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Fail?

I suspect that the government is, at this moment, screwing the pooch. Starting in November, the government sold the bank bailouts as a way to stave off a truly catastrophic economic tailspin. Just a little priming of the pump, a little life support. Fine.

But what I hear now – from everyone – is that we need to do everything we can to “get banks lending again” – as in, consumer lending – which is insane. That lending is precisely why we got into this crisis in the first place. For the last decade, Americans have been on a debt-fueled spending spree that is completely unsustainable. Borrowing does not create wealth. We need to pause to pay back our debts, and then start actually producing things to generate wealth.

Instead, the government is obsessed with cajoling you into taking out a mortgage, and banks into offering it to you. Great plan.

What’s worse, yesterday’s new plan seems intended to keep the real estate-backed asset bubble inflated by, basically, subsidizing shit, keeping the risk with the taxpayer, and handing the profit to private companies.

Of course the stock market rallied yesterday: We’re about to write those knuckle-heads another check for $1 trillion!

Why we don’t force some banks into bankruptcy, fire the management, restructure them, and sell off the pieces, rather than keep bailing out someone else’s leaky boat, is beyond me.

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