Wednesday, November 12, 2008

Treasury Has Turned Itself Into the 4th Branch of Government

We have the Executive, the Judicial, and the Legislative branches of the United States Government, a "checks and balances" system that does everything we need it to. Or so we thought.

Who knew that Treasury, under the guidance of Comrade Secretary Henry Paulson, could become its own branch of Government? Which seems to be what's happening right before our eyes.

Remember the hullabulloo about passing the $750 Billion bailout bill? The one that failed in the House, was so dire Presidential Candidate John McCain interrupted his campaigning, the bill that then passed in the Senate and finally, after growing from three to 400+ pages, passed the House? It's no longer doing what we all thought it was so important to do.

Comrade Hank has shifted the focus of TARP, the Troubled Asset Relief Program, from buying up banks' bad assets--CDOs, bad mortgage paper, etc.--to consumer debt. He's given strong instructions to banks to lend lend lend, for autos, for student loans, and for the all important grease that makes the American economy hum, credit cards.

This week, the Stock Market is tanking on retailers reports: Americans have, finally, closed their wallets. The results are staggering, and expected to get worse. The big car companies are faltering and begging for loans, and retailers are feeling the cold shoulder. Starbucks, Best Buy, Gap and related brands, Macy's, Target, Neiman Marcus (sales down 28% in October) are all tottering; Circuit City, Mervyn's, Linens'n'Things, and others have filed for bankruptcy. And delivery company DHL is cutting 9500 jobs in the US and curtailing business.

Americans need to Spend! It's not Christmas unless everybody is in Debt! What will happen if Black Friday (the shopping day after Thanksgiving) doesn't put retailers in the black for the year?!

Answer: the recession will be that much longer and deeper.

It's not just consumer lending that's getting cash. House Financial Services Committee Chair Barney Frank (D-MA) has a plan to give GM, Ford, and Chrysler $25 Billion from the former "TARP" funds. He'll be holding a hearing on November 19.

Stay tuned.


Mark said...

This is getting out of control. Every hot dog stand in America that can't stay in business needs our grandkids' tax dollars?
It's a RECESSION! The word "cycle" in "economic cycle" implies that there are downs that go with the ups.
And please don't tell me "this time it's different." I am so sick of that phrase, which has been used time and again to justify astronomical tech stock PEs and then the housing bubble.

Anonymous said...

It's ridiculous!
Mark is right about GRANDKIDS $.
Everybody is boohooing about not being able to shop. What kind of country are we leaving for the next few generations?!

Aaron Weber said...

What was it that Hoover said about purging the rottenness out of the system?

Consumer Credit doesn't necessarily imply "I went into debt for vacation." It also includes things like buying a car so you can get to work, or a plumber buying pipes and fixtures before getting paid to install them. Or a law-school graduate borrowing money to pay the rent while they cram for the bar.

Credit makes our economy work. Yes, it can be abused, but we need it.

Is Paulson doing it exactly right? Is there bound to be some waste in the bailout? Yes. I would prefer to see a stimulus based largely on short-term aid to the unemployed and medium-term infrastructure improvements.

But this is hardly time to start railing against the socialist dangers of "pump priming."

Aaron Weber said...

(I mean, "is he doing it exactly right? No."

go dog go said...

secretly i,

check out the biz section of the NYTimes today.

and floyd norris, and paul krugman, and david brooks.

some entities should be allowed to fail.

too many corps wanting a handout, and too many transforming themselves into "bank holding companies" so they can get a piece of the $750B.

and lobbyists swarming the Capitol....

sensei said...

fwiw, purging the rottenness out of the system is a quote from Andrew W. Mellon, the industrialist...who said "People would work harder, live a more moral life" apropos the Great Depression and stock market crash of 1929