You put this much leverage together with this much global integration with this much complexity and start the crisis in America and you have a very explosive situation.
If you are going to fight a global financial panic like this, you have to go at it with overwhelming force ”” an overwhelming stimulus that gets people shopping again and an overwhelming recapitalization of the banking system that gets it lending again. I just hope the U.S. Treasury has enough money to do it. When you look at the way A.I.G. and Fannie Mae and Freddie Mac are eating money, you start to wonder.
And that brings me back to Obama. We need a leader who can look the country in the eye and say clearly: “We have not seen this before. There are only two choices now, folks: doing everything we can to shore up banks and homeowners or risk a systemic meltdown.”
Yes, that may mean rescuing some bankers who don’t deserve rescuing, while also helping prudent bankers who were doing the right things. And, yes, that may mean rescuing reckless home buyers who never should have taken out mortgages and now can’t pay them back, while not aiding people who saved prudently and are still meeting their mortgage payments.
Yeah, Tom, we’ve seen how well that $200 billion for Fannie and Freddie and that $700 billion for the banking industry is working out.
“Toxic mortgages” , Friedman? Well, well …. interesting that he did not want to comment on how that happened. Who pushed giving mortgages to people who could not afford them? Who was at Freddie Mac and Fannie Mae when all of this was happening? Oops, one of them was Obama’s new chief of staff. Politics of change? I am not betting on it. But I hope for a miracle.