Bailout or Investment:

The real problem that the people of America have with the current proposal is that government seems unable to administer programs well. This is not said lightly. The current administration managed to bungle its way into a war in the Middle East. Not only were there no weapon of mass destruction but intervention by the United States seems to have caused far many more problems than it solved.

Now the Department of the Treasury is asking for a blank check with which to purchase “toxic loans”. If these loans are purchased at a severely discounted price I can’t oppose the bill. My problem is that there is very limited oversight to assure that market values of the loans will be applied. It is just as foolish for the government to pay $100,000 for a house worth $30,000 as it is for an individual to do something that stupid. Recall doing exactly that is what brought Freddy Mac and Fannie Mea down.

So the real question is do you trust the government to purchase the loans and by doing so assess a correct value to these financial instruments. Such purchase could be considered an investment in the future of America or conversely it could become a rat hole into which many billions of dollars are wasted. The congress of America is charged with making this decision. Overwhelmingly the people of America think that to purchase these loans would be a colossal mistake.

Do we trust the judgment of everyday Americans? Or should we trust the experts and fund the purchase of these loans. Either way the real problem is to get the credit markets flowing. At the moment those markets have become clogged like an artery and the life blood of the country simply can’t get past the blockage. America has suffered a stroke. It is that simple. It remains to be seen exactly how crippling the stroke is and what parts of the economy recover and what parts do not recover.

These things are in the future and cannot be seen or foretold. The real problem is to break up the clot and get the blood flow of credit flowing again in the capital markets.