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September 18 - 24, 2008
Philosophical debates arise at the oddest times, and in the heat of this election season, one is now rising in Republican ranks. The narrow question is this: Is Sarah Palin qualified to be vice president? Most conservatives say yes, on the grounds that something that feels so good could not possibly be wrong. But a few commentators, like George Will, Charles Krauthammer, David Frum and Ross Douthat demur, suggesting in different ways that she is unready. The issue starts with an evaluation of Palin, but does not end there. This argument also is over what qualities the country needs in a leader and what are the ultimate sources of wisdom. There was a time when conservatives did not argue about this. Conservatism was once a frankly elitist movement. Conservatives stood against radical egalitarianism and the destruction of rigorous standards. They stood up for classical education, hard-earned knowledge, experience and prudence. Wisdom was acquired through immersion in the best that has been thought and said. But, especially in America, there has always been a separate, populist, strain. For those in this school, book knowledge is suspect but practical knowledge is respected. The city is corrupting and the universities are kindergartens for overeducated fools. The elitists favor sophistication, but the common-sense folk favor simplicity. The elitists favor deliberation, but the populists favor instinct. This populist tendency produced the termlimits movement based on the belief that time in government destroys character but contact with grass-roots America gives one grounding in real life. And now it has produced Sarah Palin. Palin is the ultimate small-town renegade rising from the frontier to do battle with the corrupt establishment. Her followers take pride in the way she has aroused fear, hatred and panic in the minds of the liberal elite. The feminists declare that she’s not a real woman because she doesn’t hew to their rigid categories. People who’ve never been in a Wal-Mart think she is parochial because she has never summered in Tuscany. Look at the condescension and snobbery oozing from elite quarters, her backers say. Look at the endless string of vicious, one-sided attacks in the news media. This is what elites produce. This is why
regular people need to take control. And there’s a serious argument here. In the current Weekly Standard, Steven Hayward argues that the nation’s founders wanted uncertified citizens to hold the highest offices in the land. They did not believe in a separate class of professional executives. They wanted rough and rooted people like Palin. I would have more sympathy for this view if I hadn’t just lived through the last eight years. For if the Bush administration was anything, it was the anti-establishment attitude put into executive practice. And the problem with this attitude is that, especially in his first term, it made Bush inept at governance. It turns out that governance, the creation and execution of policy, is hard. It requires acquired skills. Most of all, it requires prudence. What is prudence? It is the ability to grasp the unique pattern of a specific situation. It is the ability to absorb the vast flow of information and still discern the essential current of events — the things that go together and the things that will never go together. It is the ability to engage in complex deliberations and feel which arguments have the most weight. How is prudence acquired? Through experience. The prudent leader possesses a repertoire of events, through personal involvement or the study of history, and can apply those models to current circumstances to judge what is important and what is not, who can be persuaded and who can’t, what has worked and what hasn’t. Experienced leaders can certainly blunder if their minds have rigidified (see: Rumsfeld, Donald), but the records of leaders without long experience and prudence is not good. As George Will pointed out, the founders used the word “experience” 91 times in the Federalist Papers. Democracy is not average people selecting average leaders. It is average people with the wisdom to select the best prepared. Sarah Palin has many virtues. If you wanted someone to destroy a corrupt establishment, she’d be your woman. But the constructive act of governance is another matter. She has not been engaged in national issues, does not have a repertoire of historic patterns and, like President Bush, she seems to compensate for her lack of experience with brashness and excessive decisiveness. The idea that “the people” will take on and destroy “the establishment” is a utopian fantasy that corrupted the left before it corrupted the right. Surely the response to the current crisis of authority is not to throw away standards of experience and prudence, but to select leaders who have those qualities but not the smug condescension that has so marked the reaction to the Palin nomination in the first place.
