God Save The Banks

The current financial and economic situation in the United States is something everyone is aware of. Although these are troubled times, the quandary our nation faces in allocating the limited capital resources we have couldn’t come at a better time for me. With a plan on graduating from UW-Madison in the spring of 2010 with a major in economics, the current state of the economy is like a free class in economic crisis 101. I thought I would take my last blog for English 201 and share my thoughts on the economy.

First on the agenda is the housing market. The origin of this problem is greedy lenders; yup that’s the fat cat bank owner who just can’t keep his damn hand out of the cookie jar. Buyers were taking out hefty loans and the banks were allowing it with little discrimination. Suddenly buyers could not pay the interest back to the banks and massive foreclosures ensued. Now Congress is taking an estimated $700 billion of YOUR money to pay the mortgage investment losses for banker friends of our beloved Ben Bernanke, or been bamboozled as I like to call him. On the bright side, well, umm we may not see a bright side for some time in the housing market.

Fast forwarding to the present, we are still in an economic hole, or maybe crater is more appropriate. Spending has spiraled out of control with many new hands in the dwindling pockets of our national reserve. Another estimated $700 billion is going toward the Troubled Assist Relief Program (TARP) to do exactly what it sounds like, relieve those who need assistance, mainly more of their banking buddies. However, this almost incomprehensible sum of money isn’t coming from the taxpayer. Wait, hold your excitement, the money has to come from somewhere, right? WRONG!! The Fed knows only one magic trick, but it’s a good one. They have the ability to create money out of thin air. With risk of intense inflation and running the country deeper into recession, or even depression, the Fed is playing with fire and we all could get burned.

This brings me to my next point, and quite frankly, my favorite the auto industry. After seeing staggering losses for the past 5 quarters or so, GM corp. and Chrysler LLC are the next on the serving line. Their plea to the Fed is for a short-term bailout to avoid bankruptcy. If the company goes bankrupt over 1 million jobs will be lost. Although this has an obvious toll on the economy, sometimes it is better to cut off a leg before the infection spreads to the whole body. What I mean by this is there is no guarantee a bailout will help the automakers. There is no point in using the taxpayer’s money to keep bailing out a failing company. A never ending bail out plan will be far worse than an increased unemployment rate and although the short-term loss will be severe, it will be better in the long run. It is a foolish economic decision to keep funding the incompetent business leaders and allow them to go up against the competent. Allowing GM and Chrysler to go bankrupt will allow the companies to reestablish their companies with their companies and create a more efficient business.

Although I haven’t mentioned many other facets entangled in the economic fiasco, I hope I gave at least some insight to what is going on in our country. I would also like to extend my sincere gratitude to everyone in the class for the relaxed environment and interesting class discussion. I would also like to give a special thanks to my cohort and to Christine. You guys rock!


Thanks for listening to:

Curtis E. Bear
The Courtesy Bear