Who Can Control the Direction of the U.S Economy?

The bail out plan, which once gave hope to Wall Street, failed overnight. The stock market took a drastic downturn and now fears are spreading. Both supporters and opponents of the plan are losers. Now the question that people ask is: Who can control the direction of the U.S. Economy?

In the face of a suddenly exacerbated financial crisis, the Bush administration is apparently unprepared. After taking over Fannie Mae and Freddie Mac and rescuing Bear Sterns, it abruptly looked coldly upon Lehman Brother’s bankruptcy; after only a single day however, it changed its mantra from “No involvement” and paid (generously) a $85 billion emergency loan to AIG—double the original amount requested by AIG. There is no standard answer as to who, or who will not, get rescued.

This uncertainty has encouraged those financial giants to increase their gambling chips: they continued their speculative behaviour in the hope that the government would purchase non-performing assets to alleviate the crisis.

For this reason, Congress rejected the Bush administration’s $700 billion bail-out plan. Those who are angry refuse to pay with their taxes the bill for the financial crisis and the high salaries of the CEOs; politicians also think this plan lowered speculators’ moral standards, and “encourages them to play for even higher stakes next time”.

The uncertainty of current politics has also increased ambiguity. People seem to waiting for another 1929: the step down of President Hoover, Roosevelt taking over and the beginning of the New Deal. Then, gradually the economy recovered from the Great Depression and a modern, scientific and effective financial surveillance system came into being in America.

Public opinion now decides the direction of the economy

However, whether Bush’s successor Obama or McCain is ready or not, the U.S. economy cannot wait for four months for a political outcome – especially after thirteen banks have gone into bankruptcy and the top five investment banks have all died. As the largest economy in the world, the American financial crisis is a global one. The direction of the U.S. economy actually decides the destiny of the world economy.

Federal Reserve Chairman, Ben Bernanke said: If we do not rescue the market, then we must face a recession. At this point, I am afraid that the United States can not rely on their highly regarded free-market system for help, and market resources are probably exhausted.

Some analysts believe that public opinion will decide the direction of the economy of the U.S. This is more than just talk. The American people still hope the government can do something—the website of U.S. House of Representatives was overwhelmed by millions of visitors in the day after the $700 billion bail-out plan was announced.

Therefore, if there is no accident, the government-led bailout plan will soon get back on to the agenda. If the modified new plan can be relatively comprehensive: not only protect people’s interests, but also offer incentives for participation by Wall Street financiers, the plan may correct the direction of U.S. economy.

“While rescuing the market may be a bad idea, it is the best idea of a bad bunch,” one critic said.