While Rome Burns

As G7 financial leaders continued to meet to provide a concerted government action against the global financial crisis, European countries – who use the Euro as their currency (this would exclude England that still uses the pound sterling) – agreed temporarily to guarantee refinancing between and among their nations’ banks to ease the credit crunch – they basically told the world that Europe would not let its banks collapse. They were solving the problem. They were stemming the obvious global “panic” that needed a psychological boost… quickly.

The World Bank and the International Monetary Fund pledged not to let particularly vulnerable, poorer, nations slide into oblivion as the richer nations struggled for answers. Meanwhile, $700 billion were transferred into the Department of the Treasury based on the rescue package passed by Congress and signed into law October 3rd.

Funny, in what was a financial crisis born in the U.S. lending markets, as the American government was instead engaged in hiring private “consultants” to help them decide how to “fix” our economy (many “consultants” were those had enabled the very problem that the Treasury Department was directed to repair!), European leaders acting without such expensive “special interest" expertise, just guaranteed the immediate and continued operation of their banks – at all levels. European banks could lend, and people knew that their governments would stand behind them. Their nations’ payrolls would be met. Their small businesses would have capital flow.

The Asian and European markets staged a rally at the news. The U.S. stock markets, seeing that someone had taken reassuring action, also opened and flew upwards. There is a “bounce bank,” but can it hold – will the panic really subside – without immediate U.S. follow-up in support?

Surely, with the U.S. markets looking for a sign – human beings trying to see that their leaders “were handling” the crisis with a firm hand – and with the Europeans and international agencies having acted, the Americans would add an instantaneous deployment of cash and guarantees based on this huge infusion. Grassroots local lending markets had to get a shot of federal antifreeze, right? The fall in home values had to be stopped, correct?

In a move that seemed to track European strategy, Treasury Secretary Paulson had strongly hinted that the government would actually step in, place equity into smaller, weaker banks – maybe even take them over entirely – as a way to get money down into the system where it could begin to unthaw the credit markets, getting payrolls funded and working capital flowing back to the small businesses who did not have the advantage that mega-billion dollar, publicly-traded companies had by selling their promissory notes (“commercial paper”) in the non-bank, open marketplace (which the Federal Reserve helped by buying such paper recently – thus guaranteeing a market).

The economy was clearly the primary focus of governments everywhere; the President of the United States addressed the issue 22 times in the last 26 days, according to the Associated Press. Yet he spent Sunday biking in a Maryland state park and remained in seclusion for the rest of the day. The U.S. government seemed paralyzed and indecisive. Lots of talk, lots of opportunity, lots of plans…

Congress is mumbling at the inactivity; there’s even a bipartisan effort towards getting a vote on a new stimulus package before or shortly after the November 4 election… tax cuts and small checks to taxpayers (like the last “stimulus package” worked?!) – a truly dumb idea – with some decent ones mixed in to help get the bill passed – like injecting federal money immediately into getting local and national infrastructure projects (already budgeted and planned – just delayed because of the economy). Americans need jobs and to be able to keep their homes, not spending money for Christmas! The aspirin of financial issues – send small checks to taxpayers or give them tax breaks (on money they may never have a chance to earn) and call it a stimulus package – does not cure a patient who is bleeding to death; aspirin even thins out the blood and makes it worse.

America needs a sign from its government that will prove that those of us who aren't mega-corporations or powerful special interests will get the relief in the credit markets that is essential for us to keep our jobs and our homes. It’s that basic.

So with all this opportunity and all this activity around the globe, with markets screaming for a sign that a “plan” was being rolled out, how did Treasury Secretary spend the first allocation of the $700 billion bailout?! We don't know. The entire $700 billion still sits in the Treasury Department accounts. The expensive outside financial “experts” aren't on board yet.

I’m Peter Dekom, and I approve this message.