The Everyman Economist

Apparently the President of the United States is always the last to know. While the Everyman has been stranded in an economic wasteland, the President has been telling him that things aren’t that bad. Finally, last Friday, the President admitted that “the economy is going through a tough time.” Ya think? Is this the most out of touch leader we’ve EVER had, or simply the most out of touch for the past 2 generations? And now that the Prez is on board, the “B” word is front and center, or at least on Wall St. What we need now is a similar Bailout for Main St.

Bailout is not a dirty word. It is simply a mechanism that the US government employs to prevent a meltdown of the financial system. The government has stepped in numerous times since the Great Depression with one form of Bailout or another to avert such potential catastrophes. However, it is up to the judgment of the powers that be to determine if and when a Bailout is necessary. Chrysler and certain Savings and Loan institutions are recent examples, and the results were beneficial at the time. Similarly, the Bailout of Bear Stearns is beneficial to the entire financial system. It is important to note, by the way, that when a company sells for $2 per share after trading at 30 times that price only one week earlier, it is hardly a Bailout. I’d say it’s more like a fire sale. Nevertheless, if it’s good for the Bear, it’s good for the Everyman.

The President needs to stop hiding behind the slogans about small government being better than big government and get to the heart of the biggest problem that has plagued this country for the last 75 years. We can’t afford to wait 9 months for a new president and “emergency” measures. The emergency is upon us and it’s now time to come up with a plan to ease the burden on the financial system. And it’s pretty easy to do. Just create a new federal agency that will do the following: (1) buy up the loans that would result in foreclosures (2) freeze the lower rates for those homeowners who elect to be in the plan (3) establish a fixed target price for each home based on current appraisals (4) remove the downside risk for any homeowner in the plan, unless he chooses to sell and incur a loss (5) remove the upside gains from the fixed target price so that future increases in home prices would benefit the federal agency, not the homeowner. These actions would immediately stabilize a seriously deteriorating housing environment, while dramatically reducing foreclosures, but would also remove both the losses and gains for those homeowners that sign on to the plan. The plan would be optional and would still permit free market forces to work their way through the housing crisis, but likely with a softer landing. Some form of housing related Bailout is now critical to the health of the nation’s financial system and the time to act is NOW! If it’s good for the Bear, it’s essential for the Everyman.     

I’m not big on judging others for their weaknesses or misdeeds. I think we should leave all that to forces bigger than all of us. However, when someone lives a life in the public eye and makes his living by holding Everyman up to close scrutiny, that’s a whole different ballgame. Governor Eliot Spitzer of New York is just such a man. After reigning supreme as Attorney General in New York and sqeezing the life out of every possible misstep by corporations and individuals alike, Governor Spitzer has left himself no margin for error. And when the error is as absurd as his current plight…Spitzer MUST GO! How dare he defile the public trust when all along he built that trust on the backs of anyone who dared cross him and his self-righteousness. Apparently those beliefs did not cross over into his own life, where his judgement and actions are far from righteous. It is a remarkable story to watch unfold, but the end is very simple. Spitzer MUST GO and he MUST GO SOON! The hypocrisy is frightening and we should all feel bamboozled by this smaller than life Everyman.