Not surprisingly, the markets were back down today after a short bit of enthusiasm yesterday on the emerging “bad bank” plan. While this plan is helpful, the overwhelming drum beat of poor economic news continues. Ford had the worst year ever in 2008, new-homes sales hit a record low, jobless claims saw a new high, business orders declined, more layoffs, further earnings downgrades, etc., all show that the economy continues to slide, making recovery this year less and less likely.
At this point, our near term prospects are governed mostly by two governmental programs: recapitalizing the financial system and stimulating the economy. Progress is being made on both fronts, but plans are still being created.
There is plenty to criticize in both draft plans. It looks like the bad bank plan will pay too much for the bad assets, further burdening taxpayers, and keep the same management in place that got us in the mess to being with. The stimulus plan has some stimulus in it, along with plenty of Democrat and Republican sacred cows.
But, it’s too early to be too critical. Something needs to be done and every available option has a host of problems associated with it.