No Cushion Against Hubris

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However necessary and skillfully managed, these rescue efforts add devastating new pressure on the dollar's value as a traded currency (which then affects oil and other commodity prices) and on rising U.S. inflation rates. They also eat into the fixed-income investments of many retirees. Like so much that has happened on Bush's watch, the bill for today's maneuvers will come due after he has gone.

Look for a moment at dogs that are not barking in the subprime mortgage mess that has decimated the earnings of, and the global confidence in, U.S. and European banks and investment houses:

Latin American and Asian bankers tell me that they had plenty of profitable local investment opportunities in this decade and did not feel compelled to chase returns in exotic and untested derivatives such as those Bear Stearns and others foisted on clients who could have little understanding of the risk they accepted.

Colombians and Indians apparently did not develop the master-of-the-universe hubris that gripped pension funds, city councils and other overly eager return seekers in Europe and America. The Bush administration says it had no responsibility or need to restrain or regulate the greed and chicanery of investment bankers, mortgage brokers and investors even as capitalist boldness morphed into blind arrogance.

The scariest thing I heard last week was this statement from Christopher Cox, chairman of the Securities and Exchange Commission, to the Senate Banking Committee:

"Up to and including the time of its agreement to be acquired by J.P. Morgan Chase, Bear Stearns had a capital cushion well above what is required." In other words, the system worked -- but it still could not save a major financial institution from a change in psychology, as investors and creditors demanded their money back.

It is hard to see how the world's global trading and financial systems can be fixed or even rebalanced without committed and credible American leadership based on realism and not hubris. But it is even harder to see that leadership coming forth unless the United States can first put its own house in order.

jimhoagland@washpost.com