Treasury Secretary Paulson wanted Congress to give him a bazooka big enough that he might not have to use it. It turned out that he did have to use his, effectively as it turned out, and now it’s Europe turn to think big. They need a really big bazooka, but show little sign of coming up with one.
We have a dog in that fight; so we are pulling for the European authorities to cowboy up and do what needs to be done to deal with their financial crisis. We hope they find their bazooka, but it doesn’t look promising.
Has anyone noticed that our sideline rants for Europe to get its act together involves our urging them to take measures that became so unpopular here and cost many of our politicians up for reelection their jobs. Europe needs a TARP to shore up their vulnerable banking system. TARP saved many U.S. banks at no net cost to taxpayers, but many of those with the courage to vote for it paid a heavy price.
The financial markets applauded the ECB’s decision last week to cut its policy interest rate, after it had raised it earlier in the crisis. Now the ECB needs to act more aggressively as lender of last resort, expand its balance sheet, and inject much needed liquidity into the banking system. I’m sure such aggressive actions would find favor in financial markets, but those actions almost cost Chairman Bernanke his reconfirmation and put him in the crosshairs of most of the presidential candidates. Some day his picture will probably appear alongside the phrase “No good deed goes unpunished.”
Yes, we want Europe’s leaders to follow the example of our leaders, but they must be prepared to be voted out of office for their trouble. Of course, that process has already begun.