Monday, January 19, 2009

Martin Luther King Day: The banking crisis worsens, while people tend to a National Day of Service


The Wall Street Journal has a pretty good editorial today (Jan 19) “The Bush Economy,” link here. The WSJ points out that recession had already begun when Bush took office, with the dot-com bubble bust, and that his early tax cuts and encouragement of Fed policy, while seeming to offer a short term boom after about the start of 2003, did indeed only create another unsustainable bubble (I’m reminded of the Magnolia/HDNet movie of the name “Bubble” that would appear during this false housing boom.). Wall Street only had a party because the Fed seemed to be giving its blessing, and yes, the rest of us felt their hangover. Maybe it was bad policy, or maybe it was bad leadership, and a feeling that Greenspan and then Bernanke are personal “role models”, but right out of Ayn Rand. The editorial offers a graph with the legend, "The Fed's Folly."

What’s clear now is that the bailouts, while keeping the ATM machines running, aren’t unfreezing credit much, and we wonder what will happen to the auto companies come the Ides of March. So the Washington Post this morning has it’s “bad bank” article, about proposals to quarantine toxic assets (the way and antivirus program quarantines dll’s and exe’s), as by Binyamin Appelbaum and David Cho, “One Idea for Bank Crisis: Quarantine the Bad Assets: U.S. Officials Look To Solution by Sweden in ’91,” link here. The Wall Street Journal indicates that Britain is considering a similar idea. All of this makes it that much harder for Barack Obama to get help to upsidedown homeowners.

Today, Obama’s campaign (along with Colin Powell) did organize its National Day of Service. In his Inaugural address tomorrow, Obama is expected to say that every day will be a day of service. In Washington DC, Josh Groban and David Arquette worked at a hot meal center. In South Arlington, there was a simple canned food collection, at a food bank often staffed by volunteers from area churches, including the Clarendon Presbyterian Church. The picture is of the collection effort today.

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