The Fed and Wall Street are not entirely to blame. Besides, these are immortal entities you can’t kill even if you bomb them with innuendoes and murderous anger! edwin a. sumcad/10/05/08.
What Caused This Problem: Greed And Lack Of Fiscal Discipline
Make no mistake about it. Greed is the weakness of America's free enterprise society. But from this weakness also rises its strength.
It is strange but true. We argue our weakness in this $700 billion bailout — as if America is no longer the greatest country in the world — when we shouldn’t.
Congress just passed this bailout bill into law. It should make everybody happy, and rightly so. Out of this financial failing, we can be great again, because that’s what we are and have always been!
But I notice with inconsolable regret that those against the $700 billion bailout are comparable to that midnight cowboy who fired his gun in anger and hit his foot!
There is no denying that many Americans are furious about this financial rescue package that has been debated in Congress to save the country from a financial meltdown, which those who are angry had themselves created! They bent their anger on the Federal Reserve, the Department of Treasury, Congress, the Bush government among others except themselves. These entities are now throwing the salvage rope in this widening sea of financial crisis for the erring survivors to grab.
These rescue institutions are not – repeat, are not — the culprits to shoot at to avenge our failure! Since the Main Street – not even entirely the Wall Street – caused this crisis, the very incensed person needs this editorial therapy.
What I am declaring now may sound incredible to the uninitiated, but it is actually easy to illustrate why this self-flogging is taking place. It proceeds from the absence of knowledge about what the bailout means. Ignorance is bliss when it is preferable not to know about something unpleasant. This is what this editorial intends to do – to make the American public know what it ought to know about this intriguing bailout.
It is painful for a government [that's us folks] to spend the people’s money this way, but there is nobody to blame but us for lack of fiscal discipline, and financial responsibility. Greed is our personal weakness. Let us admit also that individual deficiency in social accountability is our common failing.
Panic Is The Culprit
To begin with, the most dangerous culprit in this financial failing is panic. This controversial bailout that the emotionally disturbed unknowingly tends to misinterpret is actually an antidote to panic. It must be applied immediately to arrest the multiplier effect of chaos that would kill the entire financial system, and eventually, the national economy.
The simplest comparison in mind is that the resent situation is similar to a bank run. It is not caused by depositors whose money is federally insured in traditional bank accounts, but by investors. Distrust is not only on banks but on insurance firms, mortgage lenders, or investment broker-dealers and the like.
A bank whose federally mandated reserve runs dry in less than 72 hours as most often is the case in a panic crush, needs an immediate bailout, as the severe problem of liquidity becomes intolerably acute.
Our current financial system is in more or less the same situation. When mortgaged-backed securities lost their values due to credit squeeze caused by panic, banks decline to give out affordable loans, and in general, credit is restricted or severely limited. Thus Capitol Hill must act fast to save our badly crippled financial systemin this moment of truth.
But the reasonable in Congress had difficulty in sharing the light of reason to those who are in the dark side of politics. The rescue bill has been defeated in the House of Representatives [and being debated again] because politically correct politicians voted against it.
They believed that if they vote for the approval of this critical piece of legislation, the anger of the mob will politically castrate them out of office. It is self-interest, not the interest of the country that always guides them on controversial issues of this magnitude.
On the other hand, many angry but less informed Americans that politically correct politicians only respect for their votes, thought that the bailout is a reward to "crocodiles" in the murky swamp of Wall Street stock speculators and high-heeled money hedgers. They premised the financial calamity on the fault of market players in Wall Street.
This is not entirely correct. Wall Street is just a part of the cause of the meltdown. The shock wave came primarily from the Main Street. It was set off by greed, i.e., ordinary enterprising people and their lending entities took advantage of the artificial market "boom". On top of this are mortgage banks that did a "killing" when opportunists increased their stockpile of real estate assets because the chance to get rich presented itself.
Thus greed caused this severe national migraine when gluttons for profit competed through subprime lending.
The example of homeowners who were encouraged to mortgage their home for a vacation in Florida in order to pump prime the economy through consumer spending, those who couldn’t afford to buy a condo but nevertheless "assisted" by banks to acquire and own one, and those who were able to own more than one home were among the thick layers of speculative ventures that soared and soured in just a matter of time in a bubble market created by borrowed money.
Subprime borrowers – debtors whose credit ratings do not deserve to be granted loans – failed to pay their regular amortizations. As a result, massive defaults and foreclosures sent a shock wave throughout the troubled financial system!
When the bubble burst, you can imagine how hard financial institutions holding those assets, were hit by a tsunami of bad debts that crushed the values of their holdings almost to nothing. If no bailout is forthcoming, insurance institutions – financial institutions that ensure banks, lending companies and corporate bonds like the American International Group, Inc. [AIG] whose operation is worldwide – will be literally wiped out.
