01/15/09 - PajamasMedia by Tom Blumer
A good review of recent events, the Government's plans, why they won't work, and the quality of top analysis and leadership. This is a short excerpt.
[edited] Meltdowns at Fannie Mae and Freddie Mac, were decades in the making, aided and abetted by Democrat cronies like Frank Raines. This exposed how Fannie, Freddie, and the Community Reinvestment Act ruined the mortgage-lending market by lowering credit approval standards.
The Fan-Fred poison spread to other lenders. Treasury Secretary Henry Paulson panicked and made up the amount of $700 billion to buy “troubled assets”, mostly mortgage loans in delinquency and foreclosure. Paulson's threats of financial Armageddon stampeded a reluctant President Bush into agreement. Pelosi, Obama, and Reid were proud advocates.
Paulson did not use the money as promised. He forced major banks to accept direct government investment. Bailing out one industry has already led to another (GM-Chrysler) and endless calls for more, from private businesses, states, local governments, and other public entities.
Is it a surprise that investors, entrepreneurs, and business managers are in no mood to invest or expand? They are shedding employees at a scary rate, down 500,000 jobs (seasonally adjusted) for a second month.
Why start or expand any business if the government may aid your competitors or whimsically alter the rules? Consumers have billions of extra dollars available thanks to energy price drops and lower interest rates. But, they seem to be reducing their spending due to uncertainty.
Washington's solution is more bailouts and more uncertainty, through another bigger “stimulus” that should be slower than the last. Tax “rebate” checks sent out February 2008 were not very effective, but they put money into consumers’ pockets quickly. The new “stimulus” package is mostly public “investment” that, even if justified, will take much longer to affect the economy.
Roosevelt spent on massive public works during the Depression. This prolonged the Depression for seven years. Japan tried government stimulus for 10 years in the 1990s. It resulted in “the lost decade”.