Transactions: Jan. 26, 2009

Pomp. Circumstance. Vast crowds gathered around the Capitol like a muffler. The New Man, a rail-thin black man, takes the oath. The stirring words, the lump in the throat. Ah, democracy. History is made. (Of course, Wiley Poopsnoop, former hedge funder and George W.'s Yale classmate, could become president and that would make history too, just not happy history.) "Making history" does not mean acting in history, which we can't really avoid. It means doing something innovative, novel, boffo, a break with history: new. "Making history" is a gamble that ever-fading memories will keep you top of mind. Freshly baked Illinois Sen. Roland Burris' now-famous "Trail Blazer" mausoleum presents his case for making history, though one suspects, for all his efforts, he will fail. You need more than your own self-regard and a granite résumé in this democracy to make history. You need a crowd. You need to make an impression on that crowd and on their progeny that endures for many years. Opinions shift. Memories fade. Reputations swing. Abe Lincoln is tough competition. George W. will be lucky to edge out Franklin Pierce.

We have wandered afield, have we not? The inauguration, the economic crisis that hangs over it, brings to mind the crossroads where democracy (pomp, circumstance) and markets (reputation, opinion) meet. It's a place of memory and forgetting, like Roland's vacant tomb. The two roads start from very different places and seek very different ends. But we've been stuck at this intersection, with the broken traffic light and the 7-Eleven, for decades now, and there are many here among us who believe this is the way It Has to Be. Markets fuel politics; politics drives markets. One coin, two sides. Conjoined twins. Barack Obama can't change that, although he is acutely aware that we'd better get moving again. But because we have evolved such a conflation of markets and politics -- a condition reflected in everything from interest rate policy to deregulation to the Madoffian belief that everyone deserves top-quartile results -- his task has become infinitely more difficult. By "task," I mean not just a stimulus package, the massive attempt to refire financial engines, but the design of a foundation for markets and politics that will last more than a bull run or two.

The great lesson of this slump is how pervasive the complicity was. Many will protest: You're blaming the innocent! But complicity suggests mere association, not an active role, as Obama himself said. Bernie Madoff stands nose-high in guilt, like a character from Dante; Wall Street, mortgage lenders, the Washington operators that urged on Freddie and Fannie shoulder, to a greater or lesser extent, their degree of responsibility, if not criminality. But as a democracy, we all share some complicity. We bought homes and boat-like cars and ran up credit card debt. In a system where markets and politics are so intertwined -- in a democracy that congratulates itself for electing a black man but shrugs off its acceptance of torture and war -- responsibility and rewards are widely shared. It's true, much that occurred was never voted on by the citizenry, from 401(k)s to deindustrialization to income inequality. And much was impossibly arcane, like credit default swaps, even to practitioners and regulators. But in its broadest sense, the folks on the dazzling white platform gave us what we wanted, including doses of market euphoria and cheap mortgages. And if abuses and weaknesses developed, well, given the good times, the trade seemed reasonable. Until it didn't.

Thus we find ourselves afflicted by the spooky, airless solipsism of democracy, which eerily resembles the anxieties of a panicky investor in a bear market. We're in a crowd, but we're all alone. We believe in the wisdom of crowds, but we know best our own self-interest. Do we fight the mob? And for what end? Fixing all this is difficult. No matter what institutional reshuffling takes place, no matter what rules are promulgated, regulators and judges cannot be sealed away in underground bunkers. Like the public, they will feel the tug of good times, the joy of what used to be condemned as permissiveness. The prudence, the grim promise never to sin again, will fade. New souls, lacking the memory of disaster, will emerge. And perhaps the crowd will be right, although determining that remains a mystery. Democracy is as much about freedom as equality. Besides, if democracy is synonymous with markets, then we are building on foundations that reprice regularly. On a cold, sunny day in January, an eloquent new president can articulate sentiments that seem to be, if not eternal, certainly words that make a case for remembering. But hours later, they begin to disassemble the bright white platform. Lincoln remains.