Recall that the first target of government rescue was AIG. An American mega corporation, AIG is "a world leader in insurance and financial services … with operations in more than 130 countries and [with extended] jurisdictions" all over the world. It is the largest of its kind. 
Any American today who is in a financial difficulty can hardly think of any loan, running debt, insurance premiums being paid regularly – from auto insurance to life insurance to retirement planning, etc. — that is not directly or indirectly linked to AIG and other similar financial institutions.
That being the case, and considering this long accepted adage that when the United States sneezes the world catches cold, the global economy will go down with it if we just stand by with arms akimbo doing nothing but finger pointing. It is in this light – not under the darkness of misguided criticism — that the urgency to save AIG and like institutions from going under should be clearly understood.
This is not a financial catastrophe that makes Wall Street entirely blameworthy. President George W. Bush was right – the proposed $700 bailout is not a lifeline rope thrown to the drowning people of Wall Street but to the American people in the Main Street who could barely swim or raise their head above the rising tide of debts in one of history’s worst financial meltdowns.
Strange But True: In This Crisis Obama Is A Talking Bubble
There is no doubt that greed and lack of fiscal discipline on the part of those victims triggered this anomaly. These are the real causes of this financial crisis.
But here is the blinder of this blunder: Politicians suffering a politically-correct syndrome dread to mention in public what really caused this catastrophe.
Only Bush and Republican presidential candidate John McCain spoke boldly about the ugly truth of greed and lack of fiscal discipline of the American people now wallowing in difficulty. They were the only ones who had the courage to look the American people straight in the eye, and in a straight talk reminded them that it was their failing that landed us in this predicament.
These are the kind of politicians we can trust when it comes to making a critical decision which to choose between politics and the nation in peril.
Similar to the war in Iraq based on party line, the Democrats chose popular politics in opposing the needed surge to win the war on terror, while the Republicans made the less popular choice of more troops in Iraq to defeat the enemy that threatens our national security. This one saved
and American lives from terror, the other guarantees the murder of more Americans and the destruction of
under the Democrats' treacherous aim to withdrawour troops from
Iraqin defeat and let terror win
It is sad to note that Democrat candidate for president Barack Obama and the Obama campaign are but talking bubbles in their public appearances when they talk the talk about the present crisis.And this is not without a reason.
Aside from the Main Street, the tectonic fault in Wall Street aggravated this financial earthquake. The firstmortgage tremor struck when Congress started investigating Fannie Mae and Freddie Mac, the country’s largest mortgage institutions, of irregularities, i.e., executives and cohorts were reportedly busy lining their pockets thus bleeding the institutions dry. To buy political regulators off their back, lobby largesse greased the palms of politicians who needed campaign funds.
Record shows Sen. Obama received $126,000.00. He was the second highest recipient next to Sen. Christopher Dodd, Jr. [D-CT] who received $133,900.00. No wonder Obama and his campaign detached themselves from the truth that caused this financial blow, and talked only of Bush as the person to blame.
But the public was aware that Obama was lying as usual. The real infamous politician to blame was not Bush butBarney Frank — that controversial Democrat congressman of the 4th district of Massachusetts, chairman of the House Financial Service Committee – who was the stalwart defender of Fannie Mae. He was openly gay and his lover Herb Moses  was an executive responsible for the massive mortgage foul up. Washington Post reported that “Frank derailed efforts to regulate the institution …” and misled the public by declaring that what the mortgage institution was doing did not pose any financial risk, and with that cover up nose-led the country down the way to hell.
Bereft of conscience, Obama and his camp then without shame asked the American people to vote for Obama as next president of the United States because this Democrat shadow of a candidate claimed he was better than McCain whom he described as no better if not worse than Bush.
What Obama cannot see is that McCain is not Bush. In many instances, McCain the "Maverick" is even the very opposite of Bush! But the problem is, Obama cannot get over with this doggy syndrome that bugs him – his addiction to barking at the wrong tree!
To the Senator this financial disaster was an opportune time for politicking. He was campaigning while rival McCain was in Washington, D.C. working for the passing of a bipartisan financial rescue bill into law.
Before a crowd of supporters, Obama was speechifying that this is not the time for politics, and that everybody must cooperate. But he was in the campaign trail when he said this, attacking Bush and McCain.
The Senator from Chicago was busy politicking! His hostility was hardly a call for cooperation! As usual, he contradicts himself. His action speaks louder than his words, and he is becoming not only more and more less credible, but his public appearances are becoming more boring and obnoxious to the American public.
The Absence Of Warning!
Aside from Obama, the very angry in the crowd are striking the wind with the sword of condemnation. But they are attacking the wrong guys.
Their complaint was that the Federal Reserve and the Department of Treasury should have at least warned the public that this problem was going to occur later if not sooner. The public was not warned, so they whined, feeling betrayed.
They also wondered: Did these entities know that financial trouble was looming ahead? If they knew, were they incompetent to address the incoming problem? Assume that those financial authorities didn’t know. In that case, are they not worse than just being incompetent?
