Sunday, May 24, 2009

the bank stress tests

As an average American, I have a difficult time understanding the state of our economy and the need for bailouts. Auto manufacturers, AIG, banks, stimulus, so what's a citizen to think? Apparently I am supposed to be grateful that tax-dodging brainy folks are in charge. Instead of feeling reassured, all I have are gut-level reactions that remind me of a slimy lying blind date. I have a pretty good radar for slime. I can't help but think that "it's going to be ok" is going to bite me later. Possibly the biggest bite will be saved for my yet-to-be-conceived grandchildren.

After months of bailouts and federal money, 18 of the 19 banks have now passed the "stress test". But the banks are still losing money. Apparently it is possible that more than $600 billion could be lost due to consumer default in the next two years. Now the governmental leaders are stepping in and requiring a new hoop. Ten of the banks are now required to release stocks for investors to purchase. Those 10 banks have 6 months to raise investors or else the treasury will become a shareholder. More government intervention. More government control. More uneasy feelings.

As the Treasury positions itself to become a major shareholder in a bank here and there or an automaker, I am supposed to be reassured that this is a good move? I don't know if there is a positive correlation between government involvement in business and that business being a successful venture. Most often the government solution is bureaucracy, paperwork, and layers of inefficiency. Then the second tier of the government solution is a need for taxpayer funding. The largest social program at this time is Social Security. There is an enormously complicated bureaucracy, and a large IOU in the vault. When it comes to having a good credit rating, good solvency, and good debt-to-income ratio, it seems that the Treasury is not the best bet.

When is the "stress test" for the American taxpayer? Will someone come door-to-door and assess my ability to pay more, my ability to do with less, and my willingness to ignore my instincts? For now, I will just add another line item to our family budget called more. Right now that might be enough to buy a bag of Fritos, but somehow I think that they'll take it.

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