The Bush TV address

By C. Edmund Wright

Who was that guy who gave the speech a couple minutes after 9 PM Eastern? He seems vaguely familiar. Oh yeah, that's the President with the 26% approval ratings who has almost disappeared from the national scene in the past year.

He reappeared tonight under unhappy circumstances, but to his credit he closed out a solid B plus performance by stating something that seems rather unfamiliar to both Barack Obama and John McCain: that "capitalism is the best system ever devised... this country is the best place in the world to invest and do business... we have the ability to absorb shocks, adjust and bounce back... together we will show the world once again what kind of country America is."

In the 12 minutes prior to that strong close, he did a better job of summing up what is going on and how it affects the average American better than the entire sound byte product of the past three days from Washington. Whether or not the plan is a good one, what the President accomplished at a minimum is get the news out that this is a plan that does in fact rescue all Americans, not simply one niche or group on Wall Street. That in itself is a major accomplishment informing the debate.

The President mentioned that the problem "developed over a long period of time" and was partially the result of "a massive amount of invesment from abroad" that resulted in "easier credit." This led to "some serious negative consequences" and then he had the courage to mention that "many borrowers took out more (mortgage) than they could afford."

He then gave a fairly good quick synopsis by saying that "with supply exceeding demand, housing prices fell. This had consequences far beyond the housing market....since home loans are packaged together as mortgage backed securities and sold."

And that is the big point around which all of this rotates. When the mortgages become worth less dramatically, it ripples throughout the entire banking system which freezes up lending. The President showed that the result was that "banks held onto their money and lending dried up... the gears of the American economy ground to a halt."

This is why the President, along with Hank Paulson, normally a "strong believer in free enterprise" and the concept that failing businesses "should be allowed to go out of business" is in favor of government intervention. He said it's a "tough vote" but did a very decent job of explaining that without it, home loans, retirement accounts, car loans, college loans and business loans will remain very tough to get. That, according to the President, Paulson and Fed Chairman Ben Bernanke is unacceptable.

Some other good points included the idea that "failed executives do not receive windfalls from tax dollars" while adding that it is imperative that "efforts to regulate Wall Street do not hamper our eocnomys ability to grow."

The President added that the Paulson plan is "big enough to solve a serious problem" and mentioned that this was putting "money on the line" and not necessarily spending the money inevitably. He said that "the value (of the mortgage paper) will likely be higher because the vast majority of Americans will pay off mortgages" and that the government is the only entity "big enough to buy and hold as long as needed."

On this last point, he was right but perhaps a bit weak in his emphasis. The fact is, this may not cost the tax payer anything and certainly will not cost anywhere near the 700 billion price tag. Hitting that harder would have been helpful.