Big Surprise - No Logic in DC

Proving once again that logic does not reign in Washington DC, Vice President Joe Biden, told a group of senior citizens today that "we have to go spend money to keep from going bankrupt." Clearly, this man has now certified himself to be a complete moron. Of course, anyone with a half a brain knew this years ago.

Can any tell me how spending more money than you earn will stop you from going broke? This is the sort of thinking that locks generations of Americans into debt servitude. And that's exactly what America’s Affordable Health Choices Act of 2009 will do however on a much larger scale. If this bill is passed, current and future generations of Americans will be slaves the ever increasing deficit and the debt service on that deficit.

Sure, healthcare in this country has some issues. But why can't we use some good old common sense to fix the problem. Things like letting people buy coverage across state lines, reform of state health coverage mandates or put an end to frivolous lawsuits against healthcare providers. There are plenty of ways to reform the system that make a great deal more sense than maxing out this country's future.

The First Cut is the Deepest?

That may be the case for many, but it is not true of the President's plan to have his cabinet cut a total $100 million dollars in spending. I can't help but recall a scene from Austin Powers when Dr. Evil declares a $1 million ransom from world leaders. Likely for Dr. Evil, he was corrected by Number 2 and upped his ransom request to a properly adjusted for inflation $100 billion dollars. Too bad someone like Number 2 wasn't on hand for today's cabinet meeting. According to The Wall Street Journal story "Obama Tells Cabinet to Trim Spending," The White House heralded recent reductions in travel and paper flow as examples of spending cuts.

While these cuts may be good intentioned, they pale in comparison to the enormous size of this year's fiscal spending. According to House Minority Leader John Boehner, the $100 million dollar cut represents .0025% of the expected $4 trillion in total government spending for 2009. Just the interest on our current national debt amounts to 1.2 billion a day. Mr. Obama was quoted as saying, "A hundred million there, a hundred million here, pretty soon even in Washington, it adds up to real money." Too bad our nation's leaders seem blind to the magic of compound interest that keeps adding on to the nation's debt which as of April 17th is 11,185,715,978,983.38 and counting.

More Bad News for Las Vegas

The recent news regarding commercial property in Las Vegas is bleak at best. The Las Vegas Sun article titled, "Las Vegas braces for commercial foreclosures" exposes how the decline in the Las Vegas economy is beginning to be reflected in an increase in the number of defaults on commercial real estate loans. Before 2007, Las Vegas was a boom town with a variety of new commercial properties. New strip malls, office buildings and industrial space sprang up to support the appetite of the growing southwestern city. However, the rising tide of unemployment and business failures is putting these commercial properties on shaky ground. According to New York-based Real Capital Analytics’ senior analyst Jessica Ruderman, the value of the troubled commercial loans is now $6.4 billion is figure is up from $4.7 billion in early 2008. The $6.4 billion reflects 26 percent of the Las Vegas commercial market is either in default or foreclosure.

Many fear that the number of commercial defaults seen in Las Vegas is not just an anomaly unique to the entertainment capital of the world. The Wall Street Journal has reported that as many as 700 banks could fail because of a combined exposure of up to $250 billion in potential commercial real estate losses. If this report becomes reality commercial properties around the country will look like ghost towns and we will more than likely see yet another government sponsored bank bailout.

At Our Mercy?

The New York Times article titled, "China Slows Purchases of U.S. and Other Bonds" shows how the Chinese government has been managing their foreign currency reserves. Data released by China's central bank show that the Chinese government actually sold their holdings of US Treasuries during the first two months of the year. This trend was reversed in March when the Chinese appear to have started to once again buy foreign securities. It is thought that increased confidence in the Chinese economy may be the reason for the reversal but there could be another reason.

In the months preceding March, Chinese officials had been highly critical of the U.S. economic policies that included huge amounts of government spending. The Chinese are worried that the increase in spending along with the Fed printing money has the potential to bring on inflation which would dilute the value of their U.S. reserves. The Chinese find themselves in a precarious position. They have a vested interest in U.S. economic success. For now it would appear that the U.S. economy has become too big for the Chinese to allow it to fail.

