Wednesday, August 22, 2007

Papa Fed and Mr. Bush

Watching Senate Banking Chairman Chris Dodd (D-CT) meet with Fed chief Bernanke and Treasury man Paulson, I can’t help but wonder why President Bush didn’t host this kind of meeting.

Suppose the president had invited these monetary bigwigs -- including House Banking Chair Barney Frank -- to a lunch, either in the White House or down in Texas. Wouldn’t a hundred million members of the investor class, and 146 million folks in the workforce be more reassured if the nation’s chief executive were involved? Wouldn’t this have given Mr. Bush a good opportunity to reaffirm his commitment to pro-growth economic polices?

Growth is really the key issue here. Even the Fed now acknowledges that inflation is receding. Economic growth uncertainty has taken its place as the principal focus of their policy. But if investors are putting all their money in risk averse Treasury paper, they won’t be financing the business sector that makes our free market capitalist economy hum.

The president might have said that ample liquidity is necessary to sustain growth. (Yes, that is Papa Fed’s role, but it’d be reassuring to hear the president say it himself.) And as the central bank reaffirms its traditional role as liquidity supplier of last resort, Mr. Bush could have reaffirmed his intention to keep pro-growth tax rates low. He could have signaled his resolve to veto anti-growth spending excesses. And he could pledge to keep working for pro-growth free trade deals around the world.

The financial storm offers President Bush a chance to show economic and monetary leadership. Instead, it was Connecticut’s Sen. Dodd who played the coordinating role, a role that really belongs to the president.

Something tells me that the president missed a golden opportunity here.