We’ve had a few comments recently asking why Harry’s Place isn’t posting more about the current financial crisis/meltdown/calamity/Armageddon/whatever-it-is. And aside from the fact that such comments are off-topic, and it’s our blog and we can post whatever we damn well want, they have a point.
On my account, it’s because– unlike some instant experts– I don’t pretend to understand the totality of what’s going on, or even a small portion of that totality. But occasionally, from the morass of information and opinion, I find something that on its face makes sense to me. Such were the comments of Elizabeth Warren, the head of a Congressional panel that oversees the US government’s $700 billion bailout program.
Warren… said in an interview Monday that the government… seemed to be lurching from one tactic to the next without clarifying how each step fits into an overall plan.
“You can’t just say, ‘Credit isn’t moving through the system,’ ” she said in her first public comments since being named to the panel. “You have to ask why.”
If the answer is that banks do not have money to lend, it would make sense to push capital into their hands, as the Treasury has been doing over the last two months, she continued. But if the answer is that their potential borrowers are getting less creditworthy with each passing day, “pouring money into banks isn’t going to fix that problem,” she said.
In her view, the government should be trying to create more reliable customers for those banks by shoring up the fragile finances of the millions of American families that could not save, borrow or spend even if their banks were flush with capital.
“Any effective policy has to start with the households,” she said. “Years of flat wages, low savings and high debt have left America’s households extremely vulnerable.”
Barack Obama seems to grasp this, which is why he is proposing to create jobs by funding programs to repair and build roads, bridges, schools and other public infrastructure, and to cut taxes for the middle class. More disturbing to some (but not me), he also advocates an increase in the minimum wage and making it less difficult for workers to organize unions.
So is the government– by pumping more than a hundred billion dollars (with no strings attached) into banks that are holding it instead of lending it— getting things backwards?