The Grad Voice

"An economic pearl harbor" —Warren Buffet

"The largest financial shock since the Great Depression" —International Monetary Fund

"It is now clear that the U.S. financial system is in cardiac arrest" —Nouriel Roubini, economist at New York University

"The world is on the edge of the abyss" —Francois Fillon, French Prime Minister

"You talk about taxpayers being on the hook? Guess what? They're already on the hook" —Henry Paulson

I don't know about you, but when I read such apocalyptic descriptions of our economic situation, I am left feeling a little bewildered. I have so much riding on the future economic prospects of this country. Besides the variable rate student loans and credit card debt that I worry about, I am an MBA student with hopes for and yes, expectations of, the future. To read these gloom and doom forecasts in the newspaper everyday has been more than a little scary. My mind immediately imagines the worst - with no job, I won't be able to pay back my student loans, and after I defer them a short while, and still don't find a job, they will certainly foreclose on my house. My fiancé and I will be forced to sleep in a tent in Central Park while tumbleweeds roll down Wall Street! We will all be ruined, ruined, I say!

This is not the first time that I have been sure that the world was coming to an end, nor is it the first time that I have heard politicians warn us the Grim Reaper was at hand. Remember when George Bush back in his State of the Union in January of 2003 had us all imagine "those 19 hijackers with other weapons and other planes—this time armed by Saddam Hussein." Going as far as to say "It would take one vial, one canister, one crate slipped into this country to bring a day of horror like none we have ever known." Perhaps if fear hadn't been so useful a tactic in rallying the country and its representatives to war, it would not still be in the powerbroker's playbook as an acceptable form of public persuasion - or should I say public coercion.

Our situation is thus - housing prices rose deliriously and then sank precipitously, causing mortgage-backed securities to lose significant value. Since banks were already over-leveraged (remember those scary graphs of banks' debt-to-equity ratios in The Wall Street Journal back in September), the devaluation of these securities was too large a hit for many banks to remain tenable. Banks, like Lehman Brothers, which were not able to deleverage fast enough flailed around like Achilles with a poison arrow in their heel. While, the world, egged on by sensational media coverage, looked on in fear, curiosity, and disgust.

But what if it was Chrysler that had failed instead of Lehman? Thousands would still have been laid off, investors would still have lost money, and there still be the psychological trauma of a pillar of American business falling on its face, but would we have hastened a $700 billion bailout for the auto industry? I thought that the risk of failing, being laid off, and losing money in the stock market was a reality of capitalism that we all accepted. We were justified in being concerned after Lehman, but since the media was making it all sound so dramatic, what really set in was panic. And we all know what panic on Wall Street means.

Obviously the media love a sensation because it draws an audience. What is more suspicious, however, is how the government was reassuring everyone one week that economy was strong and then the next is forcing a bailout down our throat. Its sounds an awful like the sort of reassurances that corrupt executives make to shareholders as they secretly dump their company's stock. Here is where it might have paid to be suspicious. If we had addressed these problems earlier, would we have had a better choice than bailing-out the banks? By waiting until panic set in, did we leave ourselves no other alternative?

Where there is smoke, there is usually fire. A better way of determining who the bailout benefits may be determining who the rhetoric of fear benefits? Let's face it - the idea for the bailout came from Henry Paulson, a former banking executive, and the bailout primarily benefits banks. If the bailout restores confidence in the stock market -confidence that has been shred to bits by the past few months of mass hysteria - the American people will also benefit, but not as much as if they were never put in this situation in the first place.

Expectations, emotions, and confidence have extraordinary bearing on our economy and nation's well-being. As was the case with the war in Iraq, I believe that fear was used against the American taxpayer to hasten us into a bailout that does not directly benefit the average American. Knowing as we do now that those in power will use such under-handed tactics to rally our support, it is more imperative than ever that we keep a cool head and vote for politicians who have the same virtue. We must train ourselves to think rationally about problems like the one our economy is facing now and speak up when we believe that we are being coerced. We can't let politicians and pundits scare us into submitting simply because they say that, if we don't, we'll be sorry.

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