I just read this bit of information this morning regarding more testimony to be given by Henry Paulson to Congress on Tuesday.
“Paulson, who is overseeing the bailout program for the Bush administration, said he was also working on a proposal that would allow the government to take over a wide range of financial institutions – not just banks – that are in danger of collapse.”
That sort of talk should worry you. If it doesn’t you most likely work for a bank or another failed industry on the verge of collapse eagerly waiting for the government to start providing your paycheck. When Republicans had the nerve to call Obama a Socialist during his campaign it was hipocracy in a most brilliant disguise. Yet Democrats are not without their faults in this mess. Their support of the UAW for a bailout of the auto industry is disgusting.
Let’s recap (yet again…)
- Banks won’t lend because people can’t pay the money back. Job losses are at an all time high. I suppose Paulson and Bernanke missed that part.
- Paulson pushes for more tax dollars to the banks so they’ll lend.
- So banks begin to lend money? Well, no. But if they did no one would want to borrow it.
- American car manufacturers make cars no one wants. But what if they made wonderful cars? Still, not many can afford to borrow $24k to buy one.
- American car makers ask for some of the love the banks are getting. After all they’re both losing money right?
- Paulson does not want to give car makers bailout money because the government isn’t sure GM and Ford won’t die anyway. The wild hypothesis is that people don’t want to borrow money to buy big, gas guzzling, expensive cars right now.
- Rinse, repeat.
Do you see the cycle here and the common denominator? Do they get it yet? Consumers are tired of mounting debt! And every economic solution put forth by industry and regulators include a recipe for more debt and renewed lending they insist we need. People are in a saving mode right now. Even people with money and credit don’t want to use it.
We have to fall down to get back up. Prolonging the inevitable does not make facts avoidable. People need time to pay for what they’ve got and debt relief. Any industry relying on people to open lines of credit right now is screwed. This includes the lenders. Using credit and going into debt is bad. Allowing the government to take part ownership of these failing industries out of desperation is even worse. The law of the jungle must be allowed to run its course. Some will not come out alive.