HISTORICAL OUTLOOK
True financial populism
September 29, 2008
As the presidential candidates prepare for their last speeches and debates, I doubt they'll be cracking the history books. But America has seen many financial storms and crises in financial policy, and many presidential candidates have found themselves in heated financial-policy debates. As John McCain and Barack Obama address this year's cascade of issues about how government should steer through our present crises, deal with sinking banks, remake Fannie Mae and Freddie Mac, and contain the economic damage, they might take a moment to consider that history.
The classic financial debates have generally been won by candidates weaving together true financial populism, anti-partisanship and a feel for larger trends. Thomas Jefferson beat John Adams in 1800 by calling for more banks to serve an emerging mercantile class, while Adams came off as a tightwad defender of partisan financial control over the First Bank of the United States. Likewise, Andrew Jackson in 1832 sold the idea of killing the Second Bank of the United States by painting it as the tool of an idle financial aristocracy. Abraham Lincoln won in 1864 after evenhandedly papering the pockets of Union soldiers with greenbacks. Undeterred by howls about their unconstitutionality, he saw the national currency as essential for a national economy to bloom. William McKinley beat William Jennings Bryan in the 1896 campaign on a monetarily tight "gold standard" platform by showing that Bryan's preference for silver would have selectively favored agrarians. McKinley understood the cries of the agrarians more as laments for a declining way of life than as legitimate beefs about financial unfairness.
In 1912, Woodrow Wilson won by campaigning against insider manipulation in banking. Roosevelt won in 1932 on the promise that he'd shore up sinking banks, ease credit against the whirlpool of the Depression and substitute a public heart for Hoover's pinched stinginess.
Until the past few weeks, neither candidate staked out comparably distinctive positions on the current financial crises other than to endorse a selective financial populism. Obama advocated government support for easy mortgage financing. McCain then fought to occupy the same semi-populist ground by rushing to urge rescue of Fannie Mae and Freddie Mac before it was clear what might be needed. Otherwise, both seemed petrified of rattling the shaky financial infrastructure until it finally began falling apart all by itself.
Most of this presidential race has called to mind not so much the great races of the past, but the 1988 campaign between Michael Dukakis and the first George Bush, which was eerily quiet on financial policy despite the ongoing thrift-industry meltdown. Dukakis even declined to take Bush to task for leading a commission that certified the thrift industry's health when it really teetered on the brink of bailout. Dukakis was said not to want to play politics with financial policy.
This year's candidates seem to be reading from the same script. They might instead try a few lines from history. As would-be financial populists, both missed the mark throughout most of the campaign in advocating for troubled mortgage borrowers — only a sliver of the population no matter how sympathetic. Indeed, past overadvocacy on their behalf in Congress was probably one cause of the crisis. The more pressing populist issue has always been that the financial condition of the entire country is in a sorry state, with damage being felt even by financially solvent citizens.
Our candidates also seem unaware of the public's hunger for anti-partisanship, as the candidates continue to snipe across the aisle as if dollars are accounted by political party. It doesn't really matter which party was more captivated by Fannie and Freddie, regulated less or deregulated more. Partisan pigs on both sides of the aisle have long been rooting obliviously while this storm brewed.
And as to the overriding context? It strangely seems to be better understood by the average citizen than either candidate. The people know that America is internationally overextended from staggering financial and military obligations, runs unsustainable federal deficits and has too many households operating on the financial edge. Reform must go beyond the narrow confines of the regulatory infrastructure to solve the core imbalances on the various American balance sheets.
That would be a conversation that both candidates seem loath to initiate. However, Americans have historically shown that they can accept tough financial talk from a leader who can tell which way the financial winds are blowing, define a practical plan for fundamental reform and call on all the people to join in the project. So far, neither McCain nor Obama seems up to the standards of financial leadership set by past presidents. Let's hope one or both of them can learn a little financial history in a big hurry.
David G. Oedel is a professor of law at Mercer University Walter F. George School of Law.
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