No Justice, No Peace

Steve Randy Waldman muses darkly:

"I am filled with despair, not because what we are doing cannot 'work', but because it is too unjust. This is not my country.

The news of today is the Geithner plan. I think this plan might work very well in terms of repairing bank balance sheets.

Of course the whole notion of repairing bank balance sheet is a lie and misdirection. The balance sheets we should want to see repaired are household balance sheets. Banks have failed us profoundly. We want them reorganized, not repaired. A world in which the banks are all fixed but households are still broken is worse than what we have right now. Too-big-to-fail banks restored to health are too-big-to-fail banks restored to power. The idea that fixing legacy banks is prerequisite to fixing the broad economy is a lie perpetrated by legacy bankers."

I agree with this analysis almost entirely.

It is wrong for policy to focus on the banks instead of households. We have long needed a policy, which would resolve the situations of individual households, through various kinds of restructuring, and expedited foreclosure. The way to clear away the "toxic assets" is not to hold them to maturity -- which is equivalent to keeping millions of Americans with over-sized mortgage debt hanging fire unable to accumulate saving for up to a decade -- it is to clear and rationalize that debt. And, if reducing that debt to match the actual, trend value of houses and the cash flow available to households, breaks the banks, then we should restructure banking as necessary.

If the Treasury wants to spend $700 billion, the right thing to do would be to pad out the pathetic stimulus, with new projects to restructure the economy. Ever heard of "global warming"? "Peak oil"? Our economy is structured wrongly, for a future that is barrelling down upon us. We face an emergency, and, if people would just recognize it, this economic crisis is an opportunity to respond to it.

But, instead, the Bourbon Democrats are in charge.

Change we can believe in?


CNBC quotes Joe Stiglitz on the Geithner plan: " 'Quite frankly, this amounts to robbery of the American people.' Even if the plan clears banks of massive toxic debt, worries about the economic outlook mean banks could still be unwilling to make fresh loans, while the prospect of a higher tax burden to pay for various government stimulus plans could further undermine U.S. consumers, he said."