Yes, I know that just last night President Obama warned of the lost decade. I also agree with him that the situation is dire and time is of the essence.
However, it is precisely because we are in a crisis that I want to make sure we are disciplined in our approach.
We are now hearing all the things that were done wrong regarding the first half of the TARP funds. Clearly, everyone is blaming the old administration.
Don't worry, this is not going to be political. I blame the democrats and republicans.
Wasn't President Obama in the senate when TARP was passed? Didn't he vote for it? Didn't John McCain vote for it? Didn't Nancy Pelosi vote for it? Both republicans and democrats let $350 billion go out the door with little to no controls- let's not do it again.
The other night there was an interview of some of the house and senate members. When they were asked how they came to the numbers for certain items in their respective bills (the analysis that arrived at these numbers) no one could answer the question.
They said this was not scientific!! These were rough estimates.
Ladies and gentlemen, this is $800 plus BILLION dollars. Let's at least be a little scientific and disciplined.
There is a good Opinion piece in the WSJ today entitled- How Government Created the Financial Crisis. It is a good read. http://online.wsj.com/article/SB123414310280561945.html
What I am most impressed with about the article, is not John Taylor's conclusions but rather his analysis.
If I were on the board of a company and management was asking to spend over $800 billion due to a crisis, I would ask for the following at a minimum:
1- Diagnosis summary- what happened and why
2- Needs/opportunities analysis- given the diagnosis, what are the immediate and long term needs/opportunities
3- Return on investment- what measurements are we using and over what time frame
4- Risk analysis and mitigation plans- what are the likely things that could go wrong and what will we do then
Now, I realize we are in uncharted waters so many of the items above could change or prove wrong. But at least we would have a plan.
This is complex and not easy to summarize. However, we have a key asset- President Obama's communication skills. He is an excellent communicator.
If he told the American people a little bit more about why we need to spend this amount of money and how he would make sure it did not get wasted, people would feel more comfortable.
Am I the only one that feels like they just spun a wheel and picked a number? Am I alone in believing that we need to do this but that I want more discipline?
What do you think?
Until next time,
Gail
Posts
Gail, there is no question that Alan Greenspan and the government contributed to the current problems. After 9/11 interest rates were lowered and stayed abnormally low for a few years. As a result, people decided getting 1% per cent on their savings was foolish and they decided to buy stocks, homes, other real estate and other assets for appreciation.
ReplyDeleteFurther, the government decided to make the interest on a home equity loan tax deductible. This encouraged people to borrow on their houses based on inflated values. This really was and is a problem and has caused many people to have mortgages plus home equity loans greater than the value of their homes.
Yes the Congress should act as if it is living in a glass house before it continues throwing stones at other deserving parties.