As I ponder the twin taxpayer shakedowns of the “stimulus” bill and “Son of TARP,” a couple of impertinent questions cross my mind.
First, has anyone else noticed that the two places the president has visited to pimp the stimulus are poster children not only for economic hardship, but for malinvestment?
Today the president visits Lee County, Florida — home to a stunning overbuild of single-family homes. Southwest Florida might well be the epicenter of this bubble, and Lee County might have it worst in that region. Lee County was where people built and bought when they couldn’t afford to build or buy in Collier County next door. Can’t afford Naples? There’s always Fort Myers. Easy financing available.
The unspoken assumption behind the president’s visit — and much of the thinking of his advisers — is that a “floor” must be put under housing prices. That is, the only way to make the “American dream” accessible to more people is with cheaper credit. Perish the thought that cheaper housing would be the better route, that supply and demand should be allowed to do their thing and home prices should fall back to a level of three or four times annual income. Can’t have that. People might actually pay off their mortgages instead of rolling over the debt.
Yesterday the president visited Elkhart, Indiana , a place I know a little about; it was one of my stops along the way during my previous career. The main industry is the manufacture of recreational vehicles.
Ponder the bonus irony; not only does the president want his “stimulus” to spur more people to buy recreational vehicles (presumably with cheaper credit, just like houses), he wants to bolster an industry that’s the epitome of the gas-guzzling culture he criticized during the campaign. But contradictions matter little to panicked politicians in the midst of a bursting bubble.
The other question I have this morning is about “Son of TARP,” which Treasury Secretary Tim Geithner unveils today: Does Congress have any say-so about this monstrosity? Or did the original bailout bill hand so much authority to Treasury that Geithner has a free hand to do whatever he wants?
It’s really breathtaking to read establishment media coverage of this; there’s almost no mention of the role of the legislative branch. It’s as if this whole bankster bailout is strictly within the purview of the executive branch and that’s the proper and normal order of things.
A clue to the answer lies in a Financial Timesanalysis that says, referring to the president’s news conference last night, “Politics forbade Mr Obama from disclosing when, or whether, he will return to Congress to ask for many hundreds of billions more in financial bail-out funds – as he will almost certainly be compelled to do in the very near future.”
The same story also puts a price tag on what Geithner will announce today: $350 billion. That indicates whatever he’ll announce pertains only to how the second half of the original TARP money will be spent. But that flies in the face of the Wall Street Journal,which says, “The expanded effort could see as much as $2 trillion in financing flowing through the system, according to Congressional officials briefed Monday night.”
So I guess Geithner’s announcement will be two-pronged; first, how to spend the other $350 billion of the original TARP, and second, to lay out the broad outlines of TARP II, price tag TBA, pending Congressional approval. Or something like that. Should I really have to read multiple sources to get a handle on something that basic?
I also see in the FT article confirmation of what I said on Friday, that Geithner has one shot at this: “[Obama] hinted that he understood precisely what everyone in Washington is thinking – that if the financial bailout fails this time round, then his presidency could turn into a sinking ship soon after its launch. ‘Let’s get this right,’ Mr Obama said. ‘Let’s create a template in which we’re restoring market confidence.’
That Obama and Geithner risk being seen as a Keystone Kops continuation of George Bush and Hank Paulson is merely implied.
Update: It’s now nearly noon EST. The Dow has dropped 200 points since Geithner’s mug appeared on TV at 11. It’s like Paulson all over again, but worse — because Geithner hasn’t even started revising his own plan.