Wall Street veterans, staggered by the unprecedented events of the past week, believe no single elected leader can offer a magic elixir to calm the maelstrom that has enveloped the U.S. financial system.
A more realistic scenario, they say, might be a powerful voice--preferably emanating from either of the two presidential candidates--with a strong message of encouragement to instill some badly needed confidence on Wall Street and Main Street alike.
But that’s not likely either.
“This is unprecedented, and that being the case, there’s no handbook for fixing this. It’s impossible for a presidential candidate, regardless of his background, to have an appropriate response,” said Art Hogan, chief market strategist at Jefferies & Co.
Hogan said the economic meltdown has emerged as “the issue” of the presidential election. “You can take everything else off the table,” he said.
The problem is no one, let alone a couple of presidential candidates, both of them career politicians, has any hands-on experience fixing this type of a broad-based financial meltdown.
“There’s no one who can give that ‘we’ve seen this before and we’re going to get through it’ message,” said Hogan. “We’ve never seen this before and we’re hoping to get through it.”
A term widely used to describe the current upheaval is “a crisis of confidence.”
Hogan believes the presidential candidate that will rise to the fore of what’s currently a dead-heat race “is the one that immediately realizes the thing we need more than anything else is someone to instill confidence back into the financial system.”
Unfortunately, politics is getting in the way.
Frank Davis, director of trading and sales at Lek Securities, said both candidates seem unwilling to break away from established campaign themes to go out on a limb in addressing the financial crisis.
“I think the political race is more important--the endeavor to win. Therefore, they either cannot or won’t be willing to respond to the challenges that are in front of us right now,” he said.
Fear that either the media, the opposition or both would attack any specific proposal has paralyzed the candidates, forcing them to offer little more than criticism and vague proposals of reform.
“It could be a death wish for them to be too specific,” said Davis. “It’s virtually impossible for them in the middle of their campaign battle to respond to such a dynamic situation.”
Bruce S. Foerster, president of advisory firm South Beach Capital Markets, is philosophical, having witnessed decades of Wall Street ups and downs.
“We expect too much of our presidential candidates and our presidents,” he said. “Give them a break.”
Neither candidate has any background in finance, he noted.
“I’m not letting them off the hook, but what do you expect them to say?” Foerster asked. “We haven’t had a president in my lifetime who’s had the training to work on this problem.”
What’s needed is some good old-fashioned communication, according to Foerster--and if he were president, he’d know just what to do.
“This is a crisis of confidence,” he said. “I’d be on the air tonight. I’d dust off the old fireside chat. Most Americans want to hear that our government is bigger than anyone company, and that while layers of confidence have been eroded the market is not dead.”
What’s distressing to Foerster is that the crisis is exploding less than two months ahead of the election, yet the campaigns of both candidates seem determined to focus on insults rather than solutions.
“We’re 50 days away from a presidential election and the (candidates’) staffs are throwing mudballs at each other. The American people deserve better,” he said.
Global Markets Sink After Wall Street Shakeup
