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Paulson, Still Failing to Understand Economy

Posted by hanson807 on December 4, 2008

Am I glad I never received a degree in ecomonics. Mr. Paulson continues to ponder the deck furniture configuration of the titanic economy. Try as he may, he is having trouble figuring out how to stimulate the economy. How does one make people who feel the economy is bad and their jobs aren’t secure, spend money they have to borrow? Sieta, who works for Barclay’s actually said you can’t force banks to lend to people. According to Luke Mullin’s the banks will want to lend. Who is right?

This crisis can be laid at the feet of the government interferring in bank lending already. Sure, even people on the left say its true even if they disagree. Take Mr. Gordon. He even agrees while saying saying it is not true. He skillfully writes The law imposes on the covered depositories an affirmative duty to lend throughout the areas from which they take deposits, including poor neighborhoods. The law has teeth because regulators’ ratings of banks’ CRA performance become public and inform important decisions, notably merger approvals. Studies by the Federal Reserve and Harvard’s Joint Center for Housing Studies, among others, have shown that CRA increased lending and homeownership in poor communities without undermining banks’ profitability. So, to summarize what Gordon said in a nutshell: The government did a study that said its choice was a good one. But it was its choice for sure. I beleive we can look at the current situation to figure out if the study was correct. That last line about profibility seems suspect at this point.

So we have government interference causing a problem, so the obvious answer is to have more government interference. The experts think the banks are going to cut back on lending. All the lawyers who make laws think they should lend more money. Paulson is going with the lawyers on this one. Of course, they pay his salary.

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One Response to “Paulson, Still Failing to Understand Economy”

  1. Do you do blogroll exchanging? If you want to exchange links let me know.

    Email me back if you’re interested.

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