The Treasury and the Fed knew about the problem even years back when shenanigans were mugging and belting Fannie Mae and Freddie Mac, which led to a series of investigations by Congress, and the issuance of regulations to stop the epidemic of financial break-ins and lucrative in-house pinching from becoming a contagion.
These financial entities worked feverishly on it too, and their attention was not only confined to the two largest sources of financing for residential mortgages but also on other lending institutions similarly situated. That was their job. To know what’s wrong in the financial market and do something about it before the cookies crumble so to speak, is their only excuse for being.
But why didn’t the Treasury and the Fed announce to the public that this financial disaster is just around the corner? Maybe a national bulletin of warning like when hurricane Ike was coming, was what the public needed, was it not?
No, it was not. Such announcement was not – repeat, not — what the public needed. On the contrary, it was what ought to be avoided.
Announcing a financial disaster before it comes must be avoided, this the curious may learn from the graduate school of economics … hardly from street mobs, or from the graduates of the University of Hard Knocks. It is from these saggy-baggy swingers where the aggravation – not the solution — of the problem comes from.
Panic IsA Killer: It Strikes Without Warning!
Bucket kickers do not get it. It is not the failing of the market that would cause the ultimate catastrophic ruin, but the killer of the banking system called "panic" that they themselves create.
In the financial market, the reason that would cause panic cannot be advertised or announced especially by the Central Bank or the government. If the government needs to intervene, it could proceed to address the problem promptly in its many insidious but judicious ways.
Had the Fed or Treasury been loose lips in proclaiming the damage greed had done to the credit and lending system even during some four years back when the problem reared its ugly head — – as these bitter mill grinders of discord wanted them to be — they would have created a tumultuous riot nationwide, that kind of "panic" much greater than what we have ever seen before.
Let’s put it this way: Hurricanes can be tracked down, can be announced accordingly, and the population prepares for the impending disaster they may create. But panic in the financial market is an economic hurricane that strikes without warning. Even when there is no fire but a stupid jester cries out "Fire!" inside a crowded theater, a stampede occurs resulting in tragic deaths of those who are crushed. Fire is not the killer … it is panic! This is what’s happening in the financial market!
It would be bizarre for the government or the Fed, to create a hurricane of distrust and throw the population into pandemonium. Our financial infrastructure was not built to survive a monstrous economic anarchy and lawlessness that drench the streets with blood … this kind of economic Armageddon that wipes the slate clean off the table, assuming that this nation had for some reasons gone mad.
This would be the inevitable outcome when the nation's financial authorities themselves are the ones announcing the failure of the system!
Where in the world would one expect the nation’s financial authority – the Central Bank – publicly announcing or declaring to the public that the financial system of the country is about to collapse? The ignorance of those who are pressuring such weird public disclosure is incredibly abysmal! Only the enemy within whose mind went kaput would resort to such madness.
How Market Glitch Is Addressed
What the Fed and the Treasury do once they detect this kind of problem is work right away to correct the market glitch.
For example, the twin entities work in tandem when "riding out" a creeping financial crisis, just as they stalk runaway prices or inflation and "kill" that economic menace outright by using the tools of fiscal and monetary policies primarily aimed at contracting aggregate demand and lowering down prices of goods and services, or inversely, pump prime the economy by lowering interest rates, and perhaps accompanied by the need to cut taxes to spur consumer spending.
Unfortunately, any applied macroeconomic remedial measure has a gradual or "trickle effect". The market or the economy doesn’t change as intended at the snap of one’s fingers. There is no such abracadabra or open sesame kind of magic in economics … radical kibitzers that speak ill of our financial system must re-learn their foolish blame game to know this.
No one should doubt that the troubles symptomatic of this financial failure have been and still being attended to and addressed accordingly by the Fed. But panic struck without warning, and warped hard hit Americans to this present crisis.
The response to this heavier aggravation is bailout. With this bailout money, the Fed is now buying short term debts.Financial transfusion of capital would enable the severely injured financial system to bounce back. Countries like Japan and Canada and still others are "investing" in this bailout. In the rebound, the people’s problem will be over, and taxpayers would share the bounty.
There will be no 1929 kind of economic collapse that many Americans fear is going to happen. Only the enemy within would predict such collapse, to create more panic.
Warring legislators should stop grandstanding and pass this statutory bailout in Congress. America was already hit by its own procrastination and folly, and Americans are in agony.
It is in the interest of the suffering American public that opponents shouldn't fire their guns of anger and animosity like that berserk cowboy who pulled the trigger and hit his foot, only to traumatize more the already hurting nation with more anguish, severe financial heartache and excruciating economic pain! #
© Copyright Edwin A. Sumcad. NWS access October 06, 2008.
The writer is an award-winning journalist. Go to NWS homepage, click on the columnist button to know more about the author or you may e-mail your comment at