American Proscenium

Back From the Brink

On July 11 President Obama said that thanks to his “swift and aggressive action . . . we’ve been able to pull our financial system and our economy back from the brink.”  Six days later, Larry Summers repeated the analogy: “We were at the brink of catastrophe at the beginning of the year but we have walked some substantial distance back from the abyss.”  After the failure of Lehman Brothers, Ben Bernanke was asked, “Well, what if we don’t do anything?”  To which he replied, “There will be no economy on Monday.”  Former President George W. Bush told ABC News in December that, in September, Bernanke and Treasury Secretary Paulson “said to me that if we don’t act boldly, Mr. President, we could be in a depression greater than the Great Depression.”  Chairman Bernanke, on July 26, told a Kansas City audience that he was “not going to be the Federal Reserve chairman who presided over the second Great Depression.”  When asked about bailing out the banks, Bernanke said, “nothing made me more frustrated, more angry, than having to intervene, particularly in a couple of cases where taking wild bets had forced these companies close to bankruptcy.”

The basic Obama administration rationale—“Things may seem bad now, but they would be much worse without us”—doesn’t sound like a strong line of defense.  Things...

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