Selling the Bailout

It is clear that, barring a complete overhaul of the Paulson Plan, the bill currently floundering in congress is not going to attract the votes of the stalwart members of Congress (which, it turned out yesterday, are in the majority). Representatives and their constituents are concerned about the philosophical nature of the plan (a drift towards socialism, that bogeyman of American politics); the perception that it rewards greedy and unwise Wall Street managers at the expense of average folk; and the political ramifications of all of this. Clearly, therefore, what we are dealing with here is a PR problem on a massive scale.

Of course, Paulson isn't helping on this front. When his original draft of the bill is three pages long and basically gives him complete, unfettered control over a chunk of money that is larger than the entire GDP of India, he didn't make too many friends. Among the American people especially. The fear that this ex-Goldman Sachs CEO is enriching his friends at our expense really is a valid concern: recent revisions to the bill, however, have softened the original proposal considerably, complete with provisions to limit executive compensation and an equity stake in the companies themselves (plus a vague guarantee that the Treasury is repaid within a certain set period of time). This should calm all those anxious heads (like mine) out there that balked at the original plan.

Something tells me that if Americans truly understood the extent of the problem, there would be more public support for this plan. The problem is that our financial system has spiralled so out of control over the last twenty years (and especially in the last 8) that it is now too exceedingly complex to grasp. Even top Wall Streeters don't understand the depth of this crisis, where all these toxic mortages were bundled off to, how the $60+ trillion derivitives markets (Buffett's "financial weapons of mass destruction") will respond to the fact that there is suddenly less money in the world, etc. They are on tenderhooks just like we are. The media has been doing a truly commendable job explaining global finance over the last two weeks, but some of this stuff is closer to quantum physics than it is to simple supply-demand macroeconomic models we've all learned in high school. Expecting Americans to "understand" what's going on might be too much to ask when nobody seems to get it.

However, this much now seems clear: if we don't act, we face certain financial disaster. The problem here, again, is one of abstraction. I imagine lots of people out there are picturing all the towers in lower Manhattan with "For Sale" signs out front and a lot of guys in Gucci suits waiting in line for some bread. They don't picture themselves in the same situation; after all, it was Wall Street that messed up, right? And despite all the turbulence on the markets these last couple weeks, the majority of Americans still have their jobs, drive to work, plan for retirement, and do everything they were doing before the financial hurricane hit. So why should they bail out Wall Street tycoons? Let them suffer a little bit for their greed.

The problem with this understanding of the situation is that it assumes one can keep away from the tangled mess of Wall Street, could simply open up accounts in banks that are completely independent from the asset-backed securities market, etc. Of course, our financial system don't work this way, and it really is impossible to stay out of the meltdown. Your job security, your ability to buy a new car, your 401(k): all of these are tied to the vageries of the markets. So before we adopt an attitude of Schadenfreude towards the tycoons, we need to understand that, like it or not, we are all bedpartners with Wall Street.

Collapse is an abstract phenomenon until it actually happens. But you don't have to dig too deep to unearth evidence that collapse was imminent two weeks ago (as it might be right now). On Sept. 16, for example, we actually experienced a near seize-up of the credit market. For a day or so, trading in commercial paper - that simple money-market instrument that allows businesses to take large, short-term loans with low interest rates - ground to a halt. Since businesses often don't have the money on-hand to make significant investments, commercial paper is essential to a well-functioning economy. It is the oil that keeps the machine running smoothly. If this market would have remained out of commission for another few days, it would have been ruinous.

Paulson, Bush, Bernanke, Barney Frank, and all the other important parties in the bailout deliberations have talked up the potential for disaster here. But the American public isn't buying it. Our legistators are losing the PR battle, and they're going to need to retool quickly to pull this bill away from certain doom. Here are a couple of PR suggestions to make this bill go down a little easier with regular Americans:

1) Stop using the word "bailout." Yes, that's essentially what it is, but it minimizes the importance to everyone of getting something passed. "Bailout" makes it sounds too contained, like the financial sector exists in isolation from the rest of the US economy and the pocketbooks of Everyman. It also puts the emphasis on saving the asses of a lot of fat cats who, most Americans would agree, don't deserve saving.

2) Ramp up the language. Bush has talked about how "this sucker could go down"; others have said that the consequences of doing nothing "could spell disaster for the economy." Let's cut the qualifiers out here. Bush needs to be saying that unless we act, this sucker will go down. There is a time for communicative nuance and hedging, but now is not it. Our leaders need to be direct and urgent with their message. I'm not suggesting that they fear-monger ("The Depression is coming for your children!!"), but the language needs to be unequivocal.

3) Stop blaming each other. I know that many top pols have talked about the need for bipartisanship here, but who's actually doing it in Washington? McCain "suspends" his campaign to put "country over politics" only to insert himself into a huge partisan circus, holds up the deliberations, and then - gallingly - blames Obama and the Democrats for failure of leadership. Like Paulson getting on his knee in front to Nancy Pelosi, there is a belief here that Democrats are somehow responsible for the actions of House Republicans. The blame game goes the other way. In an act of supreme stupidity, Nancy Pelosi chided the Republicans right before taking a vote on the bailout. (Although it should be noted here that the Republican claims that Pelosi's speech doomed the vote is risably ludicrous.) Our politicians talk the bipartisan talk, but when the rubber hits the road, everything turns rancorous, arguments spill into the Capitol halls, and politics once again reasserts itself as the dominant force. In addition to the financial crisis, our leaders are creating a political crisis in Washington, further eroding confidence in the American system around the globe and domestically. Reps in the House need to stop blaming each other and start working together: we can only handle one major crisis at a time.

Something needs to change quickly in the way Washington is handling the Paulson Plan, for it's not just the fat cats bankers who will be hurting when "this sucker goes down."