Over recent months, Wall Street’s reckless speculations, improprieties, and, yes, even possible criminal acts, have been reported in the news media almost daily ?- Washington’s reaction has been to open the doors to the Fed to support such conduct thereby implicitly endorsing the excesses that have created many of our current economic problems. While the SEC and various regulators have announced countless investigations of Wall Street banks involving things such as questionable valuations of securities, mismarketing of auction rate securities, failure to make adequate disclosures to investors, rampant speculation in the derivatives markets, and an array of other situations, Washington’s actions speak louder than its words. Notwithstanding these “investigations,” Washington seems bent on trying to “sweep the problem under the rug” by opening the doors of the Federal Reserve to enable the Wall Street firms to sell securities of questionable value to the Fed in order to maintain adequate liquidity to continue the same old activities. Apparently, in Washington’s eyes, misconduct and excessive speculations do in fact pay.
Unfortunately, Main Street America is not being treated nearly as well despite the hardships facing ordinary men and women. Millions of homeowners currently owe more on their homes than their homes are worth. Rampant increases in the prices of oil, gas, and other commodities have pinched the pocketbooks of Main Street America. While Washington has given lip service to wanting to address these problems, nothing substantial has been done. Washington certainly has not opened the vault of the Fed to Main Street America. Instead, Washington’s reaction was succinctly stated by the Treasury Secretary Henry Paulson, who stated to MSNBC: “Many of today’s unusually high number of foreclosures are not preventable. There is little public policy makers can, or should, do to compensate for untenable financial decisions.”
In sum, Washington apparently feels comfortable opening the vault of the Fed to Wall Street banks in order to compensate them for “untenable financial decisions.” Unfortunately, Main Street Americans are not treated the same way. How can Washington justify granting Wall Street firms and other financial institutions unfettered access to federal funds by pledging loans and other securities of highly questionable value, when it simply compensates such institutions for “their untenable financial decisions”?
Washington’s actions are sending a message, loud and clear – rampant speculation, unchecked excesses, misconduct, and even violations of law do pay. Is this the message that we want to hear from Washington?
The collateral impact of this conduct on Main Street America is even more serious. Washington’s actions have done little more than foist losses arising from Wall Street’s abuses off on the American taxpayers. Both current Americans and future generations will ultimately end up paying the price for Wall Street’s excesses and rampant speculation. So the beat goes on.
Main Street Americans should be asking “when is it going to end?” What is Washington going to do when the next financial institution encounters overwhelming financial problems? What is Washington going to do as the airline industry struggles to keep afloat? Where does it stop? The government simply cannot be everything to everybody.