Business liquidity = payroll funding = jobs = income = ability to afford houses + ability to pay taxes = real estate values = viability of the mortgage market = financial health of the financial institutions (and viability of “credit default swaps”) = business liquidity…. Well, you get it. It isn't a confluence of separate messes; it’s a profoundly interrelated series of messes, compounded by the federal government’s choosing to act on that part of the problem (financial institutions) that will take the absolute longest time to stop the hemorrhaging of home values and job loss… assuming you believe in the “trickle down” theory, which I do not.
I guess that’s what you get when you take a guy out of the investment banking world – whose career is totally wrapped up in financial institutions – the former head of Goldman Sachs, and give him a problem to solve. Treasury Secretary Henry Paulson, an extremely wealthy man, actually has no clue what’s it’s like to feel your job slipping away and seeing the very real threat of losing your home. He’s an institutional guy with institutional sensibilities.
Here’s what Henry said today (carried on AOL): "We're not proud of all the mistakes that were made by many different people, different parties, failures of our regulatory system, failures of market discipline that got us here," but he said he had "no regrets" about the announced steps the government is taking now. Sorry Henry, you're still making mistakes; they're just getting bigger. The global markets, governments and business press have not been kind to your strategies.
When the market rises, as it did today, it isn't because of your efforts. Europeans announced bigger bank deposit guarantee limits, several states are now implementing protections for renters whose homes have been foreclosed, oil is cheaper and the Bank of England will introduce new emergency overnight borrowing facilities for banks starting Monday
The rest of the federal government is muddling along too. Federal Reserve Chairman, Ben Bernanke, seems to have thrown up his hands noting that this looks like it’s going to bad for more than the near term. The Attorney General’s office is doing a little tiny bit of prosecutorial investigation: investigating the management of the collapsed Washington Mutual Inc. bank to see if they broke federal laws that led to the largest banking fall in U.S. history and investigating funds and companies like SemGroup, the parent of bankrupt SemGroup Energy Partners LP, which filed for protection under U.S. bankruptcy laws in July after it lost $3.2 billion in bad bets on oil prices. We need a lot more investigating.
But we also need to be a lot more basic right now as well. Look at the first sentence in this blog. Where would you start if your job were to begin to fix this mess? At the top of institutional level as the government believes? Or might you want to get jobs funded and home foreclosures stopped right now? Hey!
I’m Peter Dekom, and I approve this message.
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