DEL.ICIO.USHard not to question the questionable
Sunday, November 09, 2008
We were told the government absolutely, positively had to buy up a bunch of bad mortgage-backed securities.
Tied to the subprime mortgage scheme, these bad securities were soiling the balance sheets of our banks and mortgage companies. This in turn had stopped lending in its tracks. This in turn had brought business in general to a halt.
• Somewhere in there, our 401(k)s became 201(k)s.
We were told $700 billion might just do the trick. Then we were asked not to pay too much attention to the fact that leaders of the bailout seemed to be saying one thing one day, and then doing something very different the next. Like making their first purchase with the $700 billion not the bad assets but rather preferred stock in our nation’s largest banks, in effect nationalizing the banking system.
“This isn’t something we asked for,” says Joe Brannen, president and chief executive of the Georgia Bankers Association. Brannen convened a seminar Friday for Georgia bankers who were deciding whether to join the national banks in having Uncle Sam as a preferred shareholder.
By all accounts, most commercial banks are healthy and have plenty of money. And despite what some have reported, they are lending that money to customers and other banks.
Now, Treasury is offering them more money at 5 percent interest. Bankers say that’s cheap money.
We are told not to pay too much attention to the obvious contradiction: If easy money and credit got us into this mess, then how is more of the same going to get us out?
The central bank and the federal government have now pumped more than $1 trillion into the economy in just a few months, and the central bank, which began cutting rates last year, has lowered its main interest rate to well below the rate of inflation.
Sound familiar?
What doesn’t sound familiar is the litany of programs the Fed has introduced: six special-purpose lending operations known by their alphabet soup designations: TAF, PDCF, TSLF, AMLF, CPFF and MMIFF.
Some have wondered what will run out first, the acronyms or the money. The only reason the Fed and Treasury haven’t done more is that there are only seven days in a week.
And still, jobless claims are being filed at the highest rate in a generation. Hardly anyone is buying a car or truck, and now auto companies are asking to get what the banks didn’t ask for — some of our money.
We are told to be patient. We are told not to focus on the fact that those in charge seemed to have adopted the notion that they should do something, anything, even if it’s wrong.
“The federal government clearly is uncertain how to proceed to get the economy moving again,” says Fred Allvine, professor emeritus of Georgia Tech’s College of Management.
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