It is difficult to think about anything but the U.S. banking sector implosion these days. Even though Wall Street is miles from your home or farm, and we often tune out the intricacies of global finance and its impact, we can’t ignore the situation at hand.
Monday afternoon’s news was all about the failed House vote on the proposed bail-out package. The partisan rhetoric whirled off of Capitol Hill like the winds of a fall hurricane.
Rep. Nancy Pelosi, speaker of the House, called the package “part of the cost of the failed Bush economic policies.”
“They claim to be free market advocates, but it’s really an ‘anything goes’ mentality,” she said in her scathing floor speech that Republicans are blaming for the failed vote.
Ohio’s John Boehner said Pelosi “poisoned” the bipartisan conference committee’s effort in finding a middle road for the bill.
A lot could happen after this goes to press, but I’m certain Congress will have no choice but to approve some kind of a bail-out bill. You can detest the finance and banking executives for their golden parachutes of salaries and bonuses while their companies crumbled. You can blame the Bush administration. Heck, you can point a finger at just about everyone and anyone. But it doesn’t do any good. We need to figure out how to fix the problem and then prevent it from happening again.
The bail-out — whatever form it takes — may not fix the problem, but we need to prevent the total collapse of our economy. And, folks, we are teetering on the brink.
It’s a vicious cycle, says economist Ilian Mihov, who has studied under Fed chairman Ben Bernanke.
“More banks could fail if distressed financial assets are not taken off their balance sheets because these assets continue to deteriorate every day, creating more uncertainty for the investors and bank depositors,” Mihov commented Sept. 29. “Such a situation could force a fire sale of bank assets to satisfy demands from investors and depositors, further weakening the banks’ balance sheets.”
How does that affect you? Banks will tighten their lending belts and companies, and ultimately consumers, will be unable to secure loans. The economy comes to a screeching halt, and we could plunge into another Great Depression. You can also read Terry Francl’s comments on the financial crisis’ affect on agriculture in our Page 1 story today.
I am not a doomsday pessimist and I believe we’ve learned lessons from the late 1920s and 1930s that won’t be repeated. But, like it or not, some form of government intervention is necessary. Right now. Not after the election.
The country is bleeding and we need triage: Attention to our most urgent wounds first.