Latest Bailout Good for Citigroup, Bad for the Country

Regulators produced two sweeping plans to bail out banks in the last couple of months. And both times, stocks bounced up but dropped quickly because investors remained skeptical. The latest plan, which emerged Sunday night, involves the government’s backstopping a portfolio of assets for Citigroup, the financial conglomerate whose stock lost more than half of its value last week. Shares in other banks, like JPMorgan Chase and Bank of America, also lost significant ground. The question, as a new week begins, is whether this plan will produce lasting effects not only for Citigroup but also for the broader stock market.

NYT Article

If at first you don't succeed, why try again? Legislators are looking for that one magic pill that will bring the economy back to life. The problem is, that pill doesn't exists. Even if it did, I am sure it would not be FDA approved. Seriously, how many times will Congress stick its nose into the market, hoping to cure all that ails it, only to find that what they do is, at best, meaningless (and at worst, ultimately detrimental). After announcing the latest bailout for Citigroup, the DOW has jumped up about 300 points this morning. However, as noted above, stocks jumped the last few times, and then went right back down the drain.

Congress needs to learn that there may be nothing it can do to bring the economy back to where it was, at least not right away. The market moves in cycles, just like the weather. Right not, the weather is bad. But rather than try to control the weather, we should just find someplace warm and dry and ride out the storm, planning on what we want to do when the weather is better. Congress should be focusing on ways it can help prepare the nation for better times, like investing in infrastructure and education and looking into possible changes in the tax code.

Congress already passed an "economic stimulus" package as well as a $750 billion bailout bill. Despite both of these bill, the economy has shown no signs of immediate improvement, as Congressional leaders were foolishly hoping it would. The sheer economic ignorance that lawmakers have displayed is terrifying. As a result of their lack of expertise, the U.S. Government is now billion of dollars poorer and no closer to economic recovery that before. It's true that President Bush supported the bailout efforts, but let's face it, President Bush has been a huge disappointment to true conservatives, especially in how high he has allowed the federal deficit to go. Tax cuts are great, but only if they are accompanied by a decrease in spending. Econ 101: If you decrease revenue, you need to decrease outlays. Instead, Bush allowed the continued increase or level spending on domestic affairs, and a sever increase in military spending due to Iraq and Afghanistan.

I can only hope that President-elect Obama, despite his proclivities, will implement a more intelligent fiscal policy. Oddly enough, I am slightly pleased to see the transition team looking to many former members of the Clinton Administration for high ranking positions in the new Administration. Say what you want about Clinton, he knew enough to ride Regan's economic wave for all it was worth, especially before the Dot.com bubble burst. I am hoping that, in light of the economic times, and staggering U.S. debt, President-elect Obama will wisely back away from his ridiculous campaign promises, and focus on fiscal responsibility. This means renewing the 2001-2003 tax cuts, accompanied by a decrease in federal spending. It is also my sincerest hope that Obama can take up efforts abandoned by the Bush Administration to reform entitlement spending.