Bailout Blues - a historic turning point

The last 6 months of 2008 will be marked as a turning point in America’s history and its status as an economic superpower. The real estate crash could have been contained had it not been for Wall Street’s unethical packaging of questionable home loans. Those loans were resold to other banks and governments as secure, rated investments. As housing prices corrected in the US, which does occur occasionally, those multi-trillion dollar investments became suspect. Once banks and investors lost confidence in these shaky loan packages, they were effectively worthless. No one wanted to buy them or guarantee them. Trillions of dollars evaporated overnight.  As a result, the global financial system was severely damaged and the world economy nearly collapsed. Someday it will be revealed how near the brink Wall Street pushed us for the sake of a sales commission.

The George W. Bush administration and Congress acted swiftly (pork-barreling nothwithstanding) to shore up the American side of the ledger sheet. Whether the initial $1 trillion was well spent is a matter for economists to debate. It provided a badly needed confidence-booster  and signaled to the world that America would attempt to clean up its mistakes. Since September 2008, trillions more have been pumped into the financial system. As of January 2008 that number stands at approximately $7 trillion. Just to provide some perspective: At 3% interest, that $7 trillion demands almost $1 billion in interest payments per day. At 1% interest, it will take almost a 1,000 years to pay off the debt based on our government’s past performance for loan repayment. America had already piled up $40 trillion in national debt before this most recent debacle.

Given the gravity of the situation and the magnitude of the destruction, it’s outrageous that no one’s been arrested, investigated or even pilloried in the press. Of course, Bush administration officials have been grilled endlessly, but what about the clowns on Wall Street who created this mess? What about Obama’s housing advisor Franklin Raines, who was a key player in the mortgage meltdown as CEO of Fannie Mae? The press has diverted attention away from the people who created this mess to an intense scrutiny of the people trying to clean it up.

What gets lost in all the noise is the hard fact that someone’s going to have to pay down this debt. It doesn’t appear that Wall Street honchos are going to cough up a nickel. Franklin Raines isn’t going to return his $45 million bonus. That leaves average working Americans to pick up the tab. That means a century or more of diminished economic growth, personal opportunity and personal wealth. It means more taxes, more inflation, a drop in the dollar’s value and a drop in our standard of living. And, adding insult to injury, Barack Obama wants to add an astounding 600,000 new government employees to the federal payroll. That’s insane. With pensions and benefits, it instantly adds another trillion dollars to this year’s federal budget, which is already a trillion in the hole. And it adds another trillion every year going forward forever. At what point do the wheels come off this gravy train? It appears that the only thing that can stop our government from spending money it doesn’t have is for the rest of the world to push our government into bankruptcy. And even then, our politicians and bureaucrats won’t be suffering one bit. That will be left to the taxpayer.