Robert Reich, former Treasury Secretary, on the financial crisis
Put simply, the Bailout of All Bailouts has been a dud, at least so far.
Several nations (Ireland, Greece, Germany) have basically guaranteed all deposits. As a result, global capital is moving their way. They’re also thereby creating a new form of socialized capitalism. At the rate they’re going, these nations will soon own and run their financial markets, and maybe a big chunk of the world’s.
If the US does not guarantee all deposits, that giant sucking sound will be billions of dollars leaving US banks. Some think this has already started.
I fault Hank Paulson, first and foremost. He never succeeded in explaining to anyone what exactly he’ll do with the bailout money.
He plans to use the money to bailout Goldman Sachs and screw everyone else. Next question. Oh, sorry, am I being snarky? Well, maybe not. Even the Wall Street Journal says “A Goldman Sachs Group alumnus in charge of the nation’s economic rescue? How unusual.”
Paulson has proven himself uniquely unable to explain anything to anyone. George W. Bush, for his part, is hopeless and hapless. Worse than a lame duck, he’s a seriously disabled parakeet, with no remaining store of public trust. Ben Bernanke seems like an able fellow but his capacity to communicate is almost as bad as his predecessor’s. Obama does understand what’s happening, and could calm global capital markets if he were already president. But he is not president as yet, nor even president-elect.
Paulson’s seeming inability to explain anything is suspect. Either he is incompetent and has no plan (doubtful) or he knows precisely what his plan is and doesn’t want to tell the public.
The leadership vacuum could not happen at a worse time. If credit markets remain frozen, we’ll soon witness a huge round of business bankruptcies. We’re in completely uncharted terrain.
That is the bottom line. Yes, the greedheads are still probably plotting how to grab billions more, but the credit markets are seized tight, and that can not continue. Expect the government to start buying commercial paper and drop the interest rate to 1% in a desperation move.
“This ain’t no party / This ain’t no disco / This ain’t no fooling around.” The world economic system is on the brink. It behooves us all to work together and somehow bring it back.