How would Donald Trump react in a fast-moving financial crisis?
Thanks to an economy that was doing fine when he arrived, most of us have experienced Donald Trump’s presidency not as tragedy but as farce. But Saturday marks 10 years since the collapse of Lehman Bros., the event that erased 3.2 million U.S. jobs by the time Barack Obama took office four months later, en route to 9.3 million overall.
Read our full coverage of the 10th anniversary of the Financial Crisis.
We came back from the brink because of the bold, persistent experimentation of political leaders led by Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke, who swallowed free-market reservations and mostly, eventually took the steps necessary to plug gaping holes in financial markets until a combination of time and economic stimulus righted the ship.
What if it happened when Trump was in charge? What would Trump do if the financial world were staring into the same abyss this week?
This week’s evidence isn’t encouraging. More than ever, we have a president consumed with talking about himself, his reputation and his fortunes — and lying more than ever. He hit a dubious milestone of reaching the 5,000th lie of his presidency, Washington Post fact-checkers said, propelled by a single day in which he made 125 misstatements of fact in two hours.
Thursday was the president’s day to lie about Puerto Rico’s death toll from Hurricane Maria last year. A new study from George Washington University estimated that 2,975 died, but Trump continues to insist it was only eight to 16 people and revised totals are designed by Democrats to make him look bad.
It’s enough to make you forget the president’s former campaign chairman is making a plea bargain with Special Counsel Robert Mueller as Mueller’s probe of 2016’s election marches toward Trump himself, that Bob Woodward’s book detailing chaos in Trump’s White House hit, or even that a new hurricane is lashing the Carolinas.
Now drop Lehman into it, a fast-developing crisis that would simply overwhelm Trump.
Ten years on, the dominant memory is how fast things moved.
One morning, you’d hear AIG AIG, +1.72% was about to collapse, as it did by day-end. Then maybe Morgan Stanley MS, +0.98% — reporters were called to work one Sunday to work tips that the bank was about to collapse.
You’d go to a job interview — this happened to me — and the interviewer would arrive an hour late, hair looking like he’d slept in a wind tunnel, explaining that Morgan and Goldman GS, +0.40% shares had just dived amid the panic. The Dow Jones Industrial Average DJIA, +0.03% dropping hundreds of points in minutes when Congress rejected the Bush administration’s first crack at a bank bailout package. Then, holy moses!, the rumor that GE Capital GE, +0.71% might crash.
Then the waves roared from markets into the real economy. Car sales fell by nearly half, new-home sales by more. Foreclosures ran rampant. Almost 9 million jobs blew up in a year.
In this environment, imagine we have a president who:
• Always thinks about his self-interest first, like the guy who spent time Thursday tweeting about a year-old hurricane as a new one approached.
• Has hired a terrible team, with a cable-news commentator running the National Economic Council and a Treasury secretary in Steve Mnuchin who lies almost as often as Trump does.
• Reads basically nothing, and who, according to Woodward’s book, absorbs information slowly and can’t be moved off of believing in old wives’ tales about economics, as when he told former NEC chief Gary Cohn that he couldn’t say why international trade is bad but he had known it for years.
• Caters every move to his “base” of voters who, simplifying slightly, wanted to let them all rot. And which, years later, often argues banks and General Motors GM, +1.11% should have been allowed to fail.
Some modest suggestions of what might happen include:
• Trump would still tweet about Puerto Rico, and Paul Manafort, and suggest the crisis was Fake News.
• He would get news about the financial collapse from “Fox & Friends.”
• He would move slowly, if at all, and more banks would fail as Trump failed to attract bipartisan support for a bailout package. General Motors would collapse as Trump declined to lend it money, not comprehending that credit markets were locked up, making a private-sector rescue impossible. Chrysler would follow.
• Merrill Lynch might collapse, as Mnuchin lacked the respect from bankers like Jamie Dimon of JPMorgan Chase JPM, -0.02% (whom Trump also tangled with on Twitter this week) to get Bank of America BAC, +0.76% to merge with Merrill, as Paulson and Bernanke did.
• And he’d likely spend time on his own portfolio, since he never put his assets in a blind trust.
From there? Who knows? Contagion would be loose, and Trump’s main goal would be to shift the blame before November’s election.
And to tweet about Mueller, fiddling while markets and jobs burned.