The current economic crisis is a many-tentacled monster that reaches across the globe. But at the heart of this creature is the U.S. banking system, whose problems with “toxic assets” are shaking the confidence of investors, scaring consumers and hindering any hope of recovery from gaining any real traction at the moment.
The Obama administration has so far struggled to come up with a clear vision for addressing the banking crisis. Treasury Secretary Tim Geithner has been pummeled for his lackluster performance to date in selling a complicated proposal that calls for governmental shepherding and private investing to address that overwhelming mortgage debt crippling the financial giants. There is a lack of directness in confronting the matter that is shaking Wall Street.
It appears no one really wants to confront the bottom line of the banking crisis because the options faced by Washington, by Wall Street, by America and by the world range from the painfully contentious to the apocalyptic.
The government could nationalize the “zombie banks” that are now basically insolvent and are dragging down the system.
What many of these troubled institutions would prefer is more bailout money, which some are already getting.
We could also let the banks go bankrupt, as some critics of this whole mess have grumbled: Let them fail and take their lumps. Unfortunately, those “lumps” could very well collapse the global economy.
Obama currently seems to be pushing a cross between nationalization and privatized bailouts.
That may be a great display of arrogance — and a great emotional argument FOR nationalization — but it also seems to be the most direct assessment so far of the current banking fiasco.
What will Washington do? And what is it going to cost us? Those are really the only two questions that matter anymore. And make no mistake, the second question is going to come with an ugly answer.