Wednesday, November 12, 2008

Paulson's Pragmatism Strikes Again

Naked emperor Henry Paulson has chosen once again to display a part of his mental anatomy we would prefer not to see. On excusing his shift to bailout credit card users instead of mortgage payers, he said: "I will never apologize for changing a strategy or an approach if the facts change."

There are so many things wrong with this statement it's hard to know where to begin.

Some facts change every instant. The Earth moves. Market rates rise and fall. (Mostly the latter, recently.) Credit card debt goes up and down, per individual and in the aggregate. Some facts are more long lived. Some people behave irresponsibly or short-sightedly with respect to debt. Governments leap in and lessen the impact by shifting the burden to others.

Just which facts does Paulson think have changed to justify changing a bad plan to a worse one?

It's idiotic to use government largesse to keep people in their homes. But a natural sympathy among men like Paulson and Bush at least makes it understandable. It's also understandable that, given how weak each man's understanding of economics is, they will advocate a Keynesian solution to the financial crisis. But is there any fact that, even to such a confused pragmatist, makes it appear sensible to bail out credit card users and issuers, so they can issue and take on still more credit card debt?

Much as I regret the outcome of the recent election, I can't wait for at least this clown to be gone. Even communists have a five year plan. This buffoon can't hold to anything more than five days.

First the plan was to unfreeze credit markets in mortgage lending. (Remember that far back? I know it's been all of a month and a half.) Then it switched a few days after the bailout bill passed to buying mortgage assets directly. That was abandoned almost before it was reported. Then, he decided to strong-arm healthy banks into taking money they didn't want or need, in order to get the weaker ones to go along. Now, according to Forbes,
The [Wall Street Journal] report also said that the Treasury is unlikely to conduct any auctions to purchase bad loans and other troubled assets, which was the original intention of the $700.0 billion rescue plan.
Paulson's decided that what we most need, and desperately enough to spend untold billions of fiat money for it, is more auto loans and credit card debt relief. It's enough to make even a non-cynic wonder who are Paulson's golfing buddies this week, and — god forbid — who will they be next week?

We'll set aside for now the total immorality of bailing out people who chose to incur credit card debt they can't service since — in all but rare cases — they're used only for non-essential purchases. Let's just examine a few practical matters.

Total revolving consumer credit in 2003 was $770 billion. Today, it's over $971 billion. You know, far be it from me (unlike the Feds) to dictate to others how they should budget. But, I'm thinkin' maybe people could hold off on that new couch or TV until they can pay for it without the government's assistance. That might help the economic situation, starting with their own.

And, though I'm sure some banks are hurting, the CEO of Wells Fargo assures me they are "strong." So, probably they can float credit card debt if they choose to without Paulson's aid package.

Most importantly is a fact Paulson seems not to have noticed has not changed: credit contraction can be a very good thing. But then, that sort of fact is in the form of a general economic principle. As such, I'm sure the myopic Mr. Paulson could never see whether it has changed or not. That would require that his focus be on some facts that don't change every minute.

1 comment:

Ted said...

One fact that does not change is, you cannot borrow-and-spend your way out of debt.
CRAPublicans forgot that seven or eight years ago, and McMarkofcain sealed his doom when he felated the Congress and president into going for the bail-out, then went back on the campaign trail to reassure the plebes he was against it...As if wetback amnesty and McCain-feingold were not treasonous enough.
Politicians love socialism, and anything else that expands their power over the ignorant voter-blocs. Paulson facilitates all the above.
Expect him to be around for awhile.