Instead, Treasury Secretary Hank Paulson and the Fed more or less rescued Bear Stearns but let Lehman Brothers fail some months later. According to Forbes, this added a level of inconsistency into the market that made planning all the more difficult and responsibility all the more evasive. He regrets, too, that Fannie Mae and Freddie Mac were not fundamentally restructured when the opportunity presented itself in 2008.
Forbes also sees a problem with mark-to-market accounting, which assesses the value of an asset or liability based on its current daily or even hourly price, not on its book value. Forbes is among those who believe this practice made some stressed securities all but unsellable in a crisis environment and helped trigger the subprime meltdown. He attributes the turnaround in stock prices to the easing of mark-to-market regulations in early 2009.
Forbes recognized, as well, the failure of the credit-rating agencies to adapt to the increasingly sophisticated financial instruments used on Wall Street, and laid ultimate blame for the mess on the Fed. Said Forbes, “We never would have had a housing bubble if we hadn’t printed too much money.”
On a tack close to Joe Sweeney’s heart, Forbes addressed the problems of publishing financial news in a seemingly saturated environment. On the plus side, he sees a growing hunger for trustworthy information. The question he posed is, “How do you take advantage of it?”
Forbes remains bullish on the financial publishing industry. As he observed, the publication’s Web presence is growing, and advertising is keeping pace, even “reaching capacity.”
On the print side, according to Forbes, “Readership has never been stronger.” Advertising has also begun to tick up. “You have credibility by having something in print,” said Forbes. He compared the print edition to a storefront that gives the impression of substance and reality. Readers still appreciate the difference between a print story that is final and an Internet story that is forever fluid.
Inevitably, the conversation turned to politics. A two-time presidential candidate, Forbes made a credible run at the Republican nomination in 1996 and in 2000, winning the New Mexico and Delaware primaries in 1996. He was not shy about expressing his endorsements in the successful Republican electoral surge in 2010.
“The Republican Party was going to revive only if it stood for something,” Forbes said as a way of explaining his early support for Marco Rubio in Florida and Rand Paul in Kentucky, both of whom had to overcome more established Republicans to win their party’s nomination for Senate and eventually their Senate seats.
Too many entrenched Republicans, said Forbes, “thought that pork was how you survive.” Forbes feels differently. He looked especially favorably at those congressional candidates who understood monetary policy and had the wherewithal “to question the Fed.”
As a final question, Schlifske was asked what he would recommend for the country were he to be appointed economic czar. He did not hesitate to recommend three specific strategies.
One was to put all forms of government—local, state, and federal—on something of a fiscal diet. He is troubled by their collective lack of discipline.
Schlifske would also return America to a sound monetary policy in regards to the dollar. He has little use for “quantitative easing,” the recent move by the Fed to buy government bonds or other financial assets to increase the money supply.
Finally, he would work to return the kind of “certainty” to the markets that would unleash entrepreneurial potential and free capital. Schilfske argued that we have free markets, a mobile labor force, and the rule of law. With the right kind of certainty, the economy would surely grow, and “growth should solve many problems.”
The always-congenial Steve Forbes could not have agreed more.