Sit Down and Shut Up

According to an article on Bloomberg.com titled, "Fed Said to Order Banks to Stay Mum on ‘Stress Test’ Results" the U.S. Federal Reserve has instructed banks to keep the results of their recent financial evaluations to themselves. Treasury Secretary, Geithner considers the banks' stress tests to be like physical examinations administered by doctors to patients. The hope is that the tests will help the administration evaluate the symptoms of financial instability that may exist in the nation's 19 largest banks and decide how to treat them.

While it is important to obtain knowledge and information to properly dissect a problem, publicly traded financial institutions must be transparent. Apparently, the Fed does not want the release of the results to influence the outcome of this month's earnings season. It would seem the much heralded concept of "full disclosure" is now subject to the whim of government.

Nation of Savers?

Who knew that the American consumer was actually capable of saving? Data from the Federal Reserve that is cited in The Wall Street Journal story titled, "U.S. Consumer Credit Drops by $7.5 Billion" shows that revolving debt which is mostly associated with credit cards dropped in February by 9.7%. However, it is important to consider why people are saving. It would appear that there is a correlation between the loss of jobs and the lessening of debt. As people fear that they may lose their jobs they are reluctant of over extend themselves.

Interestingly, this decrease in revolving debt appears to be more than a short term blip. Fourth quarter data on U.S. household debt showed a 2% annual rate decrease. This after the third quarter showed a marginal increase of 0.2%. As unemployment increases, it is likely that consumers will continue to save. Likewise as consumers retreat, business will slow their production. It is interesting that saving, the one attribute that many have said the American public lacked the most, may now lead to the further decline of our economy.

Shipwrecked

According to a recent New York Times article titled, "Boats Too Costly to Keep Are Littering Coastlines", it would appear that the current economic woes are having an impact on areas of the U.S. coastline. Many coastal areas are finding boat owners are deliberately abandoning their boats because they can no longer afford the costly nature of boating. In response to the increasing number of derelict boats, some states are working on writing laws to make owners who abandon their boats be handle responsible. Maj. Paul R. Quellette of the Florida and Wildlife Conservation Commission summed it up in saying, “Our waters have become dumping grounds. It’s got to the point where something has to be done.”

One option that some boat owners have used to get from out from under the expense of their depreciating boat is to make the sinking of their vessel look like an accident. This enables the owner to escape the payments on a vessel they are hopelessly upside down on. A San Diego insurance investigator noted that his caseload has nearly tripled in the past year. These abandoned vessels are a poignant symbol of our shipwrecked economy.

Say Domestic Cheese

A recent article in The Wall Street Journal titled, "Looming Tariffs Whet Appetite for Delicacies" illustrates the unintended consequences that occur when governments put tariffs on certain imports. The most obvious outcome is that the prices of the import increase dramatically. The upcoming tariff rates on most E.U. produced delicacies are slated to increase by 100%. While tariffs hurt imports, they can provide domestic companies will an opportunity to gain some market share. However, this approach restricts a free market. In a free market, the consumer is the ultimate judge of whether or not a product deserves to compete in the marketplace.

As the article indicates, the basis for this mini trade battle between the U.S. and the E.U. is a disagreement over an E.U. ban on hormone treated beef. Would not a better approach be for the consumers in the E.U. to be given the choice between purchasing beef with hormones versus beef without hormones? Until some sort compromise is reached, it looks as though Roquefort cheese lovers living in the U.S. better look for a domestic alternative or pay the price.

Innovation Is Key

Sunday's edition of the Sarasota Herald features an article titled, "Tough Times for Tamiami Trail Businesses" which chronicles how local businesses are struggling in the current economic downturn. Much of people's attitude towards their own individual economic situation is formulated by first hand experiences. Seeing the salon where they used to get their hair cut close or the store where they bought someone last year's Christmas gift is liquidated has a significant effect on people's psyche. However, failure does not have to become a certainty. Sometimes a little innovation can spark success.

Such is the case with Modern Beauty salon. Located in North Port, the epicenter of the Sarasota real estate implosion, this salon has defied the crumbling local economy by diversifying. Owner Stella Derby added more value to her establishment by dividing up her salon and adding a contract post office. The strategy of adding the post office to draw more people to the salon appears to be working with the salon adding two to three new clients a week. While the innovation to add a post office to a beauty salon is fairly rudimentary. This sort of forward thinking is going to be the key to getting the U.S. economy on the move once again.