WASHINGTON – Alaska Gov. Sarah Palin has awesome self-confidence. Chosen by fellow Republicans to be Sen. John McCain’s running mate, she told an interviewer: “I’m ready.” That confidence reflects her naivete about her role that puts her one heartbeat away from the presidency. In accepting the nomination as veep, she invoked the greatness of President Tr u m a n , based on their small-town origins. But anyone who was around during Truman’s era knows there is a world of difference between Palin and Truman. Take, for example, humility. Truman was vice president for only a short time when on April 12, 1945, he was summoned to the White House and told the stunning news that President Franklin Roosevelt was dead. Truman and FDR were not close and Truman was not deeply familiar with the U.S. military plans for World War II. He also did not know about the atomic bomb.
As the nation’s new leader, Truman wanted a few days to move into the White House. He understood the magnitude of his new job.The morning after being sworn in Truman emerged from his Washington apartment to go to work on his first day as president. He took one look at the three wire service reporters who standing in front of his building. “Boys,” he said to the familiar faces, “the moon and the stars fell on me. If you ever prayed before, pray for me.” So when Palin says she is “ready,” one thinks of the two U.S. wars underway in Iraq and Afghanistan – and the devastating market crash on Wall Street. There is no question that Palin has given a big lift to McCain and helped boost his ratings so that he’s now virtually tied with Barack Obama, the Democratic nominee. As a team McCain and Palin are on the same page. Both are pro-guns, and antiabortion. She is literally a rifle-toting mama, against sex education, and has attempted to ban books she considers immoral from her hometown library. But Palin’s evangelical rigidity on social issues puts her out of step with the modern Continued on Page 42
Will the U.S. financial system collapse today, or maybe over the next few days? I don’t think so – but I’m nowhere near certain. You see, Lehman Brothers, a major investment bank, is apparently about to go under. And nobody knows what will happen next. To understand the problem, you need to know that the old world of banking, in which institutions housed in big marble buildings accepted deposits and lent the money out to long-term clients, has largely vanished, replaced by what is widely called the “shadow banking system.” Depository banks, the guys in the marble buildings, now play only a minor role in channeling funds from savers to borrowers; most 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. And as the unknown unknowns have turned into known unknowns, 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. And here’s the thing: The defenses set up to prevent a return of those bank runs, mainly deposit insurance and access to credit lines with the Federal Reserve, only protect the guys in the marble buildings, who aren’t at the heart of the current crisis. That creates the real possibility that 2008 could be 1931 revisited. Now, policy makers are aware of the risks -- before he was given responsibility for saving the world, Ben Bernanke was one of our leading experts on the economics of the Great Depression. So over the past year the Fed and the Treasury have orchestrated a series of ad hoc rescue plans. Special credit lines with unpronounceable acronyms were made available to nondepository institutions. The Fed and the Treasury brokered a deal that protected Bear’s counterparties – those on the other side of its deals – though not its stockholders. And just last week the Treasury seized control of Fannie Mae and Freddie Mac, the giant government-sponsored mortgage lenders. But the consequences of those rescues are making officials nervous. For one thing, they’re taking big risks with taxpayer money. For example, today much of the Fed’s portfolio is tied up in loans backed by dubious collateral. Also, officials are worried that their rescue efforts will encourage even more risky behavior in the future. After all, it’s starting to look as if the rule is heads you win, tails the taxpayers lose. Which brings us to Lehman, which has suffered large realestate-related losses, and faces a crisis of confidence. Like many financial institutions, Lehman has a huge balance sheet – it owes vast sums, and is owed vast sums in return. Trying to liquidate that balance sheet quickly could lead to panic across the financial system. That’s why government officials and private bankers have spent the weekend huddled at the New York Fed, trying to put together a deal that would save Lehman, or at least let it fail more slowly. But Henry Paulson, the Treasury secretary, was adamant that he wouldn’t sweeten the deal by putting more public funds on the line. Paulson seems to be betting that the financial system – bolstered, it must be said, by those special credit lines – can handle the shock of a Lehman failure. We’ll find out soon whether he was brave or foolish. Even leaving aside the obvious need to regulate the shadow banking system – if institutions need to be rescued like banks, they should be regulated like banks – why were we so unprepared for this latest shock? When Bear went under, many people talked about the need for a mechanism for “orderly liquidation” of failing investment banks. Well, that was six months ago. Where’s the mechanism? And so here we are, with Paulson apparently feeling that playing Russian roulette with the U.S. financial system was his best option. Yikes.