United States Bailout

The House Republicans are putting up a fight over the proposed Bailout package. I've already detailed my objections in other forums and would like to focus on one specific area of this proposal, the impact on American Citizens. What happens when these banks fail? If you listen to Hank Paulson and President Bush you'd think that when these banks collapse the entire US economy will shut down. But is that actually correct? Or is there more fear mongering than fact-telling going on here.

My problem with these statements that rhetorically induce immediate action by calling for a "rapid resolution" to "avert this crisis" is that they over sell the effects of these banks. Granted our financial system hinges on liquidity. The entire economy needs access to capital and the multiple and regular transfers of funds keep the wheels of consumption turning. One of the great dangers is that international buyers would swoop down and pick the eyes out of the market gathering cheap assets that are still appreciable while filling the void left by a major banking institutional failure. However it is dead wrong to state the majority of banks will go under because of the egregious mistakes of a few, albeit massively large, banks.

In fact this is an opportunity to distribute the financial base of the United States wider and more broadly across the geographic United States. With more localized banks purchasing discounted assets from failing banks we would see an effective restructuring of the US financial landscape. Many regionally based banks stand to reap great rewards, PNC and long standing Pittsburgh banks could recapture their position as financial leaders, and other relatively small banks can gain and support pieces of the foundational structure of our capital market. Stronger more ethical managers will have the opportunity to succeed where others did not. In this case what the government should do is serve as a broker dividing and auctioning off the assets of failed banks.

However, the back story is tied to the Big Apple. Because investment houses are located in NYC and our federal cronies as well as many influential domestic and international investors like a centrally located locust of power the government will seek to maintain the crumbling Wall Street. The commonly used distinction between Wall Street and Main Street is more pejorative than utilitarian but does drive home a point: the interests of each are linked but not conjoined.