What a wild ride it's been on the world's financial markets. It's as if the hurricane that had just blown away Galveston, Texas, reversed course, rushed back out to sea, and on the way took care to deposit every house, building, street and road it had washed away back in the same place and in much the same shape.
But if you looked closely, you'd see crews of workmen trying to shore up one structure after another, and the city planners proposing to build a whole new system of breakwaters to save the whole island.
You can measure the high and low tides of the markets last week by looking at the gyrations of the Dow Jones Industrial Average. The market may have ended almost where it started, but in the meantime it had swung a thousand points as investors reacted to every sign of panic on Wall Street and every whisper of hope from Washington.
The team of Henry Paulson at Treasury and Ben Bernanke at the Federal Reserve have been rushing around plugging holes in the dikes as they've developed, trying different strategies for different breaches. They'd rescued both those oversized public-private disasters, Fannie Mae and Freddie Mac, but it wasn't enough to calm the crisis in the housing market. They'd taken the assets of Bear Stearns and sold them off. They decided to let Lehman Brothers go under. But the waters kept rising. AIG was next to be threatened and if it went under, much of the world's economy would go with it. So they lent it enough money to keep it afloat and kept on bailing.
Toward the end of the week, the ad hoc firm of Paulson and Bernanke unveiled the biggest rescue operation since the New Deal, proposing to buy hundreds of billions in securities that couldn't be traded now because the entire market was seizing up. It was the biggest, most daring decision of all - to use the full faith and credit of the U.S. government, that is, We the People, to get credit flowing again.
One could question the wisdom of each decision these two made along the way. Are they dedicated and innovative public servants, or just the financial version of Laurel and Hardy?
But there's little question their action may give markets hope - if Congress will only cooperate or even improve on their proposal. Imagine the fall-out if they hadn't acted. They bought some time and confidence, and what else does credit consist of?