The Stimulus is a Distraction

If you’re worked up about whether or not the government is going to spend $800 billion (not counting interest) or $900 billion (not counting interest) in Obama’s stimulus plan, you’re been successfully misdirected: News
Feb. 9 Bloomberg — The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages.

The Federal Reserve, Treasury Department and Federal Deposit Insurance Corporation have lent or spent almost $3 trillion over the past two years and pledged to provide up to $5.7 trillion more if needed. The total already tapped has decreased about 1 percent since November, mostly because foreign central banks are using fewer dollars in currency-exchange agreements called swaps. The Senate is to vote early this week on a stimulus package totaling at least $780 billion that President Barack Obama says is needed to avert a deeper recession. That measure would need to be reconciled with an $819 billion plan the House approved last month.

The stimulus if Obama’s Iraq War – big, expensive, controversial, not as good as he hopes, not as bad as the opposition claims. It might well do some good, whether or not its primary objectives are met

The Obama bailout, or TARP III (which will be unveiled Tuesday), on the other hand, is incredibly dangerous. It’s going to be executed through the Federal Reserve, instead of the Congress, because there’s no way the Congress would agree on $10 trillion in guarantees to Citi, BOA, etc., but which Obama thinks is a good idea.

Britain did the same thing recently, and that’s where talk of the bankruptcy of Britain (not likely, but no longer unthinkable) came from, too. Letting Citi and BOA go bankrupt would be a catastrophe, everyone agrees on that. My difference with Obama is whether or not it’s good for the country to promise to pay back those loans, if Citi and BOA can’t.