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The Wrong Problem

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President Obama urged Congress this week to release the rest of the Wall Street bailout funds. The first $350 billion did not free up the credit markets because many banks have used the money to stay open. Maybe the problem cannot be fixed by throwing money at it. Or maybe the Fed threw the money at the wrong problem

The New York Times tells of Independent Bank in Michigan, which has received $72 million, but has had to use that money to repay short-term loans it took from the Federal Reserve. With many non-producing investments already on its books, the chief lending officer is not about to take on much risk.

It is still possible to get a car loan or mortgage with good credit. Businesses with good plans and strong balance sheets can also borrow money. Interest rates are low. Qualified people who want to borrow money can, but there seems to be a shortage of those.

Credit is tight for underfunded enterprises with shrinking businesses and individuals with large amounts of debt. This recession began with hiccups in the subprime mortgage market. Risky real estate loans are not easy to get for good reason.

The Fed has promised to print as much money as it takes to get the credit market moving again, but it may be on the wrong track. The problem might not be a shortage of dollars, but rather a shortage of borrowers.

The American auto industry hangs on by a thread. Autoworkers and those whose jobs depend on autos are wise to pay down debt and keep from borrowing more money. They have few guarantees against downsizing and pay cuts. Others in manufacturing, except those in the alternative energy sector, are in the same boat. Traditional industries have given the economy as much wealth as they could. Consumers, even ones with great credit, ought not buy things they do not need. They certainly only need so many houses and cars. The market may be approaching saturation on the consumer-goods side. If that is the case, Americans will not be able to shop their way out of this recession, regardless of how many economic stimulus checks Washington sends them.

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On the other hand, alternative energy, replacements for petroleum and the internal-combustion engine all have a bright future. Entrepreneurs in these kinds of businesses can borrow money to make money. When these businesses bloom, the economy will pick up. When affordable, efficient alternative-energy goods become available, demand will drive the market to new heights.

At present, solar panels and similar products are expensive and take a long time to pay for themselves in most parts of the country. Consequently, demand for them is light. When they become affordable, demand will increase, people will buy them and the economy will pick up. The same goes for hybrid autos and other green technologies.

Because Congress created the Wall Street bailout, options for using the money are limited. Congress should wait until January 21 to address the problem, and then focus on business incubators in areas like renewable energy. Replacing foreign oil will help the economy in innumerable ways. It might also spell the end of the current recession.

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Ann Weaver Hart is a political columnist and social critic practicing her craft in Bryan, Texas since 1995.
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