Belay that last order. Forget the financial system. Helm hard a starboard! Keep a weather eye on the consumer! It’s not the banks that we need rescue. It’s the consumer.
Now, after panicky cries that we must rescue the banking system, Mr. Paulson, our first mate, tells us, “No, lads, the banks will not help. They are not lending us a hand.” They want to sit on their cash, pay out dividends, and keep credit tight. “
We are off now to, of all things, institutions that issue credit cards and consumer loans.
Treasury officials said they hoped to invest about $50 billion from the bailout fund into the new loan facility, with the aim of helping companies that issue credit cards, make student loans and finance car purchases.
As envisioned, the Treasury would put up about 5 percent of the money that a company would use for lending and private investors would put up perhaps 20 times that much by buying bonds issued by the new program.
A new loan facility? And we expect the companies that issue credit cards, make student loans, and finance car purchases to behave differently than the banks? We really think that this is the new silver bullet?
Whom are we bailing out? Who is getting the cash? Are they going to play the old “me first” games?
Not that I want to, but I am going to suggest a radical alternative. This ship is going down, fast. Financial capitalism is broken. (Note the adjective, please.) Nationalize the banks and all lending facilities. Just do it. Set a reasonable rate for credit cards and other types of loans–and mortgages. Set up real lending standards. No one gets ten credit cards; they get one, if that. No more multi-billion dollar CEOs and their cadres of wolves. No more figuring out ways to game the credit system.
For those of you who still believe in free market banking and lending, here is the bottom line: If you thought Ben Laden was a threat–or that Saddam Hussein, a third world dictator was a threat–, well, I have news for you. We are looking down the barrel of a real threat.
If this system really crashes, you will know what a security threat really is.
How about your homes, your jobs, your retirement?
We have met the real enemy. It is time we faced facts, hard facts. The guys in charge still want the old system to work, still want the lending boys to make a bundle.
Even if we nationalize the entire lending system, we will be a long time in recovering from this mess. But at least we will have understood our problem and took steps to rectify it.
The consequences of not facing it are too dire to contemplated.