When the sarcastic slogan “Leave No Banker Behind” started sticking to Hank Paulson's bailout package Monday, we got the first hint that Main Street hadn't quite come around to the Treasury Secretary's view on the need to rescue Wall Street.
Then a Republican named Jeb Hensarling from Texas weighed in with a view that the rescue plan endorsed by fellow Texas Republicans in the White House would put the nation on “the slippery slope to socialism.”
And another Texas Republican, John Culberson, spoke out against handing enormous power to a Treasury Secretary he derisively labelled “King Henry.” And before we knew it, Mr. Paulson's rescue plan was history.
The Treasury boss, one of the top financial minds of his generation, tried to fix the banks by buying $700-billion (U.S.) of their worst loans. His plan ended up being widely viewed as an attempt to refill the bonus pool on Wall Street, with taxpayer's cash. Culture wars, a divisive Republican political tactic, have reared their head in financial markets.
The U.S. banking meltdown reflects middle-America problems with falling house prices and maxed-out credit cards. In the same vein, a freeze in money markets means that major companies, which employ millions of people, can't get the capital they need to operate.
Mr. Paulson repeatedly tried to make these links between Main Street and Wall Street. The baggage that comes with being former head of Goldman Sachs meant this message was lost on a big chunk of the population, including a couple of Texas Congressmen.
As scary as this is to contemplate, Monday's 7-per-cent drop in North American stock benchmarks likely isn't enough to scare opponents of the bailout into changing their views.
Sure, a couple of European banks needed rescuing Monday. But do American voters or Congressman really care about problems at Germany's Hypo Real Estate or a British mortgage lender Bradford & Bingley? What kind of name is Hypo or Bingley anyway?
This credit crisis needs to get a whole lot worse before the likes of Mr. Paulson get another stab at making things better. Billionaire T. Boone Pickens dropped by The Globe and Mail last week, opining that he expected a few more really big failures - at banks and public companies - before voters and politicians got serious about fixing the banking system. Mr. Pickens seemed relatively relaxed about this possibility. But he's 80 years old and has $3-billion in the bank. He can afford to be relaxed.
Markets can fix themselves, but as Mr. Pickens pointed out, that means more failures. The consistent criticism of policy-makers in this credit crunch is they've failed to get ahead of events, and were always reacting after banks hit the wall. Well, Mr. Paulson is really behind the curve now. And as the business failures continue to pile up, it will be more than just bankers who get left behind.
