"The failure of Lehman Brothers and the near-failure of Merrill Lynch raised the interest rate at which profit-seeking lenders were willing to lend to highly leveraged investment banks. The market thereby forced Goldman Sachs and Morgan Stanley to change their business models drastically and to convert to commercial banks. If that isn't effective regulation, what is? Protecting firms from failure (Bear Stearns, AIG, Fannie Mae, Freddie Mac, Goldman Sachs, Citibank) and mitigating their losses with bailouts renders this most appropriate form of regulation much less effective."
The president's confidence in his capacities is undermining confidence in his judgment. His way of correcting what he called the Bush administration's "misplaced priorities" has been to have no priorities. Mature political leaders know that to govern is to choose -- to choose what to do and thereby to choose what cannot be done. The administration insists that it really does have a single priority: Everything depends on fixing the economy. But it also says that everything depends on everything: Economic revival requires enactment of the entire liberal wish list of recent decades.
The implausibility of this opportunistic hypothesis is deepened by Obama's rhetoric, which says "catastrophe" impends unless everything is done simultaneously. But his budget, in effect, says the danger will soon be gone and the new risk will be whiplash from the economy's sudden acceleration. Although only a small fraction of the supposedly countercyclical stimulus will be spent by the end of the year, the budget assumes that by then the economy will have perked up, and that it will grow robustly -- 3.2 percent, 4 percent and 4.6 percent -- in the next three years. Growth supposedly will cut the deficit in half -- growth and the $1.6 trillion "saved" by first assuming, and then "canceling," a 10-year continuation of the surge in Iraq. Why, one wonders, not "save" $5 trillion by proposing to spend that amount to cover the moon with yogurt, and then canceling the proposal?
The first president whose campaign was his qualification for office continues to campaign. And he is overexposed. His schedulers should remember what a contemporary said of Thomas Babington Macaulay, a prodigiously articulate but oppressively constant talker: "He has occasional flashes of silence that make his conversation perfectly delightful."
One afternoon last week, cable news viewers saw, at the top of their screens, the president launching yet another magnificent intention -- the disassembly and rearrangement of the 17 percent of the economy that is health care. The bottom of their screens showed the Dow plunging 281 points. Surely the top of the screen partially explained the bottom.