In testifying before irate members of the House Financial Services Committee today, Fed Chairman Ben Bernanke and Treasury Secretary Harry Paulson (who have to be going steady at this point, they've spent so much time escorting each other in public) agreed that, though things haven't quite worked out the way they thought it would, the injection of money directly into the banking system is working. Paulson went so far as to say we've "turned a corner" in financial stabilization.
I'm not sure we can assess exactly what Paulson means by "turning a corner," since Paulson admits that he has now entirely abandoned the idea of using any of the bailout money to help shore up foreclosure debt (a key promise in getting Congress to vote "yes" on the bailout in the first place), and opposes the use of the money to assist the struggling Big Three automakers. Watching Paulson's statement as he gave it, I'm not sure Paulson was even buying it himself. Members of the committee referred to Paulson's shift away from helping Main Street as "classic bait and switch." Still, for all Paulson's optimism, things don't seem to be getting better for the average American. Loans and new mortgages are still tough to come by, and the job loss situation is still a bloody, gorey mess.
I do know that both Bernanke and Paulson seem genuinely loathe to do things with the bailout money that might directly assist the regular folk. Regardless of arguments made at the time this money was voted into existence in October, the new emphasis by Paulson seems to be to pump as much money into banks which still refuse to loosen their death grip on credit. Instead, banks have been passing these little early Christmas presents on to executives, in the form of bonuses, and to stockholders, in the form of dividends.
What happens now is anyone's guess. Bush has promised to leave half of the orignial $700 billion to Obama's incoming Administration, at which time the new President and new Congress can decide what to do regarding the Big Three. Can the American auto industry survive until then? If not, what will happen to all the retirees and employees who will lose their health and retirement benefits, should the companies go under? And how will the potential loss of 3,000,000 jobs impact the economy?
In spite of the firm stance of the Fed Chairman and the Treasury Secretary against any assistance, they seem no better able to answer those questions than anyone else. Sadly, it seems to matter less to them than making sure bank stockholders get their dividends and AIG executives get spa retreats with bailout money to shore up their sagging budgets. (More and more, I'm beginning to see the wisdom in Keith Olbermann's suggestion that we're calling it "the Bailout" now, but someday we'll be referring to it as "the reason Daddy went to jail.")
Not sure exactly what is going to happen here. It is becoming increasingly clear that this money wa not meant to help real people. It is a bailout for Wall Street, which is exactly what Paulson promised it wouldn't be. I can't wait to find out who Obama's Treasury Secretary will be. And I'm hoping Bernanke won't be far behind. It's clear where their hearts lie, and it isn't with us.