Dear Senator McCain,
Here is the status of your "Still Strong Economy," circa Monday, September 15, 2008, also known as Black Monday:
• Lehman Brothers, a 158-year-old bank, with $60 Billion in failed real estate holdings, filed for Chapter 11 bankruptcy proceedings. This is the largest single bankruptcy in history.
• Merrill-Lynch got gobbled up by Bank of America-for $50 Billion in-not money, but equities-STOCKS.
• The Dow Jones industrial average plummeted 500 points. The largest single-day nosedive since the first trading day after September 11, 2001 (when the DJIA fell. 684 points).
A short while ago, Fannie Mae and Freddie Mac got rescued, although Motley Fool, whose judgments I believe to be sound, if not prescient, believes this is ultimately for the taxpayer's good.
Who is next to fall? AIG? Washington Mutual? Oh, wait a second. I have to remember about the "fundamentals of the economy still strong" thing that you attest so loudly, Senator McCain. And that sentiment, despite the leaks that have been dripping for some time now, such as that:
• The credit crisis started 14 months ago
• Bear Stearns collapsed six months ago (and was rescued--but, hey, we can't rescue everybody who bought bad debt instruments, now can we?)
• Formal bank run on IndyMac
• Chinese stocks down more than 50% since the beginning of 2008
• The housing bubble has burst
Perhaps one of your advisers could tap your shoulder and urge you to pull your head out of the sand on this one? Sure, it looks as though the loosening of restrictions on lending, the lowered prime rate during the Alan Greenspan years allowed the greed that already lurks in the hearts of men everywhere to bubble up in bankers everywhere to make ridiculous loans to optimistic folks who simply wanted to buy--and buy and buy-for cheap rates, because heck, everyone else was doing it. And then, some handy-dandy financial folks packaged those mortgages into pools and then zipped them up into neat little securities, offering them to whomever wanted a bargain-"Get your mortgage-backed securities, with only a slightly tarnished credit rating, now at a financial institution near you." Had to see that one coming, didn't you?
But yeah, you'd have to say we all had at least a little finger in the soufflé-from Main Street all the way to Wall Street. But don't you think that maybe all of this messy, rapidly falling confection is an indication of an economy that is, at hem, at least a teensy bit financially unsound?