Still, Lewis and Cohan [link to article in headline image below], critical as they may be, refuse to put into words what should be evident: the present administration has no intention whatsoever of opening up any book, or investigate who did what on Wall Street. The few executives who have been forced out are simply those who fell out of favor, not the most inept or suspicious figures. Bernie Madoff will be victimized and hung out to dry, but the extent of his crime and the names inside his network will be kept secret. The same will be true of Tangelo Mozilo, who could potentially drag down with him scores of financiers and politicians, but won’t be allowed to. In the end, Lewis and Cohan elect to lose themselves in what can only be called rhetorical propositions to provide clarity; rhetorical because they don’t (re-) present a chance in hell.
Eating the Seed Corn
President Obama and his advisors, Treasury secretary and Fed chairman are gambling trillions of borrowed dollars that pouring the borrowed money into failed banks, insurance companies, auto manufacturers and assorted other sinkholes will somehow magically spark a renewal of those ephemeral “animal spirits” which cause consumers to run out and borrow stupendous sums and then squander it all on new stuff.
Would anyone care to guess how many American households are burning through their savings, withdrawing IRA funds or draining the last of their remaining credit just to get by? At least one of my friends is draining his retirement funds to live while some investment real estate sells and he launches a new enterprise. If the real estate fails to sell, he could run out of money despite being worth quite a lot on paper. I doubt he is the only one in this circumstance, or the only one eating the seed corn in hopes 2010 will be better.
Only a fool who perversely wants to lose money would give credit to an over-leveraged, over-indebted borrower with no collateral.
As interest rates on the trillions borrowed skyrocket then the interest payments alone will crowd out spending on Medicare, Medicaid, Defense, etc., essentially impoverishing the American people who placidly stood by while the bet was placed (“$3 trillion on number 13, please”) and lost.