President Obama is planning a major address on Monday to mark the anniversary of the Lehman Brothers collapse, to take credit for “taking us back from the brink.”
Well, a speech seems appropriate, since next week marks another anniversary, that's the week, a year ago, that the president's political fortunes changed for the better. One year ago today, Lehman Brothers collapsed, which set off a week of financial bloodletting on Wall Street. Within a month, the Dow Jones Industrial Average dropped almost 3,000 points from 11,421.99 on September 12 to 8,451.19 on October 10. By the end of the year some 40% of the world's wealth had vanished, according to Stephen Schwarzman, chairman of the Blackstone Group.
Coincidentally, on September 8, 2008, after the Republican Convention (and the Sarah Palin bounce) the Real Clear Politics average of polls had the hapless McCain beating Obama 48.3% to 45.4%. But, when Lehman Brothers failed, all bets were off. By September 17, both candidates were neck and neck at 45.7% apiece and the rest, as they say, is history.
But the crisis didn't end there. On the day the president was elected, the Dow Jones dropped 486 points, not exactly a ringing endorsement. By the end of that week it closed at 8,497, down 1,128 points.
Then there was the “stimulus bill” which was passed in February, that triggered another bear market. The day it was announced that Republican Senators Collins, Snowe and Specter would support the stimulus, the Dow began dropping from 8,280 on February 6 to 6,547 on March 9. That’s a loss of 1,743 points in a month. It also happened to be 3,078 points lower than the day the president was elected. That says the markets didn’t believe the stimulus would work.
Maybe that’s because four years earlier, a pair of economists at UCLA, Harold L. Cole and Lee E. Ohanian warned of the damage an ill-conceived stimulus could do to the economy. In their study of the Great Depression, they concluded that FDR’s policies prolonged the misery by 7 years.*
But, that’s exactly the policy President Obama instituted. Now, the world is wondering whether we are actually bankrupt. And, we are forced to beg China to continue financing of our exploding debt.
To put the gears in motion, someone, we know not who, drove up the price of gas to over $4.00 a gallon. Could it have been George Soros (who also had a very good crisis) or Iran even? And, the collapse of the Fannie Mae and Freddie Mac, that pair of Democrat slush funds hastened the demise of Lehman and company. It was especially convenient that this all happened under a Republican president.
Indeed, 2008 was a year full of magic for Mr. Obama, but the crystallizing moment happened one year today, no wonder President Obama wants to give a speech, that's how he celebrates.
*In an interview, Ohanian said:
"Why the Great Depression lasted so long has always been a great mystery, and because we never really knew the reason, we have always worried whether we would have another 10- to 15-year economic slump…We found that a relapse isn't likely unless lawmakers gum up a recovery with ill-conceived stimulus policies."
Repost from 09/11/09