Don't Look Now

Because there is a very real chance that the money in your monopoly game may end up being worth more than the money in your bank account. Yesterday's article in The Financial Times titled "China calls for new reserve currency" reports on a recent proposal by the head of the Chinese central bank to replace the dollar as the world's dominant currency with a new reserve currency that would be administered by the International Monetary Fund. Zhou Xiaochuan, governor of the People’s Bank of China, posted his opinion on the bank's website. In his post Zhou states, "The outbreak of the [current] crisis and its spillover to the entire world reflected the inherent vulnerabilities and systemic risks in the existing international monetary system." Because of the risk, Zhou goes on to assert the need to find a more stable system that does not rely on the currency of a country with a significant amount of debt.

The move to a new reserve currency would be a worst case scenario for the value of the dollar. If this were to happen not only would China not buy our new debt but they would instead look to dump their current dollar holdings. Couple this liquidation with the efforts of The Federal Reserve buying more than $1 trillion of U.S. government-backed IOUs last week along with the increasing amount of spending by the U.S. government; it is difficult to imagine how the U.S. can avoid high inflation perhaps even hyper-inflation. This scenario has the potential to make the value of the dollar on par with monopoly money.

How Long Until We Get There?

On Saturday The New York Times published an article titled "Has the Economy Hit Bottom Yet?" In the article various economists describe possible scenarios that could signal the end of the current economic downturn. The contributors to the article discuss how various changes in stocks, homes prices and consumer spending could indicate that the bottom is in. One analyst cites demand for copper as a sign of a recovery while another mentions a flattening in the saving rate. It is interesting that none of them mentions employment.

Without a decline in the number of people unemployed, it would seem difficult to hit a bottom. Rising unemployment spreads paranoia about the future for both the people that have lost their jobs but also for those who continue to have work but see their friends and family losing their jobs. This uncertainty is what has fueled many people to stop shopping at the mall and instead increase their saving. Without more jobs this economy will have a long way to go to get to a bottom.

You Know It's Bad When...

You know it's bad when even the repo man is having a hard time making it. The recent The Wall Street Journal titled, "The Recession's Gotten So Bad, Even the Repo Man's Singing the Blues" chronicles the trials and tribulations of Tony Cooper, the owner of Professional Auto Recovery LLC. Over the years abundant and easy credit helped Cooper grow his business. It was easy for people with marginal credit to get loans. If those same people got behind on their car loans they would simply walk away from their car because they were confident some other sub-prime car lender would give them a loan for another car.

While the number of car repos have increased in the past year, vehicle financing is down by 32%. This seems to suggest a dramatic shift in the car buying habits. This trend is in part a result of a tight credit market but also a reflection on how the economic downturn has incentivized people to not go further into debt for a car. With rising unemployment, it is difficult to see what could break this trend. Given the decline in auto loans, it might be a good time for Mr. Cooper to park his tow trucks and open an auto repair center.

In China We Trust

On Friday, Ian Bremmer, president of Eurasia Group, was interviewed by Alexis Glick for a segment titled "Government Shaping Economic Future?" on Fox’s Money for Breakfast. Bremmer points out several ways that government policies both abroad and in the U.S. will have a direct impact on the U.S. economic reality in the very near future. One of the most troubling topics that Bremmer and Glick discuss is the possibility that China will shift their investment strategy away from buying U.S. Treasuries and toward their own domestic investments.

If China does adopt this strategy, the implication for the U.S. economy will be marked. According to Bremmer, the U.S. will have to "turn on the printing presses." Unfortunately, much of the recent U.S. government spending is predicated on both the Chinese continued purchase of U.S. Treasuries and the U.S. economy recovering in 18-24 months. If either one of these predictions fail to materialize, then high inflation will likely follow. Our reliance on countries like China is increasingly forcing the U.S. into what Bremmer calls a "secondary role" where "the days where the United States had the political and economic leverage to get the rest of the world behind it are behind us." Short of an economic rebound the likes we have never seen before, it would appear we better hope that China buys our debt.

Deal or No Deal?

In Sunday's Times Online, the British Prime Minister, Gordon Brown, makes the argument that the way out of the current financial crisis is with a global new deal. Brown argues that the U.S. and Britain should parlay their common interests and shared histories to help spread the notion of globalization around the world. Central to many of the Prime Minister's ideas, is the belief that governments must initiate the necessary changes in order for there to be an economic recovery.

