ShaunCarter.com

I am absolutely shocked at the words coming out of Washington right now regarding our nation’s banks willingness to lend. Lawmakers are pressing the largest banks to lend money much more freely to spur consumer borrowing and increase consumption in order to jumpstart the economy.

There is only one glaring problem with this plan: that’s how we got in this mess in the first place! Freewheeling lending by the nation’s banks caused the unsustainable increase in home prices and propped up sales of new cars and fueled the inner consumerist in all of those who can’t manage their spending appropriately.

The solution to the problem isn’t going to be easy, but it has already begun because banks have tightened their lending standards to only put money in the hands of people with a good track record of repayment. This will not only benefit consumers by keeping money out of the hands of those who can’t repay, but it will also restore these institutions to profitability much quicker than under the government’s plan of just giving money to any Joe Guy that walks in the door and wants a loan. The politicians should also stop complaining about dividend payments being made by financial institutions because most American’s hold substantial stakes in our nations banks in their retirement portfolios and are directly benefited by receiving this money.

If the government gets its way and begins forcing banks to lend money to undesirable borrowers, then I am certain we will see ourselves in this mess again within the next decade. With a democrat in the white house and both houses of congress being controlled by the same party it is likely that the bailouts will continue and try to prop up the economy in the short term. However, the moderate term outlook for the stock market and economy looks terrible. There could be a short-lived pop in the economy after the government greases the wheels of the economy, but it will almost certainly come crashing down again sooner rather than later.

I really don’t see how anyone can be bullish on the economy either domestically or internationally if these events are allowed to unfold as our politicians are hoping. Just remember, their only concern is to get re-elected and most are not economic experts.

I think the investors with the foresight to short the financial and sector will be the winners in 2009.

Technorati Tags: economy, bailout, democrat, financial crisis, housing, meltdown, shaun carter, banks, lending, borrowing, federal reserve, economy