Watching the Senate Banking Committee

Clichéd as it may sound, the eyes of the world are likely to be on the Senate Banking Committee today. Both Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke are scheduled to testify, and we can already read what they are expected to say on the BBC NEWS Web site. However, this is not where the action will be. The focus of attention will be on the questions that Committee members will pose to both Paulson and Bernanke and the quality of the answers that are delivered. If I was concerned yesterday that Congress would rubber-stamp the Administration's proposed $700 billion "solution" in the same reckless way that they approved the President's ill-conceived plans for deploying our troops, then my fears have been alleviated far more that I could have anticipated. Not only is there skepticism in the Congress; but also that skepticism is bipartisan (even if the reasons for skepticism are not always bipartisan). The whole affair looks more and more as if the only "solution" on the table is tantamount to rewarding those whose bad judgment brought about this mess in the first place, while the needs of the general public are ignored unless they can be hauled out for a specific rhetorical strategy.

Consider, as an example, the following statement that the BBC included from Paulson's anticipated testimony:

When the financial system doesn't work as it should, Americans' personal savings, and the ability of consumers and businesses to finance spending, investment and job creation are threatened.

We have heard this sentence too many times since the beginning of last week. The fact that it has been used so often by not only those who really do not know what they are talking about but also those who, by all rights, should know better, should be enough to arouse our suspicions; and, as soon as we take a closer look, it is easy enough to see why we should be suspicious. In the first place this sentence is little more than a tautology: "When the financial system doesn't work," then the activities of anyone trying to do anything with their money "are threatened." Thus, from a logical point of view, the sentence really does not say anything, which means that, in the realm of argumentation, it does nothing to warrant any claim advocating the proposed solution. On the other hand it is one of those rhetorical moves that will try to convince the Senate Banking Committee that the solution is "good for everyone," not only the high-rollers in the financial sector who have discovered what it feels like to crap out but also all those "ordinary Americans" who work for, or perhaps own, businesses (getting less and less ordinary if we read the unemployment numbers) and who cannot avoid being consumers.

One way to counter such a move is to assume the consequent and start questioning its consequences. For example what will a $700 billion increase in the national debt do to "Americans' personal savings, and the ability of consumers and businesses to finance spending, investment and job creation?" Is there not the threat that those personal savings will be devalued, not only in terms of foreign currency trading but also at the lowest level of domestic buying power; and, if the underlying buying power of the money we have (or think we have) is undermined, what will that do to "spending, investment and job creation" in the business sector? Then there is the question of what will happen to Government spending? Beyond what they have saved for themselves, what will happen to those Americans' Social Security checks? Will they provide adequate support against the hard numbers behind the cost of living? What about the role of longer-term Government spending in areas such as education and health care (both of which have been blithely ignored in just about every other decision the current Administration has made)?

Ultimately, there is really only one question that Paulson and Bernanke need to answer in their testimony today: Cui bono? Who actually benefits? The members of the Senate Banking Committee need to provide an answer to that question to those who elected them as representatives, and that answer should do for the rest of us. (To this end it is important that they consider alternative perspectives, such as, for example, those of leading economic experts in Germany.) If the answer is that the primary benefit will be to maintain the comfort of those who brought about this crisis in the first place (in the interest of increasing their own comforts, otherwise known as greed), then Congress should speak up for the rest of us before we get screwed one more time by an Administration that has never taken the overall quality of life of the electorate to heart. This may well be the day when we see who still has respect for the "job description" specified in our Constitution!