It is this reliance on government over the private sector in Brown's proposition that makes his reasoning so flawed. It is capitalism not government control has done more to end poverty and advance freedom around the globe. Brown claims to understand, "the American spirit of enterprise and national purpose" but he doesn't have a clue. His assertions should be firmly rejected by the Obama administration. Simply put; no deal!

When Risk Outweighs Reward

In reviewing this week's announcement of the revised GDP numbers for the fourth quarter, the data pertaining to the decrease in investment in equipment and software was quite striking. The Wall Street Journal article "Economy in Worst Fall Since '82," outlines the details of the revised GDP numbers which were released by the Commerce Department on Friday. Overall the new data reflects a 6.2% fall in GDP rather than the earlier fourth quarter estimate of a decline of 3.8%. This increased decline in fourth quarter GDP indicates that the U.S. economy is in a much more turbulent situation then earlier estimated.

But the rapid decline in portion of GDP relating to investment in equipment and software seems to be the most striking. When a business ceases to purchase such items in spite of the fact that long term saving might result, it is clear that they are uncertain of the future business environment. Bradley Aldrich, the president of the engineering firm, Forcier Aldrich & Associates Inc. sums up his unwillingness to purchase software that would potentially enhance his firm in stating, "It makes sense to do it, but with the economy the way it is right now we're reluctant to make the investment." When the reward of a business investment appears to be fraught with risk, a falling GDP will continue follow.

Seriously, a "Fiscal Responsibly Summit"?

This week, the White House hosted a Fiscal Responsibility Summit. About a week ago, the administration signed the Stimulus Bill which was the personal finance equivalent of a consumer maxing out their credit card to pay for plastic surgery. Now, having spent almost a trillion dollars, the administration aims for fiscal responsibility? This is the equivalent of that same consumer who blew out their credit cards now looking to cut coupons of save a few bucks.

According to Mr. Obama, "We're not going to be able to fall back into the same old habits. The casual dishonesty of hiding irresponsible spending with clever accounting tricks, the costly overruns, the fraud and abuse, the endless excuses." This comment comes after signing of the $787 billion stimulus bill, the $275 billion mortgage bailout proposal, discussions over how to spend the second phase of the TARP money and concerns over providing more money to failing U.S. automakers. Clearly, the administration believes that government spending will lift the economy out of its current decline. It remains to be seen whether or not this government can spend responsibly.

Uncertainty and Banking Much Like Oil and Water

Uncertainty and banking are a lot like oil and water; they just don't mix together very well. People expect their money in banks to be safe. However the Obama administration's recent ambiguity regarding the future of private-sector banking has caused many to question the viability of the current U.S. banking system.

Much of this week the markets have been free falling on the fear the current administration might consider nationalizing banks. As Wall Street Journal article titled, "U.S. Seeks to Stem Bank Fears" shows sometimes not saying anything projects something. Until Friday of this week the 800 lb gorilla in the room was the fear that some U.S. banks may fall victim to nationalization. Fears seemed to abate somewhat when on Friday afternoon White House spokesman Robert Gibbs stated that the administration, "continues to strongly believe that a privately held banking system is the correct way to go." Following the comments from the White House, the Dow came off its lows of the day which had threatened to return the exchange to levels not seen since 1997.

When there is an absence of clear policy, uneasy markets become institutions that are ripe for rumors to take hold. Last year Bear Sterns, a financial giant that had been on business since 1923, collapsed in less than 10 days amidst rumors of liquidity problems. Right now a repeat of the Bear Sterns collapse is what many banks fear the most. Citigroup is keeping close watch of its deposits. Any indication of a disturbing rate of outflows could bring on rapid failure. It is apparent that one thing is for certain, financial institutions don't like uncertainty.

Investment of Last Resort

An article in last week's Financial Times titled, "China to stick with US bonds" illustrates the dilemma that China feels with regard to the state of the U.S. economy. According to Luo Ping, a director-general at the China Banking Regulatory Commission, China is less than happy with the amount of debt that the U.S. government is racking up with its recent bank bailout, auto bailout and stimulus bill, “We hate you guys. Once you start issuing $1 trillion-$2 trillion . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do." To bad the leaders in Washington haven't figured out that increased debt will not stimulate the economy but is a great way to foster inflation.

