White House, Fed: We Are Out of Time

Welcome to the Banker's Emporium

Why do I get the feeling I'm listening to a really, really bad used car salesman using high-pressure sales and scare tactics to push what is sure to be a junker on me when I hear Bush and Paulson tout their plan?

Does the economy need help? Yes. Do we need a plan? Yes. Do we need THIS plan? No. Do we need to act this week? No.

Throwing money at the banks will NOT help either them or us in the long run. The US government is already 10 trillion dollars in debt and that debt lowers the value of the dollar. A lower dollar value means higher prices for cat food and kitty litter for everyone. Adding to the government debt will leave a far more lasting negative effect on the US economy than even letting these banks fail and doing nothing.

But some things CAN be done - accounting and banking regulations and reform to free up capital and thus credit. Resetting interest rates (as in the story, regulating those rates or adjusting lending practices to moderate those rates). Another way to stimulate the economy is do a quasi-take over of the investment industry, using Mae and Mac as the front for government guaranteed business loans and investments with an eye for good future growth potential - hopefully without any political agendas or strings.

But the overall goal should be to keep things from freezing up, not necessarily thawing what's already frozen. The banking industry has to be regulated (in some cases heavily) as well as the credit lending industry. Provide a regulatory climate that helps business grow and develop. These are things the government can and should do now. They will let a trickle of capital flow, keeping the lifelines open, but won't guarantee any single bank their continued existence.

We are not beholden to any single or even group of banks. They can fail and the US economy will recover. The government can do a lot to make their failure less painful for Ma and Pa America than throw money at the problem hoping Ma and Pa's great, great, great grandchildren will pay for it. It seems to me that, like a shot, it's a better thing to suffer a lot of financial pain now than endure generations of fiscal discomfort.

Fatesrider of CA @ Oct 01, 2008 15:47:11 PM