Ben Stein: What needs to be done to fix the economy?
... What is the solution? With the greatest respect to President Obama, it is not necessarily to hire men and women to build more wind-power windmills, or “21st-century classrooms.” These plans may have merit in and of themselves. But they do not get at the central problem: credit. The International Monetary Fund just issued an opinion to the same effect: that the United States economy and the world economy will not revive until the credit crisis is resolved.
The solution is to lend the banks more federal money. They have had huge losses and need huge amounts of help. Yes, they will do stupid, immoral, evil things with some of the money. They are humans and that’s what humans do. We’re sloppy and often dishonest.
We went through something a bit like this in the early 1990s, when the results of staggering mismanagement pulverized savings and loan institutions. The government acted swiftly and sensibly under Bush 41. The Resolution Trust Corporation assumed bad loans of the S.& L.’s and sold them to bidders, and we went on with the nation’s business. In the end, the government made money on many of the assets, then “toxic,” that it bought.
WHY not do the same thing now — buy the bad assets of the banks and take them off the banks’ books? That was the original plan of the Troubled Asset Relief Program, and it was a good plan. Yes, there will be colossal valuation issues. Yes, there will be fortunes made because government bought too high and sold too low. That’s what happens in life. Again, life is sloppy.
But if the crisis is really an economic Pearl Harbor, as Warren E. Buffett says, we have to behave as if it’s war. There is a lot of waste in fighting a war. But it is far better to waste money than to lose the war. We have to get money into the banks by buying their assets, taking them off the books and reliquefying the banks and other lending institutions. As I have been suggesting for a while now, we should also start making guarantees on bank loans, absent fraud, and make sure the banks have no excuse not to lend.
That will keep businesses going. That will use the power and money-creation magic of the Federal Reserve to thaw the frozen rivers of commerce, to paraphrase Franklin Roosevelt. That will put the private sector’s ingenuity to work. In the end, the government might even make money off some of those toxic loans, the way the R.T.C. did.
Again, I do not doubt that much of what Mr. Obama now proposes has merit for reasons having little to do with the economic situation. But right now, this minute, we are in a financial-monetary crisis. It is begging for a financial-monetary solution, not mammoth public works, which might be useful down the road. Let’s start on the credit issues yesterday.
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Arnold Shcherban - 2/10/2009
<The solution is to lend the banks more federal money....>
$350B of TARP money being lent without any conditions have already disappeared in nowhere-land, without any tangible effect on the credit crisis - really "some of the money"!?
So what? It was meant to be. That's just a cheap change, compairing to the worth of the US and... the insatiable appetite of those immoral, cheating, but likeable chaps, who in the course of the decade preceeding current crisis have already stolen hundreds of billions of dollars from American taxpayers. But never mind; "we" (are you, Ben in on it too?) "are sloppy and often dishonest"...
"We" are going to let you Feds and you taxpayers know when "we" have enough of your money. Only then the crisis will be over. Just don't expect it to happen too soon...
Meanwhile, "we" are going to continue greatly exaggerating our losses to get more of your money.
Don't you love us, fallible human beings?
Bravo, Ben! Bernie Maddoff himself would not be able to pitch this scam any better than you did.