While I agree with Ping as it relates to the U.S. taking on more debt, I totally disagree with him more when he states, "Deregulation in the US has gone a little bit too far. The market can’t be omnipotent.” In my opinion, it is government regulation that is the root cause of much of our current current. It was the government that decided that home ownership should be treated as right rather than a privilege.

Regardless of what the director-general at the China Banking Regulatory Commission thinks even he acknowledges that the U.S. Treasuries are the best of the worst investment out there.

Las Vegas Doesn't Have Immunity

The New York Times article, "Las Vegas Sags as Conventions Cancel" demonstrates how the current economic upheaval has effected the city of Las Vegas. Prior to the downturn in the economy Las Vegas had become the city of choice for corporate conventions and industry trade shows. However now some seem to think that Las Vegas epitomizes the excesses that has brought the U.S. economy to a near screeching halt. According to Mayor Oscar Goodman, "There’s an impression out there that somehow if you come to Las Vegas, it’s going to reflect on your business culture, and that’s a bunch of hooey.”

Government bailout money given to financial giant Goldman Sachs has also had a recent negative impact on the city. This week President Obama advised companies that they, "can’t go take a trip to Las Vegas or go down to the Super Bowl on the taxpayer’s dime.” Given the President's remarks, Goldman Sachs promptly cancelled the firms Las Vegas conference deciding that the $600,000 cancellation fee was worth the cost in order to avoid negative press. In a statement to the press, Goldman Sachs claimed their decision to cancel was “based on our best efforts to operate according to the requirements of the new landscape of our industry." Clearly, the economic crisis has had an effect on the economy of Las Vegas. Looks like,"What Happens There, Comes Here."

The Gallop to Socialism

In a 2004 interview with Fox News, economist Milton Friedman stated the following when describing four ways to spend money:

"There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40% of our national income."

The stimulus bill as approved by the Senate, is a prime example of someone spending someone else's money on somebody else. When people spend someone else's money on other people marginal analysis is not the primary concern. The Wall Street article titled, "Stimulus Brings Out City Wish Lists: Neon for Vegas, Harleys for Shreveport" showcases some of the excesses that can occur when unbridled spending of other people's money by government occurs. A dog park for Chula Vista CA, a Frisbee course for Austin TX and more neon signs for Las Vegas to name a few. And while these projects may have merit to the residents of their local area, one wonders why federal tax dollars should be used for these projects. Unfortunately, it appears that the current politicians in Washington believe that government spending is the only way to get the U.S. economy back on track. Last Thurday in a speech before House Democrats, President Obama asked, "“What do you think a stimulus is? It’s spending — that’s the whole point! Seriously.” Looks like socialism is taking the lead in the race to control the U.S. economy.

Banks Should Be Careful What They Wish For

I would have loved to have been a fly on the wall of some prominent bank boardrooms when they got the news that government TARP money may come with a few strings attached. Yesterday, The New York Times article, In Curbing Pay, Obama Seeks to Alter Corporate Culture states that the current administration is considering placing limits on executive pay for the corporate officers of firms who have received bailout money and/or are looking to obtain money from the second wave of TARP. The current proposed limit is $500,000. However, in my opinion, why stop there? I think the limit should be substantially lowered. How about $50,000. I can think of no better incentive to get these former private-sector firms start thinking like capitalist again.

Apparently, just the discussion of limits has been enough incentive to make Goldman Sachs, which received $10 Billion in TARP money, to have buyer's remorse. Wednesday, David A. Viniar, the chief financial officer of Goldman Sach, stated firm is looking to repay the money they received as soon as possible in order to "be under less scrutiny and under less pressure." Welcome back to capitalism Goldman Sachs.

A Paradox for the Banks

The AP article, "Banks are pressured to hoard money and make loans" featured in Sarasota Herald Tribune illustrates how banks are attempting to juggle their role as a lender and their responsibility to adhere to government regulations. The paradox that the banks find themselves in is at the heart of the economic crisis. The Treasury has given the banks money for them to lend but the banks can't lend.

Why can't the banks lend even though the Treasury has given them the money to do so? It would seem the problem has a lot to do with another hand of the government. According to banking regulations established by the Federal Deposit Insurance Corp. (FDIC), banks must maintain capital equal to at least 12 percent of assets on their balance sheets. According to Greg Melvin, chief investment officer at investment firm C.S. McKee, "Two arms of the government are saying exactly the opposite thing -- it's ridiculous."

