They are continuing to use fear and intimidation to get passage of a stimulus package that economists believe will do little, if anything, to stimulate the economy during the current fiscal year, but which will saddle generations of Americans to come with huge debt.
Geithner's latest TARP proposals didn't win any converts either, as the markets reacted negatively.
As for the porkfest, it now heads to conference committee and good way to keep track of what the key differences are between the House and Senate versions. My expectation is that the solution to the differences will not be to take the item that costs lower, but to include the higher amounts. This bloated grabtastic porkfest will cost future generations billions in carrying costs that they can ill afford, and no one expects this porkfest to actually stimulate anything other than an increase in government spending and size.
Obama deserves quite a bit of the blame for this mess, as he didn't demand a structured and coherent bill from Congress. Instead, Congressional Democrats rammed through a highly partisan and incoherent wish list of pet projects and program spending that is wholly unrelated to actually stimulating anything other than government growth and power at the expense of the private sector and individual liberties.
President Obama's communication skills need a vast improvement if he was attempting to sell this pork to the public. The markets started tanking yesterday even before Geithner spoke, which relates to how the markets responded to Obama's speech the night before. Geithner's plan was skewered by the experts on Wall Street, who found it to be incoherent despite the fact that all the players involved know what the issues are and have been confronting them for weeks. Geithner's solution is to throw still more money at the problem and hope it works. Some reports suggest that the Geithner plan may run as high as $3 trillion.
That's the whole solution proffered by the Democrats - throw money at the problem and demand that the government solve things, when all it does is stifle the private sector and the private sector responds by cutting investment and spending as it entrenches to ride out the storm.
Some see this latest plan as nothing less than the nationalization of banks and shareholders don't want to be left holding a worthless bag, so they were dumping stock left and right yesterday. There's a reason that banks have tightened lending standards - they don't want to repeat the same mistakes made that got everyone into this mess in the first place - lax lending standards pushed onto the industry by Congress who wanted affordable housing and easy credit for everyone, including those who were not credit worthy.
The new Treasury plan continues to put most of the emphasis on pushing banks to make more loans to over-indebted consumers, homeowners and firms. Unlike last year, however, Geithner now believes, "Our policies must be designed to mobilize and leverage private capital, not to supplant or discourage private capital. When government investment is necessary, it should be replaced with private capital as soon as possible."Now, these same banks that were burnt by the toxic paper crisis are looking to avoid the situation, but Geithner's plan wants the banks to open the spigots once again on lending. It wants to support and expand the very kinds of lending that led us to this very costly solution to solve the affordable housing issue.
That's a laudable goal - but contradictory. In reality, government capital replaces ("crowds out") private capital, leaving taxpayers holding a bigger and bigger bag. Call that nationalization by default.
Under the new and old TARP schemes, the mere threat of incremental nationalization of banks and insurance companies will always "supplant and discourage private capital." You could watch it happening while Geithner spoke - as investors rudely pushed bank stocks down sharply. (An "ultra short" exchange-trade fund that bets heavily against financial stocks (SKF) was up 15 percent by the end of his talk and 18 percent at closing.)
Obama's solution is to assure that affordable housing and easy credit remains available. People who sought and received mortgage modifications under last year's bailouts are now back in line demanding more assistance and bailouts.
These are people who should have never been extended the credit to buy in the first place, but are now facing a situation that requires either the banks to eat the losses or the foreclosure of properties. Never mind that the foreclosed properties provide a good opportunity for those who have good credit and can afford the now truly affordable housing now that the housing bubble has burst in many parts of the country.
Here's a memo to Geithner and the Obama Administration. Even if the banks were to open up lending to everyone, they can't do so in a timely fashion because everyone cut staff as the real estate market crashed and the toxic paper crisis hit the mortgage industry hard. There aren't enough staff on hand to process all the mortgages and refinancing in the pipeline as it is. I had to wait nearly a month longer than anticipated before closing on a refinancing because the bank wasn't able to process it any faster.
Easy credit got us into this mess, and easier credit isn't going to get us out of this mess. Restraint on government spending (certainly not evidenced by the porkfest stimulus package) - targeted government spending can help, but assuring the private sector that the government will get out of the way will free up more capital for use in investment, growth, and jobs. Why should any business throw its own money into creating jobs when they're expecting that the government will do it for them?
The Obama Administration continues to take the wrong lessons from past recessions and doubled down on government spending, which will have disastrous consequences for all Americans for years to come.
That was quick. The Conference Committee has managed to reconcile the two versions, and the plan is now supposedly below $800 billion. They didn't cut the spending, but instead limited quite a few of tax cuts offered, including one put forth by Obama. Nice.
As far as bipartisanship is concerned, only three GOPers are involved in the process in any way, shape, or form - Sen. Arlen Specter, Olympia Snows, and Susan Collins. This is a Democratic show, and it's a farce. They've spent a few hours coming up with this mess, and it's going to cost Americans dearly.