Now's as good a time as any
I guess now is just as good a time as any to start this, especially as I have been hearing a lot of people throw around blame to a lot of different targets, yet I think some of the most deserving of the blame are going unnoticed. I’m really not trying to point fingers here, but as everyone wants to be a Monday morning quarterback, thinking blaming all kinds of different people for the economic crisis, it’s really getting to the point of calling the kettle a little too black.
Over the past week and especially since the failed vote on the Paulson Plan yesterday, people have been pointing fingers at essentially everyone under the sun, but the main argument I have heard is that the failure of the bailout is the Bush Administration’s fault. Now, I’m not a diehard defender of the Administration, but I can assure everyone that this rescue package did not fail because Bush didn’t do whatever his Administration could. I have to remind everyone that it was the Bush Administration officials who immediately presented a bailout proposal that would have injected stability into our financial markets. It wasn’t until the proposal went to the politicians on the Hill when it went from a succinct 3-page document to a 110 page repository of earmarks and unnecessary provisions that ultimately failed.
Further, the Fed’s role as a lender of last resort is one of the most important responsibilities of the central bank and that is what Fed Chairman Ben Bernanke tried to do (e.g., his job) by intervening with liquidity. Instead, the know-it-all’s on the Hill decided to politicize good monetary policy to death.
But, the real blame game so far does not lie in all of the pointless political rhetoric that we’re hearing ad nauseum on every media outlet and blog discussion out there. The problem is happening with voters, e.g., regular Joe and Jane American. People throughout the country are criticizing the Paulson Plan as an effort of insiders to bail out Wall Street ‘fat cats’ who allegedly created this financial crisis. I hear people left and right saying that these firms need to fail and “pay for their transgression.”
But, these people do not understand what they’re saying. They don’t realize what it means if the strongest financial system in the world fails. They think it’s just going to prevent the “greedy executives” on Wall Street from being rescued, but in reality, this “bailout” has nothing to do with rescuing people on Wall Street.
This rescue package is about saving Main Street. It’s about restoring stability into the financial markets, so your small business doesn’t go under from the inability to meet credit demands to finance payroll. It’s about enuring the stability of your retirement portfolio. It’s about maintaining profitability for the company that employs you, so that they can pay you and so you don’t become unemployed. It’s about preventing unemployment from skyrocketing, which will require us to balance it out with inflationary policies, thus driving inflation higher than it already is. This is about reinforcing the entire macroeconomic landscape of our country, not making rich people richer.
Unless people see this, they will never understand the true impact, until it is too late. It’s easy for the second guessers to say “let the financial system fail and we’ll recover,” but they don’t understand what they’re wishing for. Yes, the market and economy will recover. Our country has recovered from strong opposition throughout our history. What people don’t see when they’re making these comments, though, is what the cost will be in the time between the fall and the rebuilding.
How long did it take for the country to recover in the 1860’s? Did people just come home to the South and magically lived in prosperity? Of course not. It took decades for the economy to be rebuilt, ultimately not recovering until the early 20th Century. And no, I am not comparing this crisis to the Civil War, but my point is that people must realize there will be a direct cost to all of us if we allow our financial system to fail, and the cost will be great.
So, what I want to know is who is the first person to volunteer their retirement – their small business, their bank account, their family’s financial stability – so that we can allow the markets to fail and rebuild them, because that is what the cost will be. While we are rebuilding, people will suffer greatly. If you think things are bad now, just wait until the fallout after widescale systemic failure hits us.
I urge people to consider the bigger picture and put their pesky distaste for Wall Street aside, because that is not what this situation is about. It has nothing to do with rich executives. It doesn’t even have anything to do with Paulson or the Bush Administration or even the folks on the Hill. Those people come and go. The political cycle will take care of all of those people and the private sector will weed out any people that need to go in that space. But, when the soundness of our economy is on the line, we can’t be so prideful as to let the failure happen, just so we can teach those people we may not prefer a lesson.
Ask yourself whether or not you can afford failure. Forget about anyone else. Ask yourself if you can afford watching your income decline or the value of your assets fade or your savings be depleted. And after doing that, think about this situation from that point of view and then be careful what you wish for.