13. November 2008 by David A. Peterson.

I heard this quote yesterday and I about fell over laughing. Henry Paulson our Treasury Secretary said this when questioned why the TARP (Troubled Asset Relief Program) is changing, “At the time…”

Note to Secretary Paulson: “At the time…” was only 40 days ago. The toxic mortgages are still on the books. Why would you want the change a program that you pitched to the American public only a couple of weeks ago? Nothing has changed except probably your independent reading of the current situation.

Regardless of your reading of the current situation the toxic mortgages are still there. October saw a 25% rise in foreclosures over the previous year.

The TARP better known as the “$700 Billion Dollar Bailout” was a tough pill to swallow for all Americans. Ultra conservative Republicans were and still are definitely against this pill. Moderate conservatives went along with it even though it is against every grain of fiscal restraint they believe in.

Democrats bought the medicine hook, line, and sinker. They snapped, like a fish snapping bait, at the chance, any chance not to govern through a possible depression starting in just 100 days.

The world was sold by Henry Paulson. My sneaky suspicion is that our Treasury Secretary had to get credit flowing again, so he just pitched the first thought that came to him… “We need to buy up the toxic mortgages to get them off the books.”

This made some sense to the common man, buy these financial instruments, then hold them to maturity or establish a transparent secondary market for them. We, the taxpayers, may actually make money – what a deal.

What it appears that Secretary Paulson really wanted to do was to get the credit flowing, not just so the banks will lend to one another (which he achieved), but he wanted us (as in you and me) to start buying stuff again. He needs the consumer which is about ¾ of our economy to go on a shopping spree.

Kind of sounds like President Bush right after 9/11 doesn’t it? Lower interest rates and encourage Americans to buy till their credit cards crack. We all now know how that turned out.

The other major problem that the Secretary knew was right around the corner is our consumer debt – i.e. unsecured debt is already so high that Americans can’t afford to purchase anything right now. Also, now that first time unemployment claims are over 500,000 (the first time since 1983) I doubt that this massive debt can be repaid.

Example: American Express is actually asking for $3.5 billion from the TARP. You got to be kidding - American Express wants the tax payers to help pay off credit card debt?

True conservatives need to step up and get their message out. You can’t just throw money that you don’t have at the problem. We are not talking about $10 programs here we are talking about $1,000,000,000,000 (as in a trillion dollars) spent in one very short period of time.

Imagine the inflation that could happen once all of the dollars that were supposed to buy out a portion of the toxic mortgages are actually spent on consumer goods.

Conservatives have to stand up and get their message heard… “Dear American Express, it you were dumb enough to lend the money, then I smart enough to let you go into bankruptcy.”  “Dear Bank CEO, if you are not smart enough to gather up, re-value, and sell all of those toxic mortgages that you own then maybe we need a new CEO.”

This is tough love. Conservatives have to find ways to create long lasting jobs, but throwing money at an ever changing program is probably not the way.

Let’s prioritize the problems, find solutions, and then get a clear concise message out. We need a conservative message that will not change in 40 days.

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12. November 2008 by David A. Peterson.

Yesterday I was watching Republican Senator Jeff Sessions from the great state of Alabama on CNBC. The topic was the GM Bailout and his own thoughts on the additional money. Also if this happens the commentator was asking where all of the bailouts would stop – “what about airlines, and retail,” etc.

Last month the Congress rammed through a $25,000,000,000 bailout for the automakers that most Americans are not aware of. This money was earmarked for the retooling of the automakers. The retooling is meant to create the new energy efficient cars of tomorrow.

So here we are in the middle of November with 1st $25 billion program meant for retooling and a 2^nd $25 billion being requested for cash flow purposes. This new request is being called a “bridge loan,” because among other things the automakers owe the union’s money for transfer of medical contracts from the automakers to the union’s expense.

Jeff Sessions left me with the impression that he is against this new bailout money. He expects that the automakers, primarily GM, ought to go into bankruptcy. In bankruptcy with a judge presiding over the case GM, its creditors, shareholders, and the public will get a full disclosure of the economic perils of the company. Maybe they will survive, maybe they won’t.

Congressman Ron Paul from the 14^th district of Texas, another prominent Republican and a past Presidential hopeful, is no stranger to this type of argument. In a nut shell his view is GM should fail if it can’t perform in the free market.

This type of message from these two Republican leaders makes all conservatives look bad. This message smells like politics. Both leaders are busy trying to look tough and different than the Democrats. However, the American public is only seeing, hearing, and reading - “Republicans say let GM, Ford, and Chrysler fail – the 3 million people affected will find other jobs.”

Come on boys – think! Do you really want 3 million job losses? How about this do you really think the extra $25 billion is not going to pass very, very soon regardless of what you think?

How about governing instead of politicking.  How about Sessions and Paul find a way to temporarily save the current jobs working with the Democrats, the companies, and the unions instead of just stonewalling.

Here’s a thought – how about you approve the extra $25 billion with these strings: If you borrow it (i.e. you need it) you will immediately begin bankruptcy proceeding. If you make it out of bankruptcy you will repay us (as in me and you – the taxpayers) with non-voting shares of preferred stock with a strike price of date you borrowed the money. 

I’m not trying to change conservative views, I’m trying to get conservative leaders to realize the message they are spewing is anti-jobs, anti-middle America. Is that the message our conservative leaders meant to communicate?

Posted in Economics, Message | No Comments »