Yes, I understand everyone is looking desperately for answers to this global economic crisis. Me, too. Today I have some questions of my own I want answered. Let's jump right in.
Q: It's apparently my mistake to be writing about the "national bailout plan" when it seems I should have said "nationalized bailout plan" all along. Are we Back in the USSR? Are we slowly being socialized?
Not yet, but we're getting closer. A $700-billion bailout to buy dud mortgage loans backed by taxpayer money. Federal taxpayer loans topping $120-billion just to keep one, single insurance company, AIG, afloat. The government mulling ownership stakes in banks and guaranteeing all bank debts and deposits. Maybe we should call it nationalization after all.
Q: Who's really in charge here? The rescue package seems to have a cast of thousands but no genuine leaders.
Ah, the $700-billion question! President George W. Bush appears often on TV but says little and usually takes no questions. Besides, he's a lame duck with three months left in office. Treasury Secretary and chief bailout architect Hank Paulson won't be around for a new administration, either. Federal Reserve Chairman Ben Bernanke is doing the heaviest lifting, but the Fed can't do it alone. Congressional leaders, so far, have had enough trouble just passing a bailout package much less conjuring up any broader scale of leadership. Do we have to wait for a new president?
Q: The stock market finished a hell-ride week with the Dow down 18.2 percent and the S&P off 10.7 percent since Monday's opening bell. Are we any closer to a bottom?
Well, with drops like that, sure we are. But it's kind of like Florida housing prices. There's still more declines to suffer ahead.
Q: Facing a testy congressional inquiry last week, Richard Fuld, disgraced head of Lehman Brothers, said he would wonder "until they put me in the ground" why the U.S. government did not rescue his Wall Street firm yet chose to save others. That's still a good question. Why?
So early in the bailout game, the Treasury needed a sacrificial lamb to test whether "failing" a major Wall Street firm was possible. The answer is yes, though the issue of fairness — who lives, who dies? — will continue to fester. Even now we still are learning of the intricate ties between Lehman and firms worldwide — even in Florida and the Tampa Bay area — that will create longer-term damage. And the conspiracy theory is, Lehman's demise helps Wall Street competitor Goldman Sachs, whose alumni (Treasury Secretary Paulson included) dominate the bailout's decision makers in the government.
Q: Despite the global financial crisis, Gov. Charlie Crist assured Floridians last week the state's banking industry is sound after emerging from a closed-door meeting with some of the state's top bankers. "If you want to sleep like a baby, go to a bank that is FDIC insured," said Florida Bankers Association president Alex Sanchez. Are our banks really super-safe?
I never sleep like a baby, unless Sanchez means I'm colicky. And FDIC insurance is good for depositors but less meaningful for businesses and people seeking loans — the real issue in this credit crisis. I'm not sure where many Florida bank executives have been hiding this past year. Certainly not stepping up to provide much public leadership in tough times. Maybe that will change. One bright light for savers looking for guaranteed returns? Certificate of deposit rates at many area banks have been rising. But shop soon. The Fed's move to cut interest rates last week, with more cuts to come, may soon shrink CD returns.
Q: We keep hearing about a U.S. government rescue package but, given the global shakeup that's nearly paralyzed Iceland and prompted Russia to close its markets for days, isn't this really an international economic rescue effort now?
Americans myopic and self-absorbed? Say it ain't so! Truth is, the United States will increasingly become part of a global team of central banks and foreign governments seeking a larger solution to the economic meltdown. It only makes sense. We buy lots of basic stuff from China while China buys our government bonds (and mortgage-backed securities). We're joined at the hips to a lot of nations these days. Better get used to it.
Q: We asked two area business school deans — USF Tampa's Robert Forsythe and University of Tampa's Frank Ghannadian — for their best advice on the giant financial rescue. What did they say?
Here's the short version. Forsythe: "Let's get it over with. Then we can study it to death." And Ghannadian: "We Americans are impatient. We want a turnaround overnight, and that's not going to happen."
Ghannadian's right. Let's give the bailout a whole week to succeed before we start squawking.
Robert Trigaux can be reached at [email protected]