This blog entry is not about the politics of recent Congressional actions and legislation to deal with our financial crisis.
This is about how a simple speechwriting screw-up almost produced a global economic catastrophe.
As Hank Paulson and Ben Bernanke prepared their remarks to the Senate Banking Committee on September 23, 2008, they both forgot to ask two fundamental questions. "Who is our real audience? And what do they want and need to hear?"
Instead, they wrote their remarks for investment bankers and Ph.D. economists -- in other words, themselves. They completely missed the real audience -- Main Street America. This error turned out to have enormous consequences.
Here's how it happened. In mid-September, as banks, brokerage houses, and insurance companies failed, both Paulson and Bernanke saw that short-term credit markets were freezing up. I'm betting their blood pressure and pulse rates went through the roof. They know that completely frozen credit markets are a Marley's Ghost moment -- when the U.S. and global economies look into their own graves.
But in his Senate Committee remarks, Paulson said the words "credit markets" just three times. Bernanke said the words "short-term credit" twice. Neither offered a word about what these markets mean in the big picture.
Here's the problem. Folks on Main Street don't even know that short-term credit markets exist. Why would they? These markets are invisible to the average citizen. But short-term credit is absolutely vital to our economy -- including Wall Street, Fortune 500 corporations, and mid-sized and small businesses everywhere.
If Paulson and Bernanke had really done their homework, one of them would surely have added something like this:
"Think of our entire economy as a human body. I'm not talking just about Wall Street but Main Street and every other part of our economy. Businesses, large and small, are the organs and cells in this body. Short-term credit is the blood. It constantly flows through the economy providing nourishment. For example, businesses routinely borrow to make next month's payroll or buy inventory to fill current orders.
“In reality, short-term credit is the lifeblood of our economy. If it stops flowing, businesses, large and small, begin to lose consciousness, go into a coma, and die. Confidence in our economy has now deteriorated to the point where short-term credit markets could completely stop working within a matter of days or weeks. This is why we need to act -- and we need to act now."
With the best of intentions, Paulson and Bernanke gave the wrong remarks to the wrong audience. They couldn't see beyond their own expertise to the real world that would hear their words.
They failed because they forgot one simple, fundamental rule of public speaking: always know who your real audience is -- and speak to them in terms they can understand and believe.