Warren Buffett's Thank You Note – And When Was the Crisis Averted?

Warren Buffett's Thank You Note – And When Was the Crisis Averted? November 17, 2010

A nice piece in the New York Times today from Warren Buffett, in which he writes a “thank you note” to Uncle Sam for pulling the country away from the brink of utter economic collapse.  Knowing that Buffett publicly supported Barack Obama for the presidency, I wondered whether this was an attempt to suggest that criticism of the Obama administration has gone too far.  There have been signs that Buffett’s affection for Obama has waned, but I certainly expected that Obama would be named as one of those who deserved credit for navigating the nation through the crisis.  Instead, this is what Buffett writes:

Well, Uncle Sam, you delivered. People will second-guess your specific decisions; you can always count on that. But just as there is a fog of war, there is a fog of panic — and, overall, your actions were remarkably effective.

I don’t know precisely how you orchestrated these. But I did have a pretty good seat as events unfolded, and I would like to commend a few of your troops. In the darkest of days,Ben Bernanke, Hank Paulson, Tim Geithner and Sheila Bair grasped the gravity of the situation and acted with courage and dispatch. And though I never voted for George W. Bush, I give him great credit for leading, even as Congress postured and squabbled.

You have been criticized, Uncle Sam, for some of the earlier decisions that got us in this mess — most prominently, for not battling the rot building up in the housing market. But then few of your critics saw matters clearly either. In truth, almost all of the country became possessed by the idea that home prices could never fall significantly.

That was a mass delusion, reinforced by rapidly rising prices that discredited the few skeptics who warned of trouble. Delusions, whether about tulips or Internet stocks, produce bubbles. And when bubbles pop, they can generate waves of trouble that hit shores far from their origin. This bubble was a doozy and its pop was felt around the world.

So, again, Uncle Sam, thanks to you and your aides. Often you are wasteful, and sometimes you are bullying. On occasion, you are downright maddening. But in this extraordinary emergency, you came through — and the world would look far different now if you had not.

President Obama is not named.  Specific names are supplied, and identifying both Presidents for thanks would have been the obvious and tactful thing to do.  Yet Buffett doesn’t do it.  Granted, Buffett is speaking of the exact moment when our economy seemed to totter on the edge of oblivion.  But it would have been easy to thank Obama for carrying on with TARP or etc.

This brings up an interesting point.  Obama does tend to take credit for averting the disaster — and cheerleaders in the media laud him for “averting another Great Depression.”  I actually do believe that Obama deserves some credit for allowing Bernanke and Bair to carry on in their roles, applying the TARP machinery that was put in place by the Bush team.  Obama never actually gives credit to the Bushes for this, of course.  Obama has proved remarkably ungracious toward his predecessor, which might be expected of a politician who still has another race to run.

But the point is this.  There is a literary technique called “telescoping,” in which events (say, events in the story of Jesus’ life) which actually took place over an extended period of time are pressed together in order to make a more compelling narrative.  We seem to have telescoped the events of the economic crisis.  You can find a helpful timeline here at the website for the St. Louis Federal Reserve Bank.

The crisis in subprime mortgages took shape over 2007 and 2008, and the ____ began to hit the fan in the middle of September 2008.  On September 7th, the Federal Housing Finance Agency placed Fannie Mae and Freddie Mac under government conservatorship.  Lehman filed for bankruptcy protection, and Bank of America announced its plan to buy Merrill Lynch, on September 15th.  Events unfolded swiftly from there.  This was over six weeks prior to the election contest between Barack Obama and John McCain — which itself is more than six weeks prior to the inauguration of the new President.

In other words, three months passed between the worst of the crisis and the inauguration of Barack Obama.  There were other moments, between mid-September and the inauguration, and even after the inauguration, when the economy looked at risk again.  But the worst of the crisis had already passed by the time that Obama became President, and initiatives such as TARP (enacted October 2nd, 2008) were already in place and addressing the problems.

Again, I am abstemious neither with blame nor with credit.  There is plenty of blame to go around for precipitating the crisis in the first place.  And there is plenty of credit to go around as well.  The Democrats in Congress might have gummed up the works for the Bush administration.  But I guess I agree with Buffett here.  It is more than possible to criticize TARP and the scores of other ways in which the government responded to the financial crisis.  And I think those responses grew increasingly dubious over time.  But in the moment, when credit was freezing up and companies were on the verge of shutting down, the government — with the cooperation of Congressional Democrats, but led at the time by President Bush and his appointees — responded and responded reasonably well.  Whatever else he did wrong, Bush deserves some credit for supporting the American economy in that very precarious stretch.

This is why I feel a twinge of discomfort when I hear President Obama (explicitly or implicitly) take credit for the fact that our economy is no longer on the brink.  It was already, by the time he came to power, no longer on the brink.  He deserves credit for not reversing the programs that were working.  But the primary credit, dare I say it, goes to the Bush administration for responding swiftly and effectively to the crisis.

It comes back to the responsibility of Christians to be honest.  We should represent the sequence of events rightly, and give credit where credit is due, whether or not we like the people who receive it.  I appreciate that Buffett, although he was not a fan of Bush, is willing to give thanks, and do so in front of the country.  The Sage of Omaha is an example to all of us.

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