Extending the Downturn
By
They just don’t seem to get it. Secretary Paulson and his team at Treasury are so blinded by the fear of government intervention that they continue to make things worse. They are running around like someone who believes that the only way to put out a fire is to pour a liquid on it – even if the liquid is gasoline.
The Treasury Department staff believes that we are in a pure financial crisis but the problem has gone well beyond that by now. The cascade has begun.
At first we had the meltdown in the financial markets on
Wall Street; it began more than six months ago and was allowed to fester before
Treasury sounded the alarm. Mortgage
markets have been in trouble for a year and
Where we are now is the beginning of freefall. Forget Wall Street, the pain is emerging country wide. The call of the election campaigns should not be for the creation of new jobs by small businesses but the retention of jobs by large businesses.
What the Treasury Department’s crack staff is doing now is going to extend the downturn for a full year or more than is necessary.
Because of Treasury’s encouragement and support of the
acquisition of Washington Mutual by J P Morgan Chase, branches will be closed,
jobs will be lost, operations facilities will be consolidated and competition
will be reduced. This is just what the
country does not need. The same will
occur with
And what are we to think of Wells Fargo and Wachovia? In truth, Wells’ acquisition of the Wachovia
East Coast franchise, a location where Wells is currently absent, maintains the
competitive environment but having them acquire the Wachovia California
franchise, Wells Fargo’s home state, makes no economic recovery sense. Does
The U S Government should have bit the bullet and done the unthinkable: take over the failed institutions.
Keep in mind that the object here is to maintain the economic viability and stability of the U S economy. By taking over the banks, jobs are preserved in the community (except for the top three tiers of management most of whom should be let go), as is the infrastructure. It should be the plan of Treasury to make the bank viable in the least amount of time and then sell it in a public offering to take it off the government’s hands and return the funds to the Treasury as a way of paying the expenses that have been put forth to make it a viable institution.
The path that Treasury is now on is the wrong one. It reduces competition, eliminates jobs and contracts the economy. Competition creates opportunities. Competition creates innovation. Large mergers do the opposite.
What about General Motors?
The automotive industry in the
But what do they want to do with the funds? Their plan is to make the company appear more viable so that it can orchestrate a merger with Chrysler.
The end result gives us the great American business success myth: merge one large, poorly managed and performing company with another large, poorly managed and performing company. What has been shown to be the actual result is that you end up with an even larger, poorly managed and performing company.
Just what the country needs for 2009: more job losses in
Everyone touts the innovativeness of the smaller
company. How about letting GM go under
and then splitting it into three separate car companies – lean and mean –
propped up by the
And now we have the airlines again. This time it’s the Justice Department finding no impediment to creating the largest American carrier out of two companies on the brink of failure.
How many more jobs must be lost before someone realizes that when a country depends on the consumer for 70% of its growth, taking a paycheck away from the consumer will not revive the economy.
Encouraging competition as a way of improving the