This week Paulson announced that he'd changed his mind about how to best distribute the three-quarter trillion bucks Congress grave him to jolt our Frankenstein monster economy back to lurching around again.
First he was going to buy up all those extra body parts clogging the system. But when he tried that the financial wizards who got us into this mess just took the money and headed off to the nearest high-dollar spa to recuperate from the trauma of it all.
So Paulson decided the best way to get the economy moving again is to return to what kept it going so well up until recently – consumer debt.
US abandons plan to buy toxic assets
Dropping the centerpiece of a 700 billion dollar bailout plan, US Treasury Secretary Henry Paulson said Wednesday the money would be better spent on cash injections for struggling banks and help to shore up consumer credit markets. (Full)
Yes siree, as any alcoholic will tell ya, nothing quite gets a drunk moving again the morning after a real bender than another shot of the hair of the dog that bit him the night before. At least that seems to be the basis for Paulson's decision to redirect bailout funds to companies that provide Americans with plastic money.
The next big crisis: Consumer Credit
NEW YORK: Just as the financial credit crisis seemed to be waning, another, potentially bigger crisis, has begun: the consumer crisis. This crisis is global in nature but is most dire in the United States. As a measure of how dire, the US government has abandoned its plan to buy up banks' toxic mortgage debts and will use some bailout funds to help consumers....Announcing this on Wednesday, Treasury Secretary Henry Paulson acknowledged the consumer credit market has frozen. In recent years, sales of securities provided the funding for 40 per cent of consumer loans, Mr Paulson said. (Full)
You betchya folks. That's what the geniuses in the administration have decided what Americans need now is, not stronger income growth, or better paying jobs, or any jobs at all, but more easy credit. Never mind that American consumers are already gasping under the weight of something just over $13 trillion in debt, Paulson wants us to be able to borrow more, so we can spend more on things we don't have real money to buy right now.
Brilliant!
So, instead of helping Americans reduce debts by, for example, encouraging lenders to renegotiate mortgage terms, or for usurious credit card companies to moderate their Shylockish ways, the administration will aid and abet those companies in their efforts to bury Americans even deeper in high-interest debt. Oh, and remember, thanks to “bankruptcy reforms” passed a couple of years ago, consumers can no longer get relief from consumer debt, but instead become indentured for life to CitiBank et al.
Brilliant!
(Oh, and this just in: Citi to Raise Rates on Its Plastic )
Of course there is a no-brainer of a alternative to this monumentally stupid, wasteful and bad-behavior-reinforcing nonsense. Jobs. Real jobs. Jobs that pay good wages, so consumers can pay down debt and buy things with money – the old fashioned kind of money – the real kind, not the plastic kind -- (which CitiBank has just raised the price of.)
Let's do some figurin' on the back of this envelope: We have $700 billion to work with:
Health coverage for every child in America would cost between $8 and $10 billion. (Frame of reference point: we have been spending over $10 billion A MONTH killing people in Iraq and Afghanistan so $9 billion a YEAR to keep people alive here seems pretty reasonable, huh?)
Health coverage for the 47 million uninsured Americans would cost between $50- and $100 billion.
That still leaves us with between $600-$650 billion to spend on federal, state and local jobs programs, fixing and modernizing America's crumbling bridges, roads, schools, air traffic control system, fiber optic networks, sewage and water systems, that kind of stuff.
Hiring all the millions of engineers, high tech and construction workers required to accomplish such a monumental task would drop the unemployment rate like a rock. And those good construction wages would fatten the balance sheets of now-troubled banks, which would revitalize home mortgage and small business lending.
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