Stimulus and Recession

So this article details the new plan to have banks try to sell their troubled assets. This is something that should have happened back in the fall. These assets are the source of the problem and usually when you want to fix something, you go to the source. When Japan faced a similar crisis in the 1990's and then had a stagnated and deflated economy for a decade, they did not attempt to take the assets off of the company's books and it was later determined to be one of the causes for the prolonging of the problem.

If the assets are not taken off of the books (I would say that most, if not all, of the mortgages should be refinanced. I know it is a significant and broad step but then again so is $900 Billion) then it will just prolong the recession and perpetuate the downward cycle as more people lose jobs, more people will be foreclosed upon, and the cycle will continue.

If you get the assets off of the books, the companies will be more liquid (and in theory) should begin to lend again. Since the lending didn't occur the last time it was proposed in theory, this banks should be federally mandated to begin lending again. It does not have to be an outrageous sum but enough to spur on some growth and so that the only tool fighting the recession is not just the government's fiscal spending.

That is problem with this proposal. As pointed out in the article, there are no mandatory regulations that will be put in place requiring institutions to lend. An error in my opinion. Hopefully, Geithner isn't taking advice from Paulson.

On another note, all of you Michiganders out there might recognize former Governor John Engler in the article's accompanying picture.

Plan to Help Banks Sell Bad Assets.

This article is from Naomi Klein and it discusses how other countries' citizens have reacted to the credit crisis.

All of Them Must Go.