The Hindu Business Line : Race against time for new US President

It will be nothing unnatural if the new US President, as he assumes office at noon on January 20, 2009, looks to the New Deal of Franklin Delano Roosevelt (FDR) for inspiration. When FDR took over as President on March 4, 1933, at the start of the first of four terms, the Great Depression had set in following the market collapse of 1929. It was marked by the folding up of over 10,000 banks holding more than $2 billion in deposits, leaving 27 million families penniless. A q uarter million families had defaulted on their mortgages and some 1.2 million Americans were homeless and a quarter of the workforce jobless. FDR’s New Deal brought the US back to health within the first 100 days.

The portents may not be as grim for the new President but will certainly be daunting. It will also be a race against time for him. He will have to demonstrate within a few weeks that he is capable of achieving the sorely needed economic turnaround. Complicating his uphill task is a constitutional quirk whereby while the Presidential election is set to take place on November 4, with the result declared soon thereafter, the newly elected President can enter office only on January 20 the following year. During this long gap, the country will be in some sort of a limbo, with both the incumbent and the Presidents-elect incapacitated from making any major moves.

There is no knowing whether within the three months from now, the catastrophic financial and banking maelstrom would have worked itself out, notwithstanding so many cooks in the Bush Administration busy dishing out the bailout broth. If anything, the $700 billion sanctioned by the US Congress might prove too tempting a gravy train to resist for unholy combines of freebooters in the mortgage, banking and insurance industries.

This is not as far-fetched as it sounds. Huge amounts meant for the relief and rehabilitation of the victims of Katrina hurricane were gobbled up by unscrupulous contractors joining hands with local officials, giving rise to numerous complaints of relief not reaching at all, or substandard items being dumped.

Similarly, before the ink was dry on the US Government’s order handing over $85 billion to the global insurance giant, the American International Group (AIG), the senior executives of the company gave themselves a grand holiday with families to indulge in a million-dollar splurge at the enchanting Shangri-las, at taxpayers’ expense.

Virtual charge

Preparation of the inventory of ‘toxic assets’ of failed mortgage companies and investment banks and their valuation will be another area of potential loot. The American media have themselves been deeply critical of the conflict of interest involved in the Treasury Secretary, Henry Paulson, a former chief of the discredited Goldman Sachs, presiding over the execution of the bailout plan.

All this makes it necessary for whoever is declared elected as President on November 4 to take virtual charge, considering the odds he will be up against. Of course, he cannot lay down the law in any formal sense, but he can make clear in a declaration the policies and strategies he proposes to pursue so that the functionaries in administration and the economic players are at least aware of the parameters to which he attaches importance

The way the new President stems the tide of recession and his success in putting the economy back on the rails within the shortest possible time is going to be the litmus test of his leadership. Oddly, in the current context, the President-elect has to start steering the course of events towards the desired end without even waiting for the inauguration of his presidency.

B. S. RAGHAVAN