The Financial Crisis—a Failure of Communication as Well as Economy

What we have here is a failure to communicate.

Presidential leadership takes different forms and has different requirements. Merely being smart is insufficient. So is confidence. Eloquence alone does not make a great president. Experience in the halls of power won't do it either. You need some combination of all these qualities. This is one of the reasons it's such a challenging job, because its requirements are so varied.

The quality currently most missing from the great financial crisis of 2008 is an ability to communicate—specifically to communicate the nature of the problem, what's at stake in terms of the risk, and why it is therefore necessary to spend $700 billion of the taxpayers' money to fix it.

This crisis is presented as the most serious since the Great Depression. Regardless of its economic merits, the comparison is instructive for sake of contrast. Franklin Roosevelt was a master of public psychology, knowing when and how to use that presidential tool that his cousin Teddy termed the "bully pulpit." FDR's famed first 100 days (which started, remember, with a speech and the admonition that we had nothing to fear but fear itself) were not merely a whirlwind of activity but were punctuated by the president periodically explaining to the people what he was doing and why, in clear and simple terms.

It was so during the entire three-plus terms of his presidency. Roosevelt had a knack for finding easily understandable terms to explain where he wanted to take the country. When he wanted to lend weapons to Britain, he said that if his neighbor's house was on fire, he could lend a length of garden hose to help put out the fire. "Now what do I do? I don't say to him before that operation, 'Neighbor, my garden hose cost me $15; you have to pay me $15 for it.' What is the transaction that goes on? I don't want $15—I want my garden hose back after the fire is over." Less than two weeks later, FDR told the country that the United States had to be "the great arsenal of democracy." (This resonant phrase was coined by the French diplomat Jean Monet.)

FDR is not alone. The most effective of our modern presidents—Ronald Reagan joins him in that rank—were masters of communication, while the least effective—Ford, Carter and the first Bush come to mind—were unwilling or unable to use the bully pulpit.

Return to the present day. The biggest single stumbling block to finalizing a bailout for the financial system is public opposition that is only growing firmer. To the extent that the crisis is the near-existential financial event that most of Washington seems to think it is, there has been a failure to communicate the nature and scope of the problem to the public. How else to explain that 28 percent of the public had no opinion on the plan in a recent poll? Or that 77 percent believe that a bailout would benefit those who behaved irresponsibly, according to another poll?

President Bush was slow to educate the public on the crisis, letting Treasury Secretary Henry Paulson take the lead. When he did speak, Bush did so from a business school background: "We're in the midst of a serious financial crisis, and the federal government is responding with decisive action," Bush told the nation the other night. "We boosted confidence in money-market mutual funds and acted to prevent major investors from intentionally driving down stocks for their own personal gain. Most importantly, my administration is working with Congress to address the root cause behind much of the instability in our markets."

He tried to connect Wall Street to Main Street but could not drive home his point. Even having taken to the airwaves, Bush was constrained by his circumstances. He is a lame-duck president with a 26 percent approval rating. The bully pulpit is only as effective as the atmospherics allow.

One wonders if Bush, who had an up-close view of his father's political demise, is experiencing déjà vu (or déjà vu all over again, as his father's favored philosopher once said). The country faces a financial crisis; President Bush has summoned congressional leaders of both parties to the White House to hammer out a deal; House Republicans are querulous; and when a politically unpopular deal is struck, Newt Gingrich encourages them to kill it. Is it 1990 or 2008?