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US elections 2008

Page last updated at 11:05 GMT, Wednesday, 17 September 2008 12:05 UK

Washington diary: Troubled times

By Matt Frei
BBC News, Washington

In the rolling, rollicking ballad that is American politics, last week was dominated by burlesque musings on pigs and lip-stick.

A trader on the New York Stock Exchange
The bad news from Wall Street now dominates the campaign

This week is overshadowed by the bleak realisation that we are all at the mercy of forces well beyond our control.

In Texas, tens of thousands have been mauled by nature's teeth in the form of Hurricane Ike.

Elsewhere, we are all - to some extent - being mauled in the tussle between greed and fear that motivates Wall Street.

Greed has ruled the roost for the past quarter of a century, with so many of us playing the happy addict as the banks willingly supplied us with easy credit and irresponsible mortgages.

Now fear is having a field day.

Gordian knot

There are those jaw-dropping statistics as titans like Lehman Brothers crumble under the weight of $617bn (345bn) of mostly bad debts.

There is the fire-sale of Merrill Lynch, and the woefully unsure future of one of the world's biggest insurers, AIG.

There is the Gordian knot of global interconnectivity linking a sub-prime mortgage in Tuscaloosa, a bad bank loan in Tokyo and an endangered job in Treviso, all bound up in the gibberish of incomprehensible financial lingo.

Worried bankers and economists are like failing generals in losing wars - the worse things get, the more they resort to euphemisms.

As far as any individual can usher in a cure, Hank Paulson is probably as good as it gets

"De-leveraging" must be the "collateral damage" of this crisis.

And then there are the scary tell-tale signs that something has changed in the world.

I rang my banks in the UK this morning.

One had the phone operator giving me his personal guarantee that the bank will not collapse.

Fine then.

The answering machine message of another bank had been switched from piped Mozart to a special recorded announcement about insuring your deposits in volatile times.

That is like the captain of the plane telling passengers to read the flight manual for the emergency landing.

The safety of our deposits is something that we would dearly like to take for granted.

Gnawing fear

A friend in London told me about all the Lehman dads who had suddenly gathered with their children at the school gate for the morning drop off.

A whole generation of Masters of the Universe is about to master the school run and the trip to the supermarket.

Personally, I feel that any schadenfreude is immediately trumped by a gnawing fear that worse is still to come and that all those comparisons with the Great Depression may be more than just an excuse to play some old black and white footage on the TV.

I know from some friends that their sound businesses are in mortal danger because banks refuse to honour the credit lines which they need in order to function.

John McCain
Mr McCain said 'the fundamentals of the economy are strong'

I know that it is much harder to get a mortgage or a bank loan, even if your credit rating is sound and you have a - so far - steady income.

Credit is the lifeblood of any economy.

It is based on trust and trust is based on some very subjective stuff.

In times like this we realise that economics is really herd psychology with numbers - and that scares me.

In Hank Paulson, who was the chairman of Goldman Sachs before he became Treasury Secretary, we already have the most experienced banker of our age trying to fix the economy.

Ominously, the same was true in the 1920s when Andrew Mellon - then the most experienced banker of his era - became Secretary of the Treasury and still did not manage to prevent the Great Depression.

As far as any individual can usher in a cure, Hank Paulson is probably as good as it gets.

And that, too, is scary.

White noise

So what are the candidates doing about it?

Last week they had our bemused attention with their inane tussles about cosmetics and barnyard animals.

This week their protestations about the economy have seemed like white noise during an earthquake.

What can they really say that reassures voters about the issue throbbing in the forefront of their minds?

Detailed policy points are bound to fall on deaf ears.

Republican John McCain has proposed setting up a commission - like the one established to look into the 9/11 attacks - to determine who is to blame for the current mess.

Democrat Barack Obama's campaign has reminded everyone that Mr McCain recently said the economy was fundamentally strong.

Clearly these are words he now regrets.

As far as anyone can benefit from Meltdown Monday, Mr Obama is getting a small boost.

According to one poll, 48% of Americans believe he is better placed to deal with the economy, compared with 45% who prefer Mr McCain.

But do not hold your breath: neither candidate is seen as an economic wizard.

For her part, Republican vice-presidential candidate Sarah Palin has been judicious enough not to claim to have knowledge of the banking sector the way she said she had "knowledge" of Russia - based on eye-contact and proximity.

The American public is not looking for scalps - it is hoping for a roadmap to normality.

But have you noticed? No-one on the campaign-trail or on Wall Street or on Pennsylvania Avenue is offering one.

It is ultimately up to the market, we are told.

And the market? That's us. Blimey.

Matt Frei is the presenter of BBC World News Americawhich airs every weekday at 0030 BST on BBC News and at 0000 BST (1900 ET / 1600 PT) on BBC World News and BBC America (for viewers outside the UK only).


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MATT FREI'S WASHINGTON DIARY

Matt Frei Troubled times
Rollercoaster ride as America wakes up to economic crisis

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