Does Paulson Understand the Average American Crises?

Paulson has spoken. Yet again.

The Treasury decided to increase the spending stakes. Paulson sang a familiar tune today, humming $600 billion for mortgage backed securities, and $200 billion meant to thaw credit for consumers. He aims at greater credit availability for student loans, car loans, and healthy new mortgage loans.

For average Jack and Jill citizens like me, the complex jargon of Paulson’s plan may sound good and well. We hear that the availability and affordability of credit will once more flow our way. For those of us that dare to ask the question of ‘why?’ underlying the decision to spend additional borrowed money in this manner, Paulson’s answer is clear. The answer is that financial institutions are still not performing as expected. Trend turned risk-averse, the lending industry is still shaking from their own mistakes, and non-existent viable risk policies. Go figure.

Here’s the deal. The fact that lending institutions are not performing as expected is the argument put forth at the bailout turn around each, and every corner. Paulson was forced to act again as the GDP fell 0,5% in the third quarter. However, the focus of average citizens is once more diverted from their own everyday realities.

Let’s bring the subject home.

Despite Citi’s rescue plan, the public was informed that they still plan to lay off 50,000 employees, and that interest and fee rates will increase. Yes, this includes credit card debt, as if those rates were not already sky-high. Considering the size of this giant conglomeration, the potential number of Americans affected is unsettling.

Furthermore. The plan that Paulson outlined in his press conference today will take a few months to implement, so any potential consumer effects cannot be evaluated until after he has left Treasury. The plan aims to solve the availability problem of new credit eventually applied for. That is, if the plan proves to work. It does nothing with the existing credit troubles of taxpayers, and we have to remember where the first bubble burst.

Although consumers are accountable for living beyond their means, forgotten is the predator lending that has taken place. Meanwhile, foreclosures continue, the unemployment rate of 6.5% is rising, and more jobs will be lost in the meantime. Although a credit thaw may save a few jobs in the future, most taxpayers with maxed-out credit lines and increased fees, may not necessarily increase their spending. They will most likely exist in survival mode, and be less concerned with ’stimulating the general economy’.

They say that certain entities are too large to not be saved. Yet, the ‘meanwhile’ effects are grossly underestimated, and these ripples may prove to be catastrophic. Will Paulson’s plan prove to work in the future? Don’t hold your breath, because the roller coaster ride is far from over.

Tamera Daun, Pentad©.

1 comment to Does Paulson Understand the Average American Crises?

  • Raymond

    Hi Tamera,

    Reality check:

    Future generations of American taxpayers (our great grandchildren) face over a Trillion in debt.

    “program unparalleled in history of depressions in any country and anytime” the quote was from President Hoover referring to his bail out scheme named New Deal during the great depression. Hoover instituted high wage rates, public works, and propping up unsound positions.

    It is interesting to note that then US Treasury Secretary Mellon headed what Hoover called “the-leave-it-alone liquidationists”.

    Though Mellon supported the governments inflationist monetary stance that led to the wild stock speculation and crash, he was actually against bail outs. Mellon cited the efficient working of this process in the depression of the 1870s. But he was overruled by Hoover. Hoover was supported by Undersecretary of Treasury Mills. Secretary Of Commerce Lamont, Secretary of Agricultural Hyde.

    Troubled Assets Relief Program (TARP) is just a new name for the same New Deal 1 and New Deal ll.

    The faces have changed but the sales pitch remains the same:

    “To help the average American in main street”

    Now read reality check above for translation.

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