When Fannie and Freddie went down it was said they are too big to fail. When AIG was nationalized it was said they are too important to fail. Where is the Justice Department? Why is anti-trust provisions not enforced? That kind of power is not characteristic of America. Monopolies is not America. No business should be too big or too important to fail!
The credit panic of 2008 has consolidated commercial banking. Most recently Citigroup absorbed Wachovia. Now, only three big banks stand alone in power and size. Consolidation was a big factor in our losing the automobile business. Monopolies make you real lazy. Real competition must be restored and maintained.
When Congress produces surprises you know that the public is applying pressure. Some of this public rage should be reserved for incumbent politicians of both parties. Without them we might not be in this mess.
The bail-out is done. The votes should be routine, with some dissenters in the House. Senate Republicans are 40 strong. Democrats that much or more. It’s not the economy that brought this on. The economy is rolling along, with some weak spots and locations. It is not credit paralysis, which is hardly evident. It’s the “markets”. The “markets” is what this is all about. Wall St. must be protected,so says Wall St.
Should the massive federal infusion to rogue bankers somehow arrest the economic tailspin, recovery could come in about 7 years. Two years to reach bottom and five years to recover.
If the bail-out fails or fails to reach goals, some results could look like this:
_ commerical real estate will crash.
_loss of revenue will produce budget crisis in many states.
_foreign funding will slow and the cost of money will rise.
-federal resources will be limited, affecting energy transition.
-unemployment will reach 15%.
Trying to gather any understanding of the financial chaos, worldwide, is hard. Very hard for most of us. Certainly hard for people like Paulsen, Bernanke, and Greenspan. Paulsen, in a matter of months, has gone from everything is manageable to we must throw the kitchen sink at the problem in five days or disaster will result. With few exceptions, individual Congressmen are trying to catch up with the daily turns. Some, no doubt, don’t have a clue to what is going on. How did it get so complex? There are a few things most independent-minded people could agree on, which may not provide solutions, but does offer some understanding.
Here they are:
1) At the political level the interest of Wall Street has denominated national politics since 1980. Some could argue that their dominance started even earlier. In the broadest sense Wall Street has funded decades of congressional elections and presidential campaigns. Wall Street has captured both major political parties with money and the dogma of jobs, progress, and global trade. They have used this political power to sponsor policies consistent with their self-interest. Those of us who have observed the Wall Street ethos over the last three decades have noticed they are quick to espouse Adam Smith and free market capitalism. However, the facts seem to run quite different. More likely you will see Wall Street as :
-favoring a big and generous federal government.
- content with oliopolies and monopolies.
- distrust the public, (the populist).
- unethical climate. Steady trail to the jail house.
- see nationalism as a threat to “globalization.”
- have attracted more “hustlers” than investors.
The great irony of all this mind-set is that business has enjoyed the perception of being political conseratives.
2) The debt limit had to be raised to 10.6 trillion with the Fannie and Freddie nationalization. Paulsen’s plan would raise it to $11,315,000,000,000. This is a total disregard for the next three generations. The new, highly competitive world economy will not permit a quick erasure of this indebtedness. Pressed to its logical end the national debt and its accompanying interest will force the collapse of the dollar and national government default,
3) The current crisis was accelerated when Alan Greenspan and Federal Reserve Board of Governors provided free money in 2004 and 2005. We could have our cake and eat it too; no correction, no suffering, just up, up, and away.
4) The American government and the American people are dangerously leveraged. The saving rate has dipped negative, but has went from a steady 7% to 11% for decades to 0-2% since 1999. That makes these times difficult to deal with.
Now for the PAULSEN PLAN. I have just read the proposed legislation that Congress is dealing with tonight. I am astonished that such a power grab would be requested, considered, and maybe even become law. Thankfully, the becoming law, as proposed, looks doubtful tonight. The plan is a disaster. Section 8 of the proposed legislation reads: Decisions by the Secretary pursuant to the authority of this Act are non reviewable and committed to agency discretion and may not be reviewed by any court of law or any administrative agency. Unbelievable!
I have read and listened to all the horror stories about doing nothing in regards to this panic. Yet, I am not convinced we need a bail out. Somehow, I think the problem could self-heal and save 700 billion. In this growing world economy I cannot believe that capital will not find it’s way to where it is needed most at the most advantagious price. The plan wants to pick up bad mortgage paper, but assets continue to fall and they are not limited to mortgage assets. Paulsen has failed in three attempts to quell the banks melt-down dilemma. It is good to try to keep financial institutions in business, but it is quite another to forgive their failures. Paulsen wants to resestablish banks balance sheets without penality. It should be a dollar for dollar deal, which means taxpayers should not absorb losses by overpaying for assets without any corresponding compensation. That sounds like ownership, but is much like the S&L crisis of the 80’s. The bail-out closed, but it ended up costing the taxpayers 125 billion and more.
Believing the threats that Congress is now facing if they don’t act quickly presents a pick-your-own-poison. The Treasury plan will likely crash the dollar and bankrupt the country. The bottom line on that outcome is that we are not in shape to handle a bail out of the trillion dollar magnitude in a descending economy. Should Congress linger or do nothing more large banks may fail and that would bankrupt the country.
