The financial system is looking for a form of what theologians call "universal salvation". What began as a simple piece of legislation to get $700 billion into the banking industry by the government purchasing toxic assets has turned into a free-for-all to rescue everyone from mortgage holders to car companies.
By the end of the week the Treasury program could be so large that the agency will be handing out free pre-paid cellular calling cards and vouchers for fifty gallons of gas, gifts from the US government.
The banking bill has already been saddled with Congressional requests to limit executive pay at banks and provide help for homeowners. Foreign banks with US operations want in as well. So do thousands of small community banks.
The latest group trying to cut into the line is the US car companies. They have already been begging for Congress to give them $50 billion in loan guarantees to upgrade their factories. According to The Wall Street Journal, "Automobile-finance companies lead a growing list of liquidity-starved industries trying to get in on the huge government rescue plan targeted originally at cleaning up bad mortgage bets."
Fitch recently downgraded GM debt to CCC. Losses at GMAC have been rising. September auto sales are expected to be worse than they were in August which means that GM and Ford could each be in the red by more than $1 billion for the month.
It only took a day or two for the Treasury program to become all things to all people, a life raft for struggling industries and citizens who are down on their luck.
Of course, the burden of caring for all of these souls is too great. If the legislation’s purpose is ransacked, it will be of no good to anybody.
Douglas A. McIntyre
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