From World Trade Center to Wall Street: Here we go again

Call it Iraq syndrome, or subprime PTSD. Our views are still shaped, and our actions hamstrung, by upheavals that began five and 12 years ago this week.
Crosscut archive image.

A World Trade Center tower rises again in Manhattan.

Call it Iraq syndrome, or subprime PTSD. Our views are still shaped, and our actions hamstrung, by upheavals that began five and 12 years ago this week.

It’s a big week for anniversaries. Wednesday marked the twelfth 9-11 since “9-11” became an indelible lamentation and war cry. And this Sunday brings the fifth anniversary of the collapse of Lehman Brothers, America’s fourth-largest investment bank and largest bankruptcy — widely seen as the tipping point in the banking crisis, stock market meltdown and Great Recession. In the standard telling, these were the two days when “everything changed.”

But why are they generating so much more buzz and pontification this year than on all the other anniversaries? An atavistic attachment to quinary or duodecimal numbers? Certainly, the current posturing and jockeying over Syria adds another layer of meaning and myth to 9/11. Lehman’s downfall may loom larger in memory as financial pundits warn of new storms ahead for the global economy and a tapering off of the three-year recovery in the stock and housing markets that’s left the well-off even better off than before and left out nearly everyone else.

Did “everything change” as a result of these events, or did they just accelerate processes already underway? “You never want a serious crisis to go to waste,” Obama’s then-chief of staff Rahm Emmanuel famously told the Wall Street Journal in November 2008. “What I mean by that is it’s an opportunity to do things you think you could not do before.” Those "things" composed an economic, financial and social agenda that Obama and Democratic leaders were chomping at the bit for, from infrastructure and clean-energy investment to health-care reform to reversing the decades-long loosening of regulations on financial institutions — perhaps even breaking up the "too big to fail" banks that now tottered on the brink.

Paul Ryan and his comrades will tell you the Obamites succeeded catastrophically in their pernicious agenda. According to Paul Krugman and friends, they fell miserably short. Certainly George W. Bush and his hyper-hawkish mandarins were more successful at seizing the opportunity their crisis presented seven years earlier, to manifestly disastrous effect. The dust hadn’t even settled over the late World Trade Center when they began talking about seizing the chance to overthrow Saddam Hussein, who had nothing to do with the attacks and no chemical or nuclear weapons.

Generals always fight their last war. Cheney and Rumsfeld, Kissinger acolytes and frustrated veterans of the Nixon and Ford administrations, saw Iraq through the prism of Vietnam. They never forgot how they would have won there if a craven Congress, quailed by backstabbing media, hadn’t snatched away victory. Never mind that, in the brief euphoria following the 1991 Gulf War, President George H. W. Bush declared, “By God, we've kicked the Vietnam syndrome once and for all!" This time we go on to Baghdad and really win.

The corollary to that adage is that the public always shirks the last war. The disenchantment that followed World War I, the “war to end all wars,” nourished isolationism in the 1930s and blinded Americans to the new and very different threats posed by Nazism and Japanese imperialism. In Iraq, tragedy followed farce. Historians and counter-factualists can argue forever over who would be better or worse off if the United States hadn’t occupied Afghanistan and Iraq. The bitter aftermath of the second Iraq invasion — the bungled, unplanned occupation, the sectarian carnage, the strengthening of Iran — may have gotten Barack Obama elected in 2008. But it haunts him in Syria, where the only date he can get is with Vladimir Putin.

Never mind that the Syrian crisis may be more like those in Bosnia, Kosovo, Liberia, Sierra Leone, Ivory Coast, Libya and Mali: a live civil war rather than a stable, if nasty, dictatorship, and an urgent humanitarian crisis. Plus the “red line” of chemical attacks. In all those trouble spots, foreign intervention (or just the threat of it in Liberia) quelled the crisis and initiated an (admittedly imperfect) process of recovery.

But now we really have kicked “Vietnam syndrome” at last. Now we see every conflict through the prism of Iraq. Maybe we’ll manage to remove Assad’s WMDs, just as we did Saddam’s, in return for leaving him to brutalize his people. Then we can overthrow him in a dozen years, when we’re feeling frisky and someone else attacks us.

The timing and choice of targets have hardly been better in the response to the financial crisis. In 2008, the Federal Reserve and Bush administration skittered around like, well, Obama trying (or trying not) to deal with Syria. Sometimes it seemed they couldn't tell baby from bathwater.

It’s always seemed to me that if there was a tipping point, it wasn’t letting Lehman fail. It was bailing out the much smaller Bear Stearns, which was likewise drowning in securitized subprime assets, six months earlier, in March 2008. That extraordinary intervention just propped up Wall Street’s house of cards till autumn, so it could fall even harder. When recipients of government largess at the other end of the economic spectrum are offered such incentives, it's called "moral hazard." Lehman’s bosses refused a buyout, assuming that if the Fed would bail out Bear Stearns, surely it would save their sinking operation, whose tendrils went much deeper into the global economy.

It didn’t. The Dow fell 504 points on September 15, 2008, soon followed by a thousand-point drop, and the panic needle swung back. Just as the second Bush administration swung from shrugging off Bin Laden and al Qaeda to full-tilt war, it and the Obama team threw everything at a financial crisis long foretold and ignored: stimulus packages, the $700 billion Troubled Assets Relief Program, the much bigger bailouts of AIG and Detroit, etc., etc. No more talk of banks “too big fail.” The mantra became, “Anything to stop them from failing.” With federal backing, the biggest banks took over the weakest (bye bye, Wamu) and got even bigger.

It’s consoling to indulge in post-crisis nostalgia, to wax over the trials we survived in 2001 and 2008, to see our 401k balances rise to their earlier levels and a magnificent new tower rise at One World Trade Center. But if you start to miss those bad old days, fear not. We’ll get the chance for a reprise. Perhaps as tragedy. Maybe as farce. Most likely as both.


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About the Authors & Contributors

Eric Scigliano

Eric Scigliano

Eric Scigliano's reporting on social and environmental issues for The Weekly (later Seattle Weekly) won Livingston, Kennedy, American Association for the Advancement of Science, and other honors. He has also written for Harper's, New Scientist, and many other publications. One of his books, Michelangelo's Mountain, was a finalist for the Washington Book Award. His other books include Puget SoundLove, War, and Circuses (aka Seeing the Elephant); and, with Curtis E. Ebbesmeyer, Flotsametrics.