Bob Silbernagel Column October 05, 2008

Financial crisis should encourage saving, not more debt

Whoopee! Judy and I are going shopping.

A credit card we have through a national company — one of those banks that hasn’t yet become a wholly owned subsidiary of the federal government — sent us an e-mail notice this week saying our credit limit has been raised sky-high.

We could get even more money if they use the new math, being circulated on the Internet last week.

Perhaps you saw one of those messages.

Instead of Congress giving the bailout money to the troubled financial houses, it should give it directly to adult U.S. citizens and send them on a spending spree that would stabilize the economy.

One e-mail message I saw several times mistakenly talked about an $85 billion bailout and claimed, that dividing $85 billion by an estimated 200 million adult Americans would yield a government payment of $425,000 per citizen.

Wowsers! That would be stimulating.

Unfortunately, I’m still tied to the old-school math, which tells me that if you divide $85 billion by 200 million you get $425 per person. That stimulus doesn’t seem quite as dramatic.

And even if you use the correct figure in the bailout legislation — up to $700 billion — the amount that would provide to each of 200 million Americans is $3,500.

Didn’t we try something like that earlier this year, giving each individual $600 and couples $1,200 to stimulate the economy? Boy, that really turned things around.

Perhaps Judy and I can obtain additional money the old-fashioned way, by refinancing our home at low interest rates and using the cash for things we want, right now! Then count on rising real estate prices to bail us out of our heavy debt. That’s why I was thrilled to see a television commercial last week that, despite all the turmoil on Wall Street and in Washington, advised me that I could still get quick cash I need for virtually anything by refinancing my home or taking a second mortgage on it.

Why wait? Patience, savings and delayed gratification, after all, aren’t what made the American economic system the great engine of progress that it is today.

Right?

There does seem to be a bit of a disconnect between the economic news in Washington and some of what is filtering down to individuals these days. In addition to poor math, there is some very poor timing. Consider, for instance, the following items:

•  A coworker received a mailer last week, urging her to sign up by Oct. 17 for a WaMu credit card. WaMu, also known as Washington Mutual, was placed in receivership by the federal government on Sept. 25. Then its assets were sold to JP Morgan Chase. While WaMu credit and debit cards continue to function, they will eventually be replaced by Chase cards.

•  Judy received a packet last month extolling the virtues of switching her IRA to Merrill Lynch. On Sept. 14, probably shortly after the packet was mailed, Merrill Lynch announced it had agreed to be purchased by the Bank of America in the wake of large losses Merrill Lynch suffered with its bond trading operation. Merrill Lynch’s wealth-management company is still healthy and will continue operating under the new ownership, according to reports. But the 94-year-old company will cease to exist as an independent firm.

•  How about video of that AIG commercial in which the precocious little boy asks his parents if they are adequately insured? The father reassures him they have no worries because they have AIG. The commercial was still airing on television up to a week before Treasury Secretary Hank Paulson decided the government needed to bail out AIG, and become a partner in its business, to keep it from going belly up.


The current financial crisis is severe and serious. But Americans have always found humor in upsetting times. Humorist Will Rogers, after all, was a leading radio commentator and writer during the Great Depression. And why not, when he offered sound advice such as this: “Don’t gamble. Take all your savings and buy some good stock and hold it til it goes up, then sell it. If it don’t go up, don’t buy it.”

These days, we must depend on television talk show hosts for much of our economic humor.

Jay Leno, speaking of the failure of the bailout bill in the House on Monday, explained it this way:

“The plan came in two parts, and I guess they couldn’t agree which part to implement first — the smoke or the mirrors.”

And late-late night television host Jimmy Kimmel, discussing the bipartisan nature of the opposition to the bailout bill, said, “It’s heartening to see Congress put aside party differences to come together to not get anything done.”

These are frightening and uncertain economic times. I think it’s time to face reality, not the moment to load up on credit-card debt or take out a second mortgage for items we don’t truly need.

I’ll be watching the mailbox for that $425,000 check from the government, though.


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