The U.S. Faces a New Epic Crisis
The bailout that was proposed to save the nation and perhaps the planet has been shelved, leaving the United States to face a new epic financial crisis without a core solution or hope of immediate resolution. The sales pitch U.S. Treasury Secretary Henry Paulson made to Congress for the bailout hasn’t delivered what was promised. The Troubled Asset Relief Program (TARP) was billed as a way to rid bank balance sheets of toxic mortgage debts.
Liquidity problems in banking have continued, putting the consumer credit market at considerable risk. “This is creating a heavy burden on the American people and reducing the number of jobs in our economy,” Henry Paulson confessed to Congress today. Buying mortgage-related assets, the main function of the month-old bailout, is no longer being considered. Instead, Paulson is looking at other ways that he can be useful. Whether Congress will continue to give the Treasury Secretary more monetary credit to complete the more than $700 billion bailout is now a wild card.
What U.S. Treasury Secretary Henry Paulson has just admitted is that the functionality, transparency and the scope of known defective banking instruments is so poor, that buying them up won’t solve the problem or would involve a significantly larger sum of taxpayer money, showing a huge chasm in the underlying viability in the U.S. and global banking industry and perhaps the U.S. economy as well.
Finance Committee Senator Charles Schumer is scheduled to hold a press conference today to praise Paulson observation of the superiority of capital injections to asset purchases. Schumer also criticizes the U.S. Treasury’s unwillingness to issue strict guidelines to ensure participating firms use the funds to increase lending rather increase the number of banking buyouts. Reactionary politics is in full swing.
Clearly, the failure of the projected bailout is not good news and the fact that Paulson has decided on other measures without consulting other authorities is not promising to the overall success of this program or any other. Effectively, the premise of the bailout has been shot down. America is without a comprehensive plan. Now Congress needs to return to the drawing board with new ideas. There is no time to lose, yet the nation is in the grasp of a lame duck president with diminished influence.
A meeting of world leaders is supposed to take place in Washington, D.C. this weekend to address global concerns for the failing global economies and the promotion of a new economic global order. How the plight of the U.S. and the failure of the bailout play into the scene remains to be seen. Capitalism seems to have failed. Is Global Socialism around the corner? ~ E. Manning