THREE tightly interrelated questions seem to be at the forefront of America's economic crisis at the moment.
First: Should the federal government nationalize some banks? Second: Will the cost to the population of a bailout constitute an unconscionably hideous long-term burden to us, our children, and our grandchildren? Third: Will all of this work?
The pain in this case is accelerating national job losses and an increasing devaluation of our assets, starting with our residences, with those two phenomena resulting in continuing faltering consumer confidence, which takes us back to the job losses, making the whole gory process the equivalent of a dog chasing its tail and catching it.
The most immediate issue seems to be the question of nationalizing banks. For me, not only the state of play but also the actions of the bankers since government efforts to save their hides began say, loudly, nationalize them. At least nationalize the ones to which the federal government has already given money, or which want government money.
We continue to hear about how neither the government nor anyone else outside the comfortable walls of those institutions knows what they have on their books in the form of "toxic assets." It is those assets which they claim is the reason why, even though the federal government has poured $350 billion into them already, they are still hoarding billions, keeping the nation's credit situation constipated.
It is almost certainly true that the only way the federal government and the rest of us are going to find out what toxic assets they have on their books is to nationalize them. These banks do not want the government or the public to know how they got themselves into the jam they are in - or who was involved in it. Who, based on what policy, determined by whom, made the bad loans that ultimately brought them low?
The other question is: What have they done with the money that the federal government has advanced to them? The information that has seeped out does not indicate a clear, conscientious, good-faith effort on their part to fix America's credit situation. Instead, it has been "divide up the loot before the feds move in."
Merrill Lynch's hurried payout of $3.6 billion in bonuses is perhaps the most glaring example. Then there's the average $33.2 million per year in compensation paid by financial houses and banks such as Citigroup and Bear Stearns to their CEOs over a 10-year period, with no apparent differentiation between when things were going well and when their leaders joined the "we're too big to let fail" chorus in Washington.
Not one nickel of taxpayer bailout should go to any of the financial institutions without a government takeover. There is just no reason, based on their record, to believe anything they say about themselves.
I have never been able to perceive why an executive of a bank or financial house should be taking home $25 million a year while a nurse, truck driver or teacher is paid a tiny fraction of that. What is it, exactly, that these people do that means that they should receive millions of dollars a year?
One of the things the current crisis has revealed is that they haven't done a good job of what they have been paid so much to do. And now they ask us, the taxpayers, to pick up the check for their mistakes, still without telling us what happened, or what is still happening?
The second question is: Whether in trying to bail out the economy with 12-figure stimulus packages the federal government is piling on American taxpayers until the end of time a debt burden that is simply more than we, our children and our grandchildren can ever repay? Is the constantly augmenting national debt America's lethal subprime mortgage?
There are various unsatisfactory answers to that question. One is, "Don't worry; we'll be dead before anyone gets around to trying to pay it." There is an element of never-never in even the allegedly responsible Obama Administration's approach to the problem. It is apparently now planning to halve the budget deficit - the amount by which the national debt goes up every year - by 2013, a convenient year down the road when Mr. Obama is currently scheduled to leave office.
The other vicious bear on the other side of the hill, whose snout we haven't even seen yet, is called inflation. The government will borrow that money - the national debt already stands at nearly $11 trillion - in 2009 dollars. Maybe by the time we get around to trying to pay it back inflation will have reduced the value of those 2009 dollars by a multiple. What's a few zeroes on a bank note among friends? That is a route traveled by pre-World War II Germany, post-World War II China, Zaire, Zimbabwe, and other ill-fated nations. Why not America?
The final question is fatalistic: Will whatever is done actually work? Will we finish at the end of the day with all or some of the clever things in the economic stimuli done and the economy still staggering? This line of argument also says that President Franklin D. Roosevelt did all this in the 1930s but it took a world war to really get the United States out of the Great Depression.
My view is that even if some or even none of these measures work, Mr. Obama gets big points for trying. As Mr. Roosevelt knew very well, there is a morale aspect to these things.
But let us know what is going on. Nationalize the banks - at least until they can be put on a sound footing. Don't rely on luck to find out if they spent our money - and our children and grandchildren's money - on bonuses for themselves, airplanes, spas, and to buy other banks. After what has happened there is just no reason to trust them for a minute.
Dan Simpson, a retired diplomat, is a member of the editorial boards of The Blade and Pittsburgh Post-Gazette.