Wednesday, April 1, 2009

U.S. Financial Markets - The Stimulus Package

Although you didn't come here to read about the economy, since I’m not writing about cancer for now, I thought I’d chime in on a subject that has impacted many people… the state of the U.S. financial markets. Here’s my take. The stimulus package's goals were to 1) prevent the collapse of our financial system, 2) open up the credit markets (e.g., allow prudent borrowing), and 3) allow the free market (i.e., capitalism) to prevail without the ongoing need for government aid.

As a bit of background, I have worked in Washington. First as a summer intern for the Federal Energy Administration (now DOE) between my first and second year at graduate school where I earned a Masters degree in Public Administration from the Heinz School at Carnegie Mellon University and later as a consultant working at the Pentagon for the Strategic Defense Initiative Organization (SDIO - the Star Wars program). What I learned during my years in Washington is that it is very hard to get anything accomplished. The politics, the turf battles, the bidding process, congress, employee morale, you name it… It’s just not that easy.

Now, let’s turn our attention back to the stimulus package. I feel they have succeeded in goal number 1. The stimulus package averted the complete melt down and destruction of our financial system. This was to the initial credit of President Bush who recognized in time the true crisis nature of the situation followed by focused aggressive action on the part of President Obama. I’ve never seen Washington work so hard and so fast in all my years on earth. On goal number 2, the restoration of our financial markets, there is light at the end of this tunnel. And no, it’s not an oncoming train. I know people who are taking advantage of the first time home buyer credit of $8,000 to buy their first home, I know people who are refinancing their mortgages and in doing so are putting significant money into their pockets monthly. This restoration will not happen overnight, but there are positive signs that they are beginning to work. It took us years to get into this mess and it could take years to get us out. On goal number 3, allowing the free markets to prevail, this is the most controversial right now. There are many who would argue that the U.S. went too far in the “forced” resignation of Rick Wagoner (CEO of GM) this week. These are drastic times and drastic measures are needed. Mr. Wagoner seemed like a good guy, he seemed to be trying, but in the end, our government (which is us) decided he wasn’t being successful enough. They didn’t actually force him to resign. They said they would not lend his company any more money if he stayed in place. I don’t want the U.S. car companies to go out of business. I think our government is looking out for our interests. The answer to whether or not we will achieve goal number 3 will not been known for a year or two. I encourage people to have at least a modicum of patience in this area.

Let’s turn to the subject of our deficit. It’s terrible, the worst in history, our kids will surely suffer, and rampant inflation is a given. I’ve heard all of these remarks. They are all possible, but I am willing to support the current deficit when the alternative was a complete collapse of our financial system (see goal 1 above). A collapse of our financial system would have led us into a depression. We have some hard times ahead, future plans about our own personal spending, retirement, and even a child’s education may be altered. But, I say, at least for now, we live to fight another day.

Take care, be patient, and good health to you all.


Anonymous said...

Interesting blog. I agree with your points. Desperate times call for some desperate actions. I wish the President would have veto'ed the budget bill with all the pork in it, but he had to maintain support from the Democrats in Congress. Hopefully, he will have more toughness with future budgets and go through the bills with fine tooth combs like he promised in the campaign. I am concerned that he is not taking some Wall Streeters to task as much as the car makers. I do not necessarily see the need for such large bonuses to reward some of the people (not all) who got the banks and country into this mess.

Anonymous said...

You have done a wonderful job giving us a perspective walking with the cancer diagnosis. We can attest to a lot of it having just been diagnosed with cancer at the base of the tongue with metasis to the lymph node. I am curius who your chemo/ radiation doctors were or at least who you would recommend. We have Dr William and Dr Schwartz respectively and are considering radiation with zactima.