Brother, Can You Spare a Billion?

In the last few weeks, the United States government has become the owner of last resort to financial institutions that went way overboard in providing bad loans and investments to folks who couldn't afford to pay it back, putting the country's economy at risk. Fannie Mae, Freddie Mac, Bear Stearns, and now American International Group (AIG) have been the beneficiaries.

No such luck for Lehman Brothers, which filed for bankruptcy. Or Merrill Lynch, which quickly sold itself to Bank of America.

(It makes you wonder about the financial health of the local banks--U.S. Bank, Wells Fargo, TCF Bank and others--although we have heard reports that Wells is a candidate to buy out Washington Mutual, another institution on the brink.)

As a result of all this, the markets have rebounded sharply in the last couple of days, but the example has been set. If you're a big corporation and you can't pay your bills, Uncle Sam has the deep pockets to get you out of trouble--even though he's got a deficit problem of his own. To paraphrase Paul Simon, the same courtesy isn't available to the mortal man (or woman).

How is it possible for the American economy to get so screwed up? There are too many people living in homes they can't afford, in hock to credit card providers, and are unable to save because of the rising cost of just about everything. Jobs are either being eliminated or sent overseas. And there's no guarantee Social Security will be there for the millions of Baby Boomers and beyond when they retire, because no politician wants to touch it if they want to get re-elected. Neither presidential candidate has much of a plan at this point to remedy the situation.

A plan is in the works to fund an agency that would deal with with bad bank loans, similar to the one that arose out of the savings and loan scandal of the 1980s. It would cost more, certainly, but the alternative--we're told--might be worse.

According to a USA Today/Gallup Poll, 23 percent of respondents believe the country is now in a depression. We may not be there yet, if you believe the government's unwillingness to call the current crisis a recession. But the days of selling apples on the street, Dust Bowls and people jumping out of buildings might be providing a warning for what's to come. And, a few weeks from now, voters will be deciding whether we're going to get an FDR or a Hoover to lead the country out of tough economic times.