While Hank Paulson, Ben Bernanke, and the Bush Administration push its $700 billion financial crisis bailout package, Barrack Obama and John McCain posture, and appear to inject their input. The U.S. Congress wrestles with itself, watches the U.S. credit markets deteriorate, and meets the constituents’ reactions to the wild fluctuation of the stock market. The world watches as America attempts to deal with a financial crisis that some say it is the severest in history of the U.S. Make no mistake, the world is watching.
By some accounts, the amount of foreign investment in this country has never been higher. It has been widely reported that much of the Iraq war has been financed with funds from China, and much of the expected bailout funds will come from foreign investment. These foreign entities are watching the efforts of the U.S. carefully as to the financial stability of our system.
When pitching the bailout plan, Hank Paulson repeatedly mentioned that he has been fielding calls from foreign central banks who are carefully watching the situation. But one may ask: what else are they watching for? The answer may well be character– leadership that does not stop at simply dealing with problems, but employs a manner that displays how things are getting done, and a level of fairness and equitability with which that solution has been reached.
The U.S. is already behind the eight ball, if you will, in inventing the financial instruments that are at the root of the crisis, and in creating the environment for high risk, poor capitalization, and a low level of liquidity. The U.S. financial system is fragile and– in the view of many at home and abroad– completely responsible for the crisis. As a result, the world’s financial system has become increasingly fragile because of the size of an estimated $13.8 trillion economy and our financial wherewithal. The inward view towards America from foreign powers does not produce a smiley face at this point.
Already faced with a trend in anti-Americanism due to the Iraq war and multiple foreign policy failures, the next administration has an uphill battle to restore confidence and demonstrate leadership that is worthy of influencing other countries to follow, partner, and work with. The notion that U.S. power is so significant, and that foreign countries will unconditionally follow western leadership, despite the way the U.S. conducts itself, is a false one.
The U.S. must not only resolve its financial crisis and restore its economic credibility, but it must do so in a manner that is fair and equitable, and respectful in the eyes of those watching, especially the foreign countries that are at risk because of the U.S.’s high risk behavior.
Providing the dollars needed to wipe out bad debt, at the burden of taxpayers who had little or nothing to do with the cause, is one thing. The Treasury’s effort show a broad approach and the sense of urgency that is needed to address the problem. Increasing the money supply to the system to bolster markets and ease the weight on lenders is also a notable effort.
But what does the world see here when looking at the U.S. method of solving this problem?
What does the handling of the financial crisis say about our society?
A quick look at media reports indicates the following:
As recently as three months ago, the President and the Secretary of the Treasury stated that the fundamentals of the U.S. economy were strong. As recently as two weeks ago, the Republican nominee John McCain was stating the same phrase in his campaign speeches. He later reversed his statements and tried to explain away that he meant something else.
In February 2008, a tax rebate was put into place (proposed by the President and voted for by the Democratic-controlled Congress). Funds were distributed to millions of Americans in an effort to stimulate the economy. After analyzing the fiscal results, the Congressional Budget Office reported that most refunds were spent on necessities such as food and gas, and not discretionary items that would have expanded the economy. The program increased the debt level of the U.S. by $106.7 billion with little or no significant immediate economic impact.
Would the economic rebate plan have been instituted if the President and Congress had acknowledged accurate data on the economic outlook? Did they not have any clue of the incoming credit-banking crisis coming?
What does this look like to other entities looking to the U.S.?
What does it say about the ability of the U.S. to project its own economic outlook and stability?
The financial bailout bill sent to the House of Representatives consisted of a vague three-page document that asked for $700 billion of taxpayer money to purchase what has been called toxic securities that, apparently, no one else, the world over, wants to purchase. The bill gave authoritarian-like power to the Treasury Department with little or no restrictions or oversight. Administration officials stated that the bill was essentially a starter document, assembled in urgency, and that the missing components are expected to be filled in by Congress. It detailed almost no method of how the plan would actually work; it did not list its chances of failure or success, or elements of timing. It did not demonstrate how the securities would be held, for how long, or what the chances were that the taxpayer investment would deliver a return. The bill put off Republican party members who effectively killed it in the House, even after much wrangling and negotiation.
What does that effort say about the administration’s consideration for Congress? Did they expect them to pass it as is? Would have they objected if they did? Most likely not.
Much debate has occurred, and many voices have expressed the frustration of having taxpayers fund what is essentially a big problem none of which has been their doing. While expressing that, it is also clear that the educated public understands that something has to be done as the credit markets are under siege and daily evidence of economic downfall is apparent.
What does it say to those watching that there appears to be no ramifications towards the Wall Street executives or banks who originated this downfall? What does it say that apparently they will be bailed out of their mismanagement and greedy risk taking ways and will suffer little displeasure? While the banks and investment firms are dropping like flies, their employees are losing their jobs and joining the ranks of the unemployed, again paid for by tax dollars. Will the executives who perpetrated this economic mess be brought to trial? Why is the U.S. Treasury Department not seeking funding from what is left of their companies? What does it look like to the outside foreign power when greed appears to be rewarded and the burden shifted towards the masses? The events of the past six weeks have shown a government that has had to behave like a authoritarian-socialized one, not a free market society that turns to its markets for ideas for solutions.
After the Senate’s vote on the bill, it will go to the House. If the House changes the bill in form, the Senate may well have to vote again, most likely resulting in more wrangling and posturing of its members. Often, measures are thrown in to benefit a certain region, project, or cause during this process. “Pork” is the term widely used to describe this. What does it say that the Congress is opportunistic enough to add pork and further debt to an emergency bill that may only create further debt and may prove disastrous if the plan does indeed fail? Who will eat that pork?
The U.S. is looking to rebuild its stature in the world in terms of leadership, judgment, economic, and moral values and actions. This problem was created here, and despite the fact that it may be well funded by foreign loans, it must be resolved here with U.S. dollars and the common sense of Congress and the people. How we solve our own problems in our house provides much for our audience to observe.
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