by J. F. Kelly, Jr. | Coronado
I have a few questions. Why are all those people at the New York Stock Exchange that we see posing for the TV cameras at the closing bell smiling, clapping and cheering like maniacs even though the market may have closed down 800 points? Why do the media and politicians always use metaphors like “bailout” to describe something they don’t really understand? And what gives voters the idea that politicians with no prior executive or business experience have any worthwhile answers to complex economic problems or the ability to actually run a huge organization like the United States government? These are rhetorical questions. Don’t bother to answer.
Isn’t it passing strange that so many otherwise rational people seem to believe rather passionately that a particular candidate has the answers to the serious problems that bedevil us? Personally, I don’t believe that either of the current candidates for the most powerful and important office on earth has a clue as to how to go about straightening out the mess that is the U.S. economy today. The government is over $11 trillion in debt with no visible means of repayment except in ever cheaper dollars. With such an example, is it any wonder that household debt is at record levels?
The collapse of credit sources has crippled businesses and a depression is probably imminent. The plunging stock market has wiped out billions in wealth, demonstrating in the process, the absence of faith in Treasury’s plan to provide a market for the junk mortgage-backed securities that are clogging the banking system and drying up credit.
What can either candidate do about it? They are politicians, not magicians. The best that we can hope for is that the winner will enlist the best possible minds available regardless of political party affiliation to work on solutions and try to prevent this from happening again. Prevention may be too much to expect since human greed will probably always lead to excesses when there’s a buck left to be made.
People are mad as hell and it’s convenient to blame George W. Bush, who had the misfortune to still occupy the office where the buck stops when the housing bubble burst. Previous administrations and congresses responsible for things like the Community Investment Act will escape most of the blame. And the blame will convey to the Republican candidates, try as they may to distance themselves from the current administration.
People are angry over what the media have conditioned them to believe is a bailout of banks and greedy Wall Street executives. But the purpose of the rescue measure is to restart the credit market for the sake of Main Street, not Wall Street. Private capital is insufficient to solve the problem. Only the federal government, which is to say the taxpayers, has pockets deep enough to infuse enough cash into the system to unfreeze lending and keep the economy going.
Of course, the measure that finally passed was enough to make any taxpayer gag. It was laden with pork, the price of obtaining enough votes to pass it. That’s the way your Congress works, folks. Isn’t it inspiring? The pork added unnecessarily to the cost and the national debt, already at a level beyond comprehension and hastening the day when America will be wholly owned and perhaps operated by foreign interests.
The plan may not even work but it must be tried. The federal government simply could not stand by and wait for home prices to bottom out and the system to self-correct. Herbert Hoover stood by and the result was a decade-long depression. The plan has many warts but some of the criticisms are naïve. Diverting the money to bailing out individual homeowners sounds admirable but would be too slow and insufficient. The immediate challenge is keeping the financial system operating and freeing up credit now so that businesses can keep running. It’s ironic that many of the citizens complaining about a “bailout” at taxpayer expense pay little if any taxes anyway. It’s people who pay their mortgages, own investments and pay taxes that will bear the principal financial burden.
With all that is happening, it’s an inconvenient time for an election but the show must go on. Soon there will be a new administration to grapple with the crisis that has shoved other crises into the background as banks and businesses fail, investments are wiped out and mortgages continue to default. Presumably there will be a new Treasury Secretary to preside over the Paulson plan or whatever comes next. Let’s hope that real leaders emerge who can somehow inspire Americans and their government to start living within their means and businesses to start making money again the old-fashioned way.
CRO
copyright 2008 J.F. Kelly, Jr.
J.F. Kelly, Jr. is a retired Navy Captain and bank executive who writes on current events and military subjects. He is a resident of Coronado, California.
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