Obama can come up with a silver bullet that is going to make everything fine and get rid of the Wicked
Witch of Irresponsible Behavior only happens in fairy tales.

We have the president that most Americans want and the polls show that even as the economy gets worse, Obama's popularity has grown with most Americans. In a democracy, that's as good as it gets. The only ones who blame him for our worsening economic picture are the "experts" in Washington and on the air.

While our politicians and pundits still speak (and often scream) about villains and wizards, most of us realize that the best we can hope for is a very good man who will try to be honest and make smart choices to help get the country back on track. He is not a very good wizard and like all good men he will make mistakes, but he's our best hope to get back to Kansas in one piece.


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