Even casual business press readers by now know that what is happening on Wall Street is new, unusual, historic, unfamiliar, unknown. Let’s be clear: what is happening is financially catastrophic for some but extremely dangerous for all.
The extinction of Lehman Brothers and Merrill Lynch as independent concerns was unthinkable only a short time ago. But then so was the insolvency and nationalization of Fannie Mae and Freddie Mac—also unthinkable. And so, for that matter, was the extinction of Bear Stearns. These were pie-in-the-sky, doomsday scenarios. Now they are happening.
The business press is doing an able job—The Wall Street Journal and The New York Times, particularly—as it scrambles to both keep up with a howling blizzard of events and to convey the enormity, sweep, and scope of what it is describing.
It’s worth pausing for a moment to appreciate the language itself, the likes of which we haven’t read in the business press in our lifetime:
Crisis on Wall Street as Lehman Totters
And that’s only the first line of a headline that dominates the Journal’s website. Here’s the second line:
Merrill Seeks Buyer, AIG Hunts for Cash
Lehman’s viability has been the subject of heated debate for months. Still, though, its actual failure is a shock. And to have Merrill Lynch —a Wall Street stalwart, loved, hated, but always a key financial-page protagonist —just vanish is to me the biggest stunner of them all. I’m sure some people predicted this, but not many.
And now, American International Group, probably the most successful insurance company of all time, is tottering as well. It simply beggars belief. How A.I.G. made its money is another story; in the view of some it took advantage of weak state regulation to degrade the insurance business with its hardline approach to paying claims.
But now even that money machine is in trouble.
A Momentous Weekend for American Finance
Indeed.
In case anyone is wondering, we are rapidly moving beyond worst-case scenarios.
Here’s the Times, with my emphasis:
In one of the most extraordinary days in Wall Street’s history... The moves came after a weekend of frantic negotiations……
And:
Coming just a week after the government took control of mortgage lenders Fannie Mae and Freddie Mac, the magnitude of the industry’s reshaping is staggering: two of the most powerful firms on Wall Street, Merrill Lynch and Lehman, will disappear.
These are not tabloids, but our leading financial publications. And believe me, there is not a word of hyperbole in this morning's papers.
It should be said, the business press, led by the Times and the Journal , has covered the emergency with skill, energy, sophistication and grace under pressure. So let’s name some names and acknowledge heroic work by Matthew Karnitschnig, Carrick Mollenkamp and Dan Fitzpatrick, who scored a massive scoop on Bank of America’s deal to buy Merrill, along with Susanne Craig, Serena Ng, Liam Pleven and Peter Lattman at the Journal; the indefatigable Andrew Ross Sorkin, Ben White and Jenny Anderson, Gretchen Morgenson and Mary Williams Walsh at the Times; Yalman Onaran and Craig Torres and others at Bloomberg; and Francesco Guerrera, Krishna Guha, and Greg Farrell at the Financial Times. I’m sure there are many more. Pass them along at dean@deanstarkman.com, and I’ll add them to the honor role.
I believe the Wall Street implosion has profound implications not just for the financial firms, but the financial press itself, implications we’ll be exploring in the coming days and weeks here on The Audit. This happened on its watch. But there will be time for lessons, ruminations and blame-assignment later.
For now, it’s time to acknowledge good work and pause before considering how we got here and what is next.
The United States is asking for trouble with its educational system. There should be a comprehensive audit of American education to determine why the country is burning through so many billions of dollars in useless courses and tests every year, and causing the rest of the world to throw so much money away on such trash as Kaplan courses and ETS garbage. I suspect that just the bogus international English business that the US is responsible for is bigger in revenues every year than Wal-Mart's, but have we even tried to find out? What are the opportunity costs?
In Vietnam, in New Orleans, in the current economic meltdown, in 9/11, America has demonstrated remarkable incoherence, as if every new disaster were unique and totally unpredictable.
It would be possible to hard wire political and economic cohesion and coherence into the system of American education if every student from grades 7-12 had the choice of doing an honors program in social sciences, in law, history, economics, geography, and political science (students should also be able to do honors programs in physics and math, or in the arts, or in the life sciences).
The honors social sciences program in grades 7-9 would begin with a four-print-newspaper reading cycle in the morning that would be expanded to eight papers in grades 10-12. In learning how to assimilate the WSJ, USA Today, Washington Post, and New York Times, in about 2 hours, junior high students would have to practise pattern recognition and learn how to collate information so as to strengthen memory, perception, and projection (foresight). The modern American student cannot remember much of anything, cannot see much of anything, and has no idea of what the consequences of any program of action might be.
This terminal illness is being compounded by NCLB, the SAT, and the prevailing mindlessness of American teaching of English.
Instead of asking questions about how a certain reporter keeps getting access to the highest levels of the White House, while a certain President continues to play little education games that create openings for Kaplan, Americans just sleep to the point that their system of education has become so loaded with parasites that it cannot function.
Although books in cognitive science and in psychology are often better than those in history, political science, and economics (given the relative volumes), it still would be possible to build a powerful national social sciences curriculum by dumping all the canned school texts and inept standardized tests for a live selection of the best books in the bookstores in the sections I have mentioned. The banks and other financial firms wallowing in incompetence would benefit from buying these books for all the students in the honors programs, instead of obsessively attempting to create mirages of value.
Amazingly, despite the decades-long incoherence in American education, foreign policy, and economics, no professor of psychology or linguistics has persuaded government authorities to fund advanced labs in the study of the linkages between language, and perception and projection, and also those between micro-cohesion and macro-cohesion.
Chapter 9 of the COBUILD English Grammar is the best introduction to cohesion in English. We might have thought that by now West Point would have developed the world's best labs in extending the study of cohesion in texts to issues of macro-cohesion and macro-coherence in policy, but nothing has happened. In America, it looks as if there never will be an understanding of how careful attention to telling detail in "The Sick Rose" or "The Turn of the Screw" can be transformed into plasticity of awareness and response in the military and in economics.
The idea that 9/11 could easily have been prevented by universal thoughtful teaching of cohesion and coherence only seems alien because of diminished expectations, partially created by ETS and Kaplan, tacit parasitism that makes it near impossible for Americans to think imaginatively about the future.
I'm confused. Is Burns' rant about our goofy public educational system directly connected to the historic yet completely predictable (if you agree with Black Swan author Nassim Nicholas Taleb) failures of our financial institutions and government regulators, or just a clever example of the incoherence about which he writes?
Unthinkable my granny's elbow. Some of us old New Dealers have not only thought about it but predicted it ever since Glass-Steagall was repealed instead of being expanded as it should have been.
Saint Peter: So you too are a black-swan man. I thought for a minute there you were with Blackwater. I agree that you are confused. If you stop compounding your prescriptions yourself, things will improve slightly.
Are you conceding that your educational system is "goofy"? If so, are you admitting that you don't know what you are talking about? If not, how did you learn the truth independently?
BTW, how does the Woodward-Kaplan-Bush economic prostitution nexus continue to thrive? I am sure that you are preparing an article on that.
It's good to know that you are still somewhat alert down home there, despite the clucking of the hens that interferes with your thinking.
Clayton Burns PhD Vancouver.