Day of Reckoning

Day of Reckoning
By Patrick J. Buchanan

How did the United States of America, the richest nation on earth,
whose economy represents 30 percent of the Global Economy, arrive
at the precipice of a financial panic and collapse?

The answer lies in the abject failure of both America's financial
elite and the political elite of both parties -- the same elites
now working together to determine how much of our wealth will be
needed to bail the nation out of the crisis of their own creation.

Big Government is riding to the rescue -- saddlebags full of our
tax dollars -- to save us from the consequences of the stupidity
and folly of Big Government. New York and Washington, the twin
cities responsible for the crisis, are now being hailed by the
media as the 7th Cavalry, coming to rescue a beleaguered nation.

Had there not been a steady and constant infusion of easy money and
credit into the U.S. economy by the Fed, for years on end, a
housing bubble of the magnitude of the one that has just exploded
could never have been created.

Had the politicians of both parties not coerced and pressured
banks, S&Ls, Fannie Mae and Freddie Mac to make all those sub-prime
mortgages, then to tie this rotten paper to good paper, convert it
into securities and sell to banks all over the world, there would
have been no global financial crisis.

Had they seen this coming and acted sooner, the Federal Reserve and
U.S. Treasury would not today, like Henny Penny, be crying, "The
sky is falling!" and the end times are at hand, unless we give them
5 percent of our gross domestic product to buy up suspect
securities backed by sub-prime mortgages.

Consider what the "Paulson Plan" of Treasury Secretary Hank
Paulson, against which Sen. Richard Shelby and the House
Republicans rebelled, entails.

Since Americans save nothing and have to borrow from abroad to
finance our trade and budget deficits, wars and foreign aid, what
the secretary proposes is this: that Congress authorize the
Treasury to spend $700 billion to buy up the toxic paper on the
books not only of U.S. banks, but of foreign banks operating in the
United States. According to The Washington Times, the Treasury
would also be authorized to buy up securities backed by rotten auto
loans, student loans and credit card debts.

Thus America would be borrowing from China, Japan and the Middle
East to tidy up the balance sheets of the banks of China, Japan and
the Middle East. And all the rotten paper will be offloaded onto
U.S. taxpayers, who hopefully will be able to recoup some of their
losses, because some of the paper will be good.

Why should we do this? Because otherwise there will be a financial
panic, followed by a market collapse, wiping out pensions, 401Ks,
portfolios and defined benefit plans of Middle America, forcing
millions into bankruptcy and millions more to put off retirement
and continue working until they drop.

In a democracy, it is said, you get the kind of government you
deserve. But what did the American people do to deserve this? What
did they do to deserve the quality of financial, corporate and
political leadership that marched them into this mess -- and that
today postures as their rescuers?

Consider what this mess has already cost taxpayers: $29 billion to
buy the rotten paper of Bear Stearns so J.P. Morgan would buy the
investment bank; $85 billion for 80 percent of AIG to nationalize
it; $150 billion in a stimulus package to flood the nation with
cash; perhaps $300 billion to bail out Fannie Mae and Freddie Mac;
and now $700 billion to begin taking the toxic paper off the hands
of America's big banks.

And even if this is passed, say Paulson and Fed Chairman Ben
Bernanke, there is no guarantee this will resolve the crisis. If
the $700 billion is not provided and the toxic paper is not pulled
off the books of the world's banks by U.S. taxpayers, however, we
face an almost certain collapse, surging bankruptcies, rising
unemployment, a shrinkage of GDP and a recession, if not worse.

Yet, the fellows who tell us we face a financial mushroom cloud
over every American city if we do not act at once to provide the
$700 billion did not see this coming and can make no guarantee that
this will succeed and end the crisis.

Nevertheless, it must be done, and done now, as collapse is imminent.

Looking at all the money being ladled out by the U.S. government to
prevent a collapse, and the diminished revenue coming in, it is
hard to see how America avoids future deficits that reach $1
trillion a year. These will imperil both the dollar itself and the
ability of the United States, which saves nothing, to borrow from
the rest of the world.
The downsizing of America is at hand.

Yes, indeed, we have arrived at the Day of Reckoning for Uncle Sam.

SOURCE:
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