Thomas Sowell, a conservative columnist from the Hoover Institute, says the banks don't want the money the government is trying to give them; but that's not even remotely true. The Banks definitely WANT the money, why wouldn't they? What Banks don't want is regulations on how/what they can spend/use the money. He also says banks are loaning less today than they were before they received any money.

What does he know that we don't?


The short answer is: nothing.

First, let's look at the loan situation. The credit crunch- the limited availability and issuance of loans- is still ongoing, and worsening, despite every measure tried. Why? There are, as with so many economic problems, lots of reasons. One, companies are going bankrupt, so there are less companies trying to borrow money. Two, companies are going bankrupt, and reporting vastly smaller profits than at any time in recent memory (if they're not suffering losses); which means loaning money to businesses is riskier. The job of a banker is to minimize risk. With the lackluster profit reports we're seeing, expectations and markets down, and the recession due to last through spring (an optimistic opinion, in my view), it's risky to loan businesses money, at the moment. However, those businesses- like WalMart- who are doing well, aren't reporting a problem with getting loans.

Additionally, people with good credit aren't having a big problem with getting loans, either. Anecdotally, my sister just got a loan on a good condition used car at a very good interest rate. Her credit wasn't perfect- she had a repossession some years ago- but she had no outstanding debts, and a good job. But, many people are getting laid-off. Look at "Bloody Monday". Many many people are already out of a job, working reduced hours, etc etc. We've all seen the news and heard the stories. The facts on the ground aren't good for workers. Which means it's risky to give a loan. If the person has slightly bad credit, they're a huge risk- when viewed objectively as a potential soon-to-be-beneficiary of, recently extended, unemployment benefits.

The credit crunch is on because the recession is bad, and people are losing their jobs. That is partly due to the credit crunch. It's a feedback loop. Fortunately, the longer the recession goes on, and the credit crunch weeds out the insolvent, the less impact it will have. The problem is, it's not over, and the point of equilibrium will only be realized in hindsight. Which means loan officers won't be aware of it when it does, if it hasn't already, hit.

Secondly, business and banks are begging for tax cuts. Why? Because that's free- read: non-regulated- money. Cut their taxes and they get access to money they would have owed. It doesn't come with all the oversight, preferred stock option exchange, or any of the other, unfortunately meager, regulatory provisions of government "bailout" money. Of course they want that. If you asked a business person if they would rather have a bunch of money free and clear, or the same amount with a bunch of political bullshit, regulation, and rules attached... Which would you pick?

The money is the same, either way. Potentially, there's more money in the bailout, immediately. Tax cuts might be easier to make permanent, though, and that may have something to do with it. The point is that Thomas Sowell and the Republicans are spouting bullshit and demanding the Democrats stop spouting bullshit. There's no way of telling if the Democratic stimulus package will work, yet.

Finally, there is some indication that the Republican stimulus plans, i.e. more tax cuts, don't work. Huh? Look at the last few years. Bush loved his tax cuts, and look where we're at. I'm not saying that tax cuts put us in this situation, but I am saying they didn't help. The last round of tax cuts barely stimulated the economy during the third quarter. Most people kept the money and saved it, a strategy that proved to be very wise indeed.

Infrastructure is a good investment. It's possible that there are better investments; but I haven't seen any. I've seen some data that claims there are equally good investments; but there's a problem not being addressed with those few I've seen. Ignoring recent data on tax cuts, they do seem potentially capable of helping. But they don't help nearly as many people.

According to Maude Barlow, the top 200 corporations control the same amount of wealth as the bottom 2/3s of people. That's 4,290,000,000 people. Infrastructure, like internet access, roads, electrical grids, etc etc, has been shown to disproportionately help the poor, while tax cuts help the rich. How? If you pay 10% of 20,000 (the federal poverty level as of a couple years ago) you're not gonna get the same benefit of a 2% tax break as someone who pays 15% of a billion. But if it only takes you 15 minutes to get to work, instead of 30 minutes, it means less gas and gas money isn't as big a problem if you make $200,000/year.

[An Aside: I use the driving example because of I-565, that "Lake of Asphalt" some of you may have heard about on NPR about a week ago. My mother's commute was cut in half when it was completed. There are those who would say 15 minutes of time for Bill Gates is worth more than 15 minutes of {anyone else}'s time. That's a good argument; except that it ignores the real world situation of gas. In reality, $20 a week in extra gas doesn't mean much to Bill Gates; but it can mean a very very modest retirement savings for someone who was otherwise living paycheck to paycheck. Again, in reality, it probably wouldn't get used solely for savings; but the point remains.]

Keynesian Economics is the real point that is being argued. It's got it's problems. However, so does every other system. The fact of the matter is that Keynesian economic strategies, or maybe just the ones I've heard, seem to benefit the poor more than the rich. In fact, they don't seem like they really help the rich. That was- in a way- Keynes's point, from what I understand. Should the government be in the business of "redistributing the wealth"? No, but if money needs to be spent- tax cuts are expenditures, just like infrastructure- I think it should be spent to help the poor more than the rich. This is a biased viewpoint; but it's not one I'm likely to ever change, regardless of my personal financial situation.

There's a balance that can be reached between helping the poorest and not seriously injuring the richest. It's just hard to reach that point when people are willing to lie, or "misstate" the "facts", to advance their viewpoint. Legislating morality is a dangerous game, and one I'm very opposed to; which is why I don't think we should legislate against greed or self-interest. What I do think, is that we should have a democracy that supports the majority, and the vast majority of people are poor.