We're in a 5-alarm financial mess

Matt Towery's picture

This spring, I reminded readers about a 2006 column of mine. That original column warned that America was headed off a cliff with its commitment to a bloated housing market, and that the mortgage industry would come tumbling after.

In March, I amplified on these themes with the suggestion that the real-estate slowdown had started. I offered that the impact on the financial world might stretch far beyond U.S. borders.

Piddling underneath the dark clouds of this gathering storm has been Congress, with its endless train of investigations into everything from the U.S. attorney general to “the sport of wrestling.”

President Bush, meanwhile, is so obsessed with Iraq that he might as well move there.

Those outside the insulated bubble of Washington, D.C. — remember us? — nevertheless recognize the real issue for the 2008 elections.

It goes something like this: Am I about to lose everything I gained from those days when Alan Greenspan reversed the Fed’s policy of instituting multiple hikes in interest rates?

You remember: The interest-rate increases Greenspan implemented to “cool off” the economy, the increases that triggered a recession.

We recovered from that Greenspan blunder only after the Great One reversed engines and started cutting interest rates as fast as he had raised them.

The trouble is that this monetary finagling created a gold-rush mindset among Americans. The nation was informed that the only lasting wealth was land ownership. Land, that is, that many purchased with the bank’s money, upon which borrowers then borrowed again to use as a giant credit card to pay for the good life.

Now we’re seeing that the underpinnings of the American economy aren’t as stout as thought. Greenspan’s wild ride has left his Fed successors and government leaders with a big fat mess.

Mark it: In the coming months there’s a strong likelihood that a full-blown economic panic will grip this country.

How can the economy be strong when we have lost manufacturing to other emerging nations, when we’re taxing our citizens to pay for the well-being of Americans and everybody else in the world, when we have citizens with negligible personal savings, and when we have an aging population that thinks early, lavish retirement should be an entitlement?

Trust me. We’re in a five-alarm financial mess. Anybody who thinks the situation is limited to the so-called “sub-prime lending” world is crazy. There are plenty of standard loans out there with borrowers worried sick about making payments — on their properties, yes, but often on home-equity loans.

And neither political party has the slightest concept of what to do. The Republicans have committed to endless war with endless costs, all the while giving huge tax breaks to oil companies.

From the Democrats come repeated calls to repeal tax cuts “for the wealthy,” which would only punish those who make just enough money to buy goods or provide jobs to others.

Unless we create a special “you’re-too-darn-rich” tax that forces those like Bill Gates, Warren Buffet, George Soros and Oprah Winfrey to pay taxes at an 80 percent rate, any tax hike on the “rich” will only accelerate economic decline.

Newt Gingrich blasted President Bush this week, saying that Bush and Congress should return from vacation and pass a bill that expatriates illegal aliens who break the law.

That’s fine, but not enough. Gingrich is aiming to hit a hot-button issue the public cares about. But he and every other politician who’s a slave to Washington consultants and pollsters don’t realize that while the public may be angry about immigration, they may be becoming terrified over the economy.

Deal with what really matters, guys. One thousand people this week alone lost their jobs when a non-sub-prime lender went bankrupt.

Consumer spending and confidence are about to crash. The stock market is now artificially supported by infusions of federal cash printed so rapidly that the ink hasn’t dried.

Want an issue to bring Congress and the president back from vacation? You just found it.

[Matt Towery served as the chairman of former Speaker Newt Gingrich’s political organization from 1992 until Gingrich left Congress. He is a former Georgia state representative, the author of several books and currently heads the polling and political information firm InsiderAdvantage.] COPYRIGHT 2007 CREATORS SYNDICATE, INC.

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Submitted by dollaradayandfound on Sun, 08/19/2007 - 2:07pm.

See I told you so! He said.
Gingrich is leaping on the flying wagon at a gallop looking for one key word that will propel him past a bunch of republican candidates who do not have a chance unless the democrats nominate Obama or Hillary, and they might do that with our stupid system of beauty contests. By the way, Gingrich might get 25% of the vote if selected!
It is amazing how we continually let banks, of all descriptions now, push our credit limits to the point where unemployed people can buy a house, or get a loan on the one they have, with interest only payments.
There are so many "banks" gathering up home loan applications and selling them to money changers, hedge funds, and stuff never heard of before-----including Europe and Asian investors, that we may have more trouble getting out of this situation than we did in 1929!
Sub-prime loans is only the beginning trouble. Regular loans have now, and will continue, to cause monthly payments to increase to the point where even people who make good wages can't make the payments and also can not sell the house!
Administration poor management again--went along with an economic Guru who ran the interest rates up and down so much in order to keep investors happy, that he has ruined us, along with our government's cooperation.
I tell you, if we ever elect such people to national office again as we have had for the Reagan and Bush years, we deserve whatever we get! NOTHING is working correctly. The rats are leaving the White House as quickly as they can right now, so as to get their book on the market and maybe a lobbying job, but we may install a similar bunch in January 2008.

Submitted by skyspy on Mon, 08/20/2007 - 6:48am.

I don't think we can blame this mess on just one person, or president.

It is the American mindset.

First of all Americans as a whole are greedy, we over-eat, we are deep in credit card debt. We have a hard time delaying gratification. We want what we want, and we want it in large, large portions.

Secondly we think we can save everybody. We need to stop trying to save the third world, or iraq, or all of the illegal immigrants. We can't save everyone. We are being taxed to death to pay for people who won't work. We need to snap out of this hero mindset.

It isn't as simple as changing the guard in the White House. We need to change the way we think and do buisness in the U.S. We need to stop taxpayer bailouts of bankrupt airlines, hospitals, mortgage companies. We can't take care of everyone, and we should stop trying. The taxpayers should not have to pay for any companies faulty buisness plan.

Submitted by dollaradayandfound on Mon, 08/20/2007 - 7:58am.

I think your proposal is called, "laissez faire."

Only the fittest survive!

hutch866's picture
Submitted by hutch866 on Sun, 08/19/2007 - 2:47pm.

If you don't like Newt, don't vote for him, it's that easy.

I yam what I yam...Popeye

Cyclist's picture
Submitted by Cyclist on Sun, 08/19/2007 - 2:57pm.

Sometimes I wonder if $ is a closet..........Republican. Well, I have been known to be wrong.
Twenty six miles across the sea......

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