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Then, since blind panic is no more sustainable than unthinking euphoria, came a crazy whipsawing that continued virtually all week and in markets all around the world. Up, down, up, down, with trends reversing in hours, and then reversing again. And always the questions: Would the stock crisis cause a recession? Or even a global depression like the one ushered in by the 1929 Crash? What would happen to the dollar, to interest rates, to world trade? What might Ronald Reagan do to calm the markets? Could a President who was so weakened by the Iran-contra affair and the impending defeat on the Bork nomination, and who was distracted by war in the Persian Gulf and his wife's cancer operation, possibly quell the financial turmoil? Did he even understand that he faced a first-class crisis of confidence in his leadership?
At first the President gave no sign that he did. He spoke only in comments shouted to reporters over the roar of helicopter rotors on the White House lawn and in brief formal remarks issued through his spokesman, Marlin Fitzwater. On Black Monday, he blithely attributed the crash to "some people grabbing profits" accumulated during the market's long rise. In a statement after the close of trading, he said that "the underlying economy remains sound" -- unwittingly drawing another parallel to 1929, when Herbert Hoover said almost exactly the same thing. On Wednesday, Reagan remarked that the midweek rally indicated the Monday collapse had been "some kind of a correction" -- a statement that would have been reassuring only if he had intended it ironically, as he obviously had not. Some critics began speaking of the President in tones of contempt. Said a Wall Street money manager during the midst of the crash: "You sell and get what you can and never again listen to Ronald Reagan." M.I.T. Professor Robert Solow, who was awarded the Nobel Prize for Economics last week, took the occasion to criticize Reagan's long, obstinate resistance to tax increases thought necessary by many to trim the budget deficit and thus restore confidence. The President, said Solow, "is holding the Congress back from slow access of intelligence."
By Thursday night, however, Reagan at last showed that he recognized the seriousness of the situation -- and the need for action. "We shouldn't assume ! that the stock market's excess volatility is over," he asserted at a White House press conference, and he acknowledged that public fear spread by those gyrations "could possibly bring about a recession." More important, he announced that he was summoning the leaders of Congress to a bipartisan deficit-cutting conference at which, through his top aides, he was "putting everything on the table with the exception of Social Security, with no other preconditions." Including a tax increase? Though he could not quite bring himself to pronounce those words, Reagan clearly indicated that, well, yes, he would at least discuss the subject. Reminded again and again by reporters of his many previous pledges to veto anything resembling a tax increase, he refused to repeat any such pledge; he merely said both spending and taxes should be kept "as low as possible."