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Congress Gets an 'F' in Managing the Financial Crisis

Congress Gets an FManaging a national crisis isn't all that different from managing a corporate crisis. In both cases, the goal is to instill a sense of confidence that the crisis is being effectively handled and will therefore go away sooner or later, as the case may be. The method for doing that is the Three Elements of Effective Crisis Management:

  1. Own up to the problem.
  2. Make things right.
  3. Let everyone move on.
We've seen some tough crises as of late, including Toyota's recall of millions of vehicles for sudden acceleration and BP's gulf oil spill. But even these pale in comparison to America's subprime mortgage and banking meltdown and the financial crisis that has since gripped the nation. If ever there was a time for Americans to know a crisis is being effectively managed, this is it.

And while the federal powers-that-be did manage to keep us from plunging into a global depression, since then, it's really been up to congress to drive legislation that will fix the housing mess, free up credit, create jobs, foster business growth, and generally create an air of certainty that what needs to be done is being done. In other words, to manage the crisis.
Not only has congress failed to do that, it's somehow managed to make matters far worse. In addition to high unemployment, slow growth, limited credit, and record housing foreclosures, now we've got a record federal deficit to worry about, too. Somehow, a short-term crisis has morphed into long-term uncertainty and fear about our nation's future.

For that, Congress gets an F in managing the financial crisis. But instead of just shooting from the hip, let's take a look at congress's performance in terms of the Three Elements of Effective Crisis Management. Just click the link below to see how congress stacked up:

CLICK for Congress's Grade on "Owning Up to the Problem" >

Own Up to the Problem
Congress has clearly and consistently blamed the Bush administration for the crisis. Regardless of whether that's true or not, in a crisis, nobody wants to hear it. What they want to hear is that the leaders in power are owning up to the problem. Why? Because, leaders who don't own a problem aren't likely to solve it. People aren't dumb. They know that.

In an MSNBC interview, Chuck Todd asked Speaker of the House, Nancy Pelosi, "Why do Democrats keep blamin' the Bush administration going forward? When do you feel like that runs out with the public?

To which Pelosi responded:

Well, it burns out when the problems go away. And here's what the president inherited. He [Obama] inherited a deficit, when this president [Bush] inherited from the Clinton administration four budgets that were either in surplus or in balance. And he [Bush] turned it into a massive deficit. He [Bush] -- brought us to the brink of a financial crisis. He [Bush] brought us to the brink of deep recession ignoring issues that relate to climate change--

This is how we got to where we are. It's hard digging back from the mess that they have driven us into.

For his part, Senate Majority Leader Harry Reid also placed the blame squarely on the previous administration in a recent interview:
It would take a real stretch to think I caused the problems with the economy. I don't have any hand in what took place during the Bush administration. I tried to rein that in.
Likewise, a recent ad by Reid blamed the nation's economic troubles on Bush, Wall Street, corporate America, and foreign oil prices. Everybody but congress and the current administration.

Grade: F
CLICK for Congress's Grade on "Making Things Right" >

Make Things Right
Since the crisis hit, congress has enacted a boatload of legislation that's not only done little to create jobs and boost the economy but has added a mountain of debt to the picture. As a result, and by every metric that counts, an already fragile economic recovery completely stalled over the summer.

In addition to record foreclosures and plunging home sales, unemployment sits at 9.6 percent and there's been virtually no job creation in the private sector.

In fact, according to yesterday's Business Roundtable report, a survey of CEOs of America's biggest companies showed that 23% plan to eliminate jobs while just 31% plan to hire workers over the next six months. Both numbers are considerably worse than last quarter's survey, meaning we're moving in the wrong direction.

In addition, a Conference Board report yesterday indicated that consumer confidence in the U.S. economy is "quite grim," citing a plunge in the board's consumer confidence index for September to 48.5, its lowest level since February.

According to Lynn Franco, director of the Conference Board's consumer research center, "Even though the recession has been officially over for quite some time, it still feels like one to consumers," Franco said. "We have yet to see strong job growth, and that is the dark cloud hanging over consumers."

And while congress did pass legislation to overhaul America's banking system, it somehow managed to leave the primary instruments of the subprime mortgage meltdown, Fannie and Freddie, completely intact. American taxpayers are not only on the hook for a monstrous $160 billion bailout of the two failed pseudo-government agencies, but the worst case projection is $1 trillion, before it's all said and done.

Grade: F
CLICK for Congress's Grade on "Letting Everyone Move On" >
Let Everyone Move On
So, here we are, stuck with high unemployment, mortgages we can't afford to pay, houses we can't sell, limited credit, and a record budget deficit and national debt. As if that's not enough, congressional leaders appear to be more concerned with their own reelection campaigns than they are with passing a new tax bill or voting to extend the Bush tax cuts that are scheduled to expire at the end of 2010.

Congress's inability to even vote on a tax bill before elections will leave every company, small business, and individual in America in a state of uncertainty because nobody knows what the tax situation will look like just a few months from now. We're all stuck, unable to plan our own budgets for the coming year.

Commenting on the plunge in consumer confidence, Barclays Capital Research wrote, "Further gains in employment and more certainty about the fiscal policy outlook will probably be required before household confidence improves significantly."

While Ivan Seidenberg, chairman of the Business Roundtable and CEO of Verizon Communications, said, "Uncertainty is affecting the growth of the economy. Businesses need more clarity from Washington. Businesses want Washington to make up its mind quickly so they can plan appropriately. Give us certainty one way or the other."

Clearly, nobody is able to move on in this uncertain economic climate.

Grade: F

Bottom Line: So, that's how I graded congress's management of the financial criss. All Fs. Did I miss anything? What grade would you give our leaders in Washington?

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