Like most Americans I’m angry and confused about how suddenly a crisis of economically biblical proportions has suddently lept to the top of the political agenda. This is especially galling because only a month ago the Bush administration was – pretty much to a person – telling us that the economy was in good shape.
It strains my credulity to think they didn’t know the credit problem pot was about to boil over, and in my cynical moments I think they probably just hoped they could stave off the crisis until Jan 2009.
But hey, I’m to blame and so are you and so are the legions of people who watched real estate rise and fall and foolishly assumed that near-catastrophic devaluations in houses of trillions of dollars would not lead to the enormous problems we now face.
Solutions? As tempted as I am to agree with Ron Paul who is basically arguing for no bailout and letting market forces revalue the whole mess, I’m thinking we need to go ahead with a staged bailout where investment of our tax money is tied to measurable successes in terms of the credit markets. If the Paulson plan is the right answer we do not need to spend $700,000,000,000 before we know it’s working. I think Congress should approve some modest amount for Paulson and tie subsequent spending to *immediate* market improvements. I want the banks and others (including individual mortgate holders) who will benefit from the bailout to *make major changes* and *absorb major risks* that it seems the current plan simply passes along to future taxpayers aka “our children”. If I understand Paulson and Bernanke correctly they’d say this type of partial bailout plan won’t do enough to work – that we need to restore corporate confidence to the extent they loosen up credit and re-oil the engine of US economic prosperity. That may be true, but I’m not convinced anybody can reasonably predict how any of this will shake out. Clearly these clever boys totally and miserably failed to predict this problem would happen in the first place, so it’s tempting to apply the “fool me once shame on you, fool me twice shame on me” rule and ask for a whole new game with new players.