Paulsen don’t want the “fix” to be punitive, but it has to be ! Otherwise, should this plan actually be successful, the people who made the mess would actually receive a windfall at taxpayer expense. They would be rewarded for their failures. That would be an immoral outcome. However, a plan that repaid the taxpayer, the effective owner, would not be detrimental to the plan and yet be just.
We know the Bush Administration has not been famous for placing talent, but appointing a Wall Streeter(Paulsen,formally with Goldman) to discipline Wall St. seems a bit much. Wall Streeters protect their own. Treasury plan is certainly an example of protecting the wrong people. The political power of Wall Street is the first thing that needs to be checked. After that, things could fall in place.
I suppose the summer months and especially this last week does qualify for the “beginnings” of hard economic times. But, big hits remain and they will likely linger; although further trouble could have a slower arrival. Two of these hits are likely to be credit card paralysis and unemployment.
Treasury and the Federal Reserve have tried all the tricks, some possibly illegal and much unfair, but the bottom continues to fall out of the financial world. As the government agencies try to remove the discipline from the markets they leave the rest of us a great burden. But, the answer so far has been a resounding “no cure."
Conservatorship for Fannie and Freddie is good for the country, so the sell goes, according to Secretary Paulson. Remembering, conservatorship is a side term for nationalization. Formal nationalization will have to be approved by Congress. Then, the mortage business will be like the Post Office, the 3rd Army, and the Washington Monument.
Thus far, I have learned nothing about indictments, although a lot went wrong for a long time. Future tax credits were considered capital for bookkeeping make-up. As for the firing of CEO’s and executives; not so fast, some will remain as consultions!
There are all kinds of moral, ethical, and philosophical issues involving this action, as well as political, if you consider Congress watched passively for a very long time. But in the end Wall Street wins and taxpayers i.e. our children and grandchildren, lose.
A lasting moral to this whole sorry episode is that you don’t mix government and private business. When it does happen you can expect inequities, corruption, favoritism, stealing and most any other vice you can think of.
After the emotional storm passes and reliable and revealing information about John McCain’s choice for Vice-President emerges: we will know for sure how McCain handled the handlers. It has been reported that Joe Lieberman was McCain’s choice for Vice-President.
Handlers are in business to elect politicans. Handlers don’t need a philosophy, poliltical convictions, or a code of conduct. They thrive on candidates with a lot of money, little political knowledge or awareness, and somewhat intimidated by the whole political system. Of course, seasoned politicans hire them too and often listen to them too much. Their accomplished skills are the practice of mind games and media manipulation. Also, they have mechanical and even creative skills in chores like placing of media advertisement.
With handlers in charge campaigns are reduced to gimmickry, vanity headlines, titillation’s, scratch fights, fears, and emotions. Handlers are a major reason campaigns are so hollow, meaningless, unilluminating, unenlightning, and boring. It is also why party associations continuously decrease. And, those who do adhere to parties, and run under the banner, are learning to discount loyalties.
The first thought, for many, of Gov. Palin’s selection was some form of insincerity. Most, it seems, have not given her the benefit of the doubt. Her many critics site her lack of experience over and over. President Truman once said he could go into any city of 20,000 residents and find one person who was intellectually and morally fit to serve as president of the United States. The qualities that make a good commander, according to Truman, is not so esoteric and restricted after all.
I do believe it takes 15 to 20 years to build a congressman. That doesn’t mean you have to serve that long to be effective. But, it does mean your thought development must begin a long time before you take your seat. In Gov. Palin’s case she does have a degree in journalism. Some political thought process, no doubt, have been in place for a long time. Like Truman, I think experience is overplayed, and philosophy, common sense, knowledge, communication skills, and passion are undervalued.
Handlers are typically backward thinkers. They believe their poll numbers for today are likely valid for tomorrow. It seems to me campaigns stay behind the curve, sometimes way back. Handlers try to manage on the basis of a lot of unimportant matters. The unimportant matter for Republicans this year was gender. If a female is chosen just to gather attention that will wear off soon, even if she is a good-looking woman. It is demeaning to women to assume they do not form political decisions on political views, abilities, and stability of candidates.
A valid question has been raised with Gov. Palin nomination. The question is can a mother of five, one a baby, successfully split her family time with that of being Vice-President or even President ? While president, Teddy Roosevelt had a daughter, Alice, who was unruly by that days standards. She smoked, which was very unseemly, and had a loose tongue. Frequently, she embarrassed the president. Finally, Roosevelt’s aides approached him with; something has got to be done with Alice. Can you not control your daughter, they asked. Roosevelt thought, and then said, ” Yes, I can control my daughter”. But, I cannot control her and be president at the same time. Which would you prefer gentlemen? Roosevelt remained as president. Many women combine responsibilities each day in less demanding vocations, but it remains a valid question.
In just 60 days and several forum’s and debates we will be able to measure the handlers, if responsible for Gov. Palin, but we will be able to evaluate Sen. McCain for sure.