United Government: Yesterday we rued the fear expressed by Republicans that the Democrats' control of Congress and the White House would jam pet projects down our throats and further exacerbate the nation's economic meltdown. At the current rate of spending by the government and programs proposed by the two presidential candidates, the budget could reach $1 trillion deficit -- spending over income -- in fiscal 2009. The latest move this past week by Treasury plunked $250 million in banks in return for shares making the government -- i.e., the taxpayers -- new owners and the most powerful player in the financial banking system and the only one at risk. If conditions worsen, Treasury may be forced to throw more money into banks, states, businesses and consumers. Call it creeping socialism on a time clock until the economy shows signs of recovery. The problem is history. It shows us government intervention in the banking system can carry its own dangers with money channeled to political favorites rather than an economy's innovators. "The logic of intervention is that the more ownership a government has," said Robert E. Litan, an economist at the Brookings Institute," the greater the regulation and management control." Most economists agree government intervention in the current crises is necessary. "My major concern has been not getting the government sufficiently involved," said Robert E. Hall, an economist of the conservative Hoover Institute at Stanford University. "We're on the right track now." In theory, taxpayers money committed for everything from the bailouts of Freddie Mac and Fannie Mae and those of the Wall Street firm Bear Stearns and insurance giant AIG to the $700 billion financial rescue package approved by Congress to providing guarantees to selected financial markets could amount to an unheard of and mind-boggling $5.1 trillion. It represents more than a third of the nation's economy. The government's moves so far are twofold. 1) The lending and loan guarantees are meant to get normal lending for businesses and consumers flowing again. 2) Government investments in the banking system is intended to steady the system by adding capital. Bank asset values, shrinking rapidly because of the housing market collapse primarily, when stabilized will in theory increase lending activity. Eventually, Congress will impose new regulatory reforms on the banking system to prevent future meltdowns from reoccurring. Meanwhile, Treasury now has the power of a quiet partner in banking activity and bankers will be forced to consult on such issues as sale of soured mortgages. Says Litan of the Brookings Institute, "I think the government will be a risk manager extraordinaire. They're not going to tell banks where to lend. But in high-risk kinds of things, they have the role of saying no, no, not there." Memo to Congress: Leave your politics at the door in your attempts to cure the nation's economic miseries. Fat chance.
Must See: Alaska Gov. Sarah Palin appears tonight on Saturday Night Live in a guest appearance as the Republican vice presidential nominee. Here's a convoluted quote from Palin before the show sounding more like her SNL impersonator Tina Fey: "The Opportunity to show American television watchers anyway that you get to have a sense of humor through all of this or even this just this really would be wear'n tear'n on you so an opportunity to show that sense of humor and all that side of all this I look forward to it." You betcha, Sarah. Wink. Wink. Meanwhile, in a more serious venue, retired Gen. Colin Powell who was Secretary of State in the first George W. Bush administration, appears on Meet The Press. Democrats are gushy in speculating Powell will announce his endorsement of Barack Obama. Powell quit the Bush administration feeling he was manipulated. Believed to be a registered Republican, Powell's support of a fellow black leader would be a major coup. The reality is, political endorsements rarely swing voters to one candidate or another.