Mar 27 2009
Over the past 3 1/2 years while living in India I felt that corruption was one of the bigger threats that could face a nation. In the US, an average citizen does not come across many opportunities to bribe. In India, corruption is dealt with on a daily basis whether it’s straight forward in business or not so straight forward. Need a new internet connection? I had to wait over 4 months to get mine, but I’m sure if I bribed the local technician I would have gotten it within a week. Service with a smile as they take your money to grease the wheels.
However, after hearing all the non-sense about the bailouts and latest program from the Treasury the Public Private Investment Program (PPIP). I think it’s arrogance over corruption that takes the cake. Wall Street believes it’s about them. They still believe they can fix the problem which was in part fueled by them. Obama from day one has talked about transparency, yet I’m willing to bet that the PPIP will be hazy in it’s dealings. The applications for managers are due on April 10, I really hope that on April 12, they provide a list of all the investment managers that applied. I hope this does not turn out to be yet another thinly disguised compensation vehicle for Wall Street. Aren’t the PPIP investments still going to fall in value until the residential and commercial real estate markets stabilize?
This idea of getting Wall Street fixed then Main Street can recover is pure arrogance. Let’s assume everything is fixed with Wall Street and all the banks are re-capitalized and ready to do business. Who are they going to loan all this money to: people, companies, state/local governments? Leverage is what got us to this point and jump starting the banking system to make loans to people that are still financially wounded sounds like another bubble in the making.
There is no silver bullet to this, there are way to many moving parts. Governments and central banks have to show they are trying to do something but their attempts seem more like swimming upstream. Some big actions like nationalizing Citibank might help and show the US is serious and bring back confidence. Once confidence is in place then people might go back to their banks and apply for a loan and get a toaster instead of the other way around.