To add insult to insanity, Federal Reserve Chairman Ben Bernanke announced Wednesday plans to administer another dose of quantitative easing (buying govt. bonds to lower long-term rates). The goal of this latest folly is to add liquidity to Wall Street bankers already straining under the weight of carrying loads of cash since the last giveaway.
Chairman Bernanke and President Obama are too often given the benefit of doubt in fiscal experiments. But this roll of the dice is just plain dumb. Putting more money into our system will not encourage banks to lend money, when they can make more money with less risk manipulating the stock market with their fat portfolios and warp speed computers. Instead of instituting policies that will do little except inflate our currency, a more prudent way to spur economic growth would be to use a reverse mirror that reflects the economy from the bottom up, as opposed to another attempt of supply-side economics, hoping the excess will eventually find its way into John and Jane Doe’s wallet
According to statistics extrapolated from the Department of Labor, since the start of the real estate and financial meltdown in 2006, American households lost more than $13 trillion in personal wealth relative to home equity. This number increases dramatically if losses from retirement accounts are added to the oceans of underwater homes that represent the life savings of most American families.
Congress can be forgiven for TARP. In 2008, former Fed Chairman Hank Paulson (former CEO of Goldman Sachs) convinced President George W. Bush our banking system would collapse if nearly one trillion of tax dollars was not given to Wall Street bankers to reward their greed and risky bets on derivatives. The same sky-is-falling spiel was feed to Congress. Not only did they write a check within days, lawmakers and recently sworn in President Obama four months later continued with another trounce, which often went to banks that didn’t need or want the extra cash.
By most economists, TARP is a success. It is estimated that the net loss to taxpayers will be around $20 billion. Being that the investment in Wall Street continues to find its way to our Treasury, when is government going to realize that the sky is not falling in neighborhoods around the country? The bottom fell out years ago and continues to depths below the foundation of Main Street economy.
Although conservatives will control spending with a majority in the House, a sustained recovery can only occur after addressing the worsening problem of declining home prices. It’s well past time to take another look at the Neighborhood Stabilization Act. The bureaucracy to run it at full speed is in place. What is needed is funding that bails out the American homeowner instead of Wall Street bankers.
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