Monday, March 31, 2008

A Band-aid For a Hemorrhaging Economy

I'm not sure what the Bush Administration is trying to do to delay the economic meltdown that seems imminent. Today's proposal by the Treasury Secretary Henry Paulson, of a regulatory makeover grabbed a lot of headlines, and seemed to suggest bold action in the face of financial crisis. If you're just a regular citizen like me, and you don't really understand the banking industry, you might think that the Bush Administration is working overtime to solve the many problems of the current credit crisis. But since I am just a working stiff trying to protect my tiny retirement portfolio, I always look to a few experts to tell me the real truth about the economy. One of my favorites is Paul Krugman (I actually sent him an e-mail a few years ago, proffessing my honest admiration of his true genius, and offering to cook dinner for him, and he sent a very nice reply, which I saved for years, until I realized it was just a form letter thanking me for reading his column). Anyway, I think he is just about the smartest columnist at the NY Times, and I think he is almost always right about the economy. He thinks, and I think he's right as always, that the Bush Administration doesn't really want to regulate the financial industries, these are the guys, who are gung-ho free-market warriors, they just need to appear as if they are trying to do something to stop the bleeding.

Here is what he says about Paulson's proposal.

And sure enough, according to the executive summary of the new administration plan, regulation will be limited to institutions that receive explicit federal guarantees — that is, institutions that are already regulated, and have not been the source of today’s problems. As for the rest, it blithely declares that “market discipline is the most effective tool to limit systemic risk.”
The administration, then, has learned nothing from the current crisis. Yet it needs, as a political matter, to pretend to be doing something.
So as our economic situation continues to bleed out, Bush and Cheney look at each other and say "So?", and offer one of those little Band-aides that my mom used to put on my pinky finger.

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posted at 11:02:00 PM by Tankwoman

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