• THE BAILOUT OF PERCEPTION

From President Bush’s push of the panic button, to an endless barrage of, “if-the-bailout-doesn’t-go-through-main-street-it-doomed” diatribe eminating from every media outlet available for main street’s consumption, a great perception bubble has been floated. So called main street America is resisting succumbing, but the rest of the world has bought into it. American taxpayers are being punished for having allowed their administration’s and legislature’s lax and sometimes corrupted behavior. The perception now awaits passing of the bailout.

Confidence of the world’s capitalist systems have been shaken, and from London to Tokyo and Hong Kong, the global economy awaits to hear if the American taxpayers will once again step up to the plate. In this case, borrow some more. Then, magically, with the perception of a looming calamity defused by a bailout, lenders will loosen their tight hold on cash, banks will lend to one another, and all will be well again on main street. Since credit availability is the real problem, then the FDIC should be used to strengthen guarantees, increase limits, and become the vehicle for a workout, rather than a bailout. The fact is that banks and lenders are in business to make money through interest from money lent out, and as dust settles, funds will flow, though hopefully not as loosely as they have in the past.

Regardless what form Congress’ bailout takes, America will not go over any precipice. It is hoped, however, that this shock to the system does not fade quickly. Taxpayers must demand a clean-out of Congress, and a clean-up of Congressional funding and modus operandi.

Taxpayers must exigently press each member of Congress to pay attention to the state of the Nation’s debt and future funding commitments. The $700 billion is dwarfed by the over $50 trillion committed, much of it to health care. Congress, along with either McCain or Obama, will have to make very dramatic cuts into the federal budget, in a time when tax increases will be virtually impossible.

Congress is already taking large leaps into socialization of some key elements of the economy, which is an overreaction resulting from its inaction in the past. Congress must be exceedingly careful not to destroy the financial system with over-regulation. It must also enact some muscle into government oversight, and take action against any of its members who took funds from any of the firms, such as Fannie Mae and Freddie Mac, involved in the abuse and abhorrent behavior that precipitated this mess.