Absurd it this may seem, this is current situation that many banks find themselves in. On the one hand, you have the negative externality impacting the banks who in the past made bad loans and now find themselves having to adhere to strict FDIC regulations. On the other hand, banks are also the focus of positive externality in the form of government subsidies from the Treasury in order to make more loans available. The outcome appears to be gridlock.

US Economy on Trial in Davos

The US economy was called into question by Russia's Prime Minister, Vladimir Putin at this week's annual World Economic Forum in Davos, Switzerland. In his speech given on the opening day of the Forum, Putin initially called for the an end to blaming the current global economic crisis on the US. However as the speech continues, Putin questions the role the US played in the global crisis. Putin asserts the US corporations were subject to substandard regulations and a lack of governmental oversight.

According to Putin, this lack of restraint for fiscal risk has resulted in a world where the economy of one nation, the United States, has brought on huge inequities between the US and other nations. Putin states, "Corporate appetites with regard to constantly growing demand swelled unjustifiably." Putin further points out that he believes that the "corporate appetites" has resulted in wealth being, "distributed extremely unevenly among various population strata" around the world. So much for ending the blame game.

It would appear that a round of "Kumbaya" will not close this year's forum. Let's just hope that next year's forum doesn't start off with "Workers of the world, unite!"

How the City of New London Bypassed Private Property Rights

Yesterday's Wall Street Journal featured a book editorial for a new book titled, "Little Pink House." The book by Jeff Benedict, details how the City of New London took the home of a woman through eminent domain. Susette Kelo, the homeowner, purchased in her home in a desirable neighborhood, made various improvements to the property and over time made close friendships with her neighbors. To Susette Kelo her "little pink house" was paradise.

Now enter the City of New London, who were looking to expand their tax revenues and attract Pfizer, a large corporation, to build a facility in their area. Unfortunately for Ms. Kelo, her home was one in a number of properties that the city wanted to acquire in order to provide the area with not just a corporate research facility but also build luxury hotels and condos. New London believed that the increased tax revenues from the redevelopment was the basis for deeming Ms. Kelo's home as blighted and subject to eminent domain. Susette Kelo fought the order and the case made it all the way the Supreme Court in the case Kelo v. City of New London.

In the end, the Supreme Court ruled in favor of the City of New London. Susette Kelo was forced to give up her home in exchange for a monetary settlement. I think this case is a classic example of how controlled our markets can be. While I can appreciate New London's argument for expanding their local economy, the core value of private property so central to a free market should not have been bypassed.

Ever since I was first exposed to economics in my high school social studies class, I have been an admirer of Milton Friedman who won the 1976 Nobel Prize for Economic Studies. Friedman abhorred government involvement in markets. Since the US economy has had more enough government interventions lately, I thought it may be interesting to look back some of his opinions on economics. Little did I know the wealth of video clips available on the Internet.



One video I found was of an exchange between Milton Friedman and Phil Donahue in 1979. In the You Tube video titled Milton Friedman - Greed, Friedman extols the merits of capitalism. According to Friedman, in a capitalist society the incentive of having the ability to follow your own self interest has led to extraordinary achievements. The interview ends with Donahue challenging free markets as manipulated and therefore lacking in virtue. I think Friedman does an excellent job in pointing out that the self interest of our elected officials can be anything but virtuous.

Too Big To Not Be Confirmed

Recently one of the phases used a lot in the media these days has been, "to big to fail." For example, the $700 billion dollar bailout was sold to the American public as a way to save banks who were "to big to fail." Or how about the auto bailout. The automakers and their related industries were declared too important to our economy so they had to receive a bailout.

This week has brought an interesting twist to the "to big to fail" mantra. For first time since this economic meltdown started last fall the media is touting Timothy Geithner's confirmation as Treasury Secretary as too critical to fail. Apparently, the politicians in Washington think that Timothy Geithner is the only man who can handle this economic mess in spite of his inability to file several years of his taxes properly. In The New York Times article titled Geithner Grilled Over Tax Issue, Iowa Senator Grassley expressed how vital Geithner is in saying, "To some he isn’t merely the best choice; to some he is the only choice.”

Looks like the politicians in Washington are looking to give Timothy Geithner a magic hall pass.