David Brooks on Worst-case Scenario

Practices, similar to those that led to the "societal credit bubble" of 10 trillion dollars, if committed by a person who is not a banker nor other distinguished member of so called financial community, would normally end in jail. Apart from legal immunity, the financial community convinced the Administration and the Congress that without bailout by the taxpayers -- poor and middle income Americans -- apocalypse is immanent. Furthermore, failed banks continued their role as the judge and jury of business in the country. Mr. John Smith, a credit officer of bank XYZ Inc., who in the past gave a mortgage loan of $500,000 to John Doe, who makes with his spouse $50,000 a year, now is qualified to decide what credit, if any, a high tech company, developing anti-cancer drugs, will get. To make the state of affairs even worse, President Obama, appointed "moderate" economic team, i.e., a team of people from the same failed financial community, to the kudos of Wall Street Journal. No wonder we are in crisis - a word which means in Greek a turning point of a disease. Under these circumstances the worst case scenario is a certainty.

The role of the banks and other financial institutions, the function of the Fed, of small business, the actual employment providers and the Obama economic team, need to be re-examined promptly; bold steps must be taken. Breaking the walls of conventional wisdom need not be necessarily according to Keynes, who if alive, may have rejected them; perhaps the solutions of the Austrian School are more appropriate. Americans expect change; they are not enthused by a President who in economy follows the steps of his predecessor.