Where the Cooler Heads?

It’s time for any remaining sober officials in the federal government to tell Treasury Secretary Henry Paulson that enough is enough:

The Treasury Department yesterday officially abandoned the original strategy behind its $700 billion effort to rescue the financial system, as Bush administration officials acknowledged that banks and other institutions were as unwilling as ever to lend to consumers.
With a little more than two months left before President Bush leaves office, Treasury Secretary Henry Paulson is hoping to put in place a major new lending program that would be run by the Federal Reserve and aimed at unlocking the frozen consumer credit market.
The program, still in the planning stages, would for the first-time use bailout funds specifically to help consumers instead of banks, savings and loans and Wall Street firms.

The bailout funds were not intended (and/or should not have been intended) as mere sand to dump into the economic swamp in the hopes that it would fill in a passable bridge. (For one things, the rats are to expert at digging trenches to receive it.)

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Robert Balliot
12 years ago

A mandatory 3% mortage rate for a year nationwide plus $5,000 to every taxpayer would have solved the economic crisis – and cost much less than giving $7 billion to banks who are unwilling to lend.

Robert Balliot
12 years ago

$700 billion

Monique
Editor
12 years ago

Henry Paulson is literally off his rocker.
It’s not just the frenetic bait and switch of the use of our $700b that Justin cites. It’s that Paulson wants to bail out debtors who have absolutely no bearing on the sound fiscal operation of the country. When I first heard a report that Paulson wants to bail out bad student loans, for example, I thought it was a joke. Incredibly, it is not.
The purpose of the bailout (a bad idea to begin with) was to loosen frozen credit and get the economy going again. Defaulted or delinquent student loans have been a staple for decades and have had zero bearing on the soundness of the economy. Why on earth would we bail them out??
Congress is ultimately responsible for all this. They need to step back in and take control of this … plan away from a man who is demonstrably fada or it will backwash on them in a big way.

Patrick
Patrick
12 years ago

Ok first, isn’t it true that its not really $700B? I thought it’s more in the neighborhood of $250B and the rest was approved to be used as needed, if deemed necessary. I would certainly hope that the remainder is not deemed necessary if the banks aren’t going to use that money for loans. However, trivial point. $250B is still a s&^%load of money. And how do you enter into an agreement with a bank and give them billions of dollars without certain requirements for what they’ll do with that money, in the contract? Why don’t they say that they need to increase their loans by at least the amount they’re being given by the gov’t. First prove how much you’ve been lending for the last X number of years. Can’t provide that, or there are inaccuracies in the data, no money. Now once armed with the data, make sure they are actually giving loans for the amount given to them by the gov’t. Was this basically given like a birthday present to these banks? Second, we need more outrage at AIG. If I’m a Congressman, I’m pulling the plug on AIG and telling MetLife and other golf sponsors, to get ready to pick up the pieces. I’m trying to figure out how Robert’s math works of even just the $5,000 to every taxpayer. That’s pretty much every adult citizen in the US. About 200M people? My math says that’s $1 trillion. Then 3% mortgages? I can understand wanting to punish bad banks, but there are lots of good ones too and ones that you’d really topple over the edge if you did that. I got my 6.7% mortgage in good faith and I always pay my mortgage at that rate. Sure, I’d love to have a 3% mortgage for… Read more »

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