Critical financial cleanup missing [Porkulus]

Washington Times ^ | Feb 15, 2009 | Patrice Hill

[Jim Robinson]

Wall Street markets have been among the biggest cheerleaders for President Obama's economic-stimulus bill, but disappointment is setting in that the White House, while vigorously pushing for a "sugar spoonful" of stimulus, is not at the same time administering the much-needed "medicine" of quickly cleaning up the financial system.

Efforts on both of those fronts are needed to spark an economic recovery and, of the two, economists consider the banking cleanup to be the more important for the economy in the long run.

But while enactment of a massive $787 billion stimulus plan is nearing completion, thanks to Mr. Obama's strenuous efforts to promote it, the Treasury has presented only the outlines of a critical bank cleanup plan that is needed to unclog the financial system of souring loan assets and get credit flowing to consumers and businesses again. Disappointment with the administration's unfinished plan contributed to a sell-off in the stock market last week that at one point drove the Dow Jones Industrial Average close to a five-year low of about 7,500.

"The passage of the stimulus bill is insufficient to right the economy," which keeps getting worse and worse each day, said John Spinello, senior vice president at Jefferies & Co.

"The biggest risk is that the massive fiscal-stimulus program ... will be stillborn as a result of not dealing upfront with these critical capital-adequacy issues in the financial markets," said Brian Bethune, chief U.S. financial economist at IHS Global Insight. "Unless that void is filled fairly quickly," he said, "we will continue to see very tight lending conditions, and the unlocking of the credit markets that is essential for securing a recovery will simply not happen."

Doubts also are being raised about major elements of the stimulus program that would do little to boost the economy...

[Jim Robinson]

"Rather, they appear designed mainly to cater to Democratic special-interest groups, such as environmentalists and teachers."

[rockinqsranch]

Adding to the disappointment on Wall Street is the growing view that the stimulus is too late to have prevented the worst effects of the deep economic downturn - including the loss of more than 2 million jobs since September - while its slow spending provisions will take effect a full year from now - when the economy is expected to be in recovery.

[rockinqsranch]

oops! forgot the quotation marks...siiiigh

[Danae]

Yep, if they want to clean this up for real they have to throw out the CRA of 1977 and the Reform act of 1992. THEN come up with a systems of checks and balances that PREVENTS Government run secondary Mortgage Markets, and STOP forcing Banks to make big loans to borrowers who can not realistically afford them. If a Mortgage is going to eat up more than 30% of someones income, then its too high.

Time to get back to bedrock basics.

Not that I am gonna hold my breath, Government has only shown the ability to make it WORSE. Particularly under OholyO.