Two months ago Congress and the Bush Administration, with the support of the two Presidential candidates, approved “a bill to provide authority for the Federal Government to purchase and insure certain types of troubled assets for the purpose of providing stability to the economy”
Well my retirement account certainly has not shown any stability. Since that bill was signed into law, and more so since President-elect Obama won his election, the stock market which is typically a leading indicator of the economy has dropped thousands of points.
I am hesitant to even comment on how that financial assistance bill is being implemented because its use and abuse seems to change daily. I will admit that I was a reluctant supporter of the intent of the bill because I do believe that the federal government has the responsibility to ensure the stability of our financial system and interstate commerce.
I should have known when Secretary Paulson initially submitted a three page letter detailing his plan, and Congress increased its size to more than a hundred pages, that the intent of the plan to unfreeze Wall Street and the banking system so they could begin lending again to businesses and individuals, was doomed to failure.
Hearing that the Treasury no longer plans to use the $ 700 billion dollars in approved funding from the bill to buy and hold troubled mortgage assets as it originally planned to do, and that Congress wants to use tens of billions of those dollars to save the Detroit auto industry, I am truly starting to fear that our government is simply rolling the dice on how to safely guide our country through the current economic downturn.
So how do we put the financial assistance bill to proper use? Simply put, we need to get American consumers and businesses spending again. But how? We need to focus on ways to get money into the banking system.
I believe that the financial assistance money should be primarily used to get banks to start loaning again. As in home mortgages. Personal equity lines. And business lines of credit. Charge minimal interest to the banks for that money so they can then offer loans at below market rates to their customers. And I believe that we still need to provide funding assistance to mortgage holders so they can renegotiate their troubled mortgages with consumers to keep more foreclosed homes from further dampening the real estate market as long as the consumer has a verifiable source of income to support the new payments.
We should not, I repeat not, use the financial assistance funds to stabilize non-financial industries. At the time of writing this column, President-elect Obama and the Democrats are pressing the Bush Administration to provide capital infusions into the American auto industry which is failing because of its high labor and rich healthcare costs. I am also against money going to the troubled airline industry or other sectors lobbying for a piece of the action.
The whole idea of using taxpayer money to bailout private industry from their own mistakes is difficult for me to swallow. But since the process has started, I can only hope that our government experts will protect the taxpayers’ money while also making the safest choices on which types of financial assistance to provide.
