On December 16th, the Federal Reserve announced a record-setting cut in interest rates, targeting the federal funds rate at zero to a quarter of a percent. There were hosannas and flourishes on Wall Street, with the Dow surging more than three hundred points.
The world’s wealthy and well-connected are reeling from disclosures that an international investment giant – Wall Street-based Bernard Madoff Investment Securities LLC, run by 70-year old Bernard Madoff, a well-known Wall Street investor – has turned out to be a colossal pyramid scheme with worthless assets.
After Congress approved a so-called "rescue plan" for the financial industry during early October, one could not help but wonder how long it would be until other industries facing hard times would also come hat in hand to Washington for help. Before the month was out, bad news started coming out of Detroit, the center of the automotive universe. The Big Three (General Motors, Ford, and Chrysler) are running out of cash at a time when auto sales nationwide are falling off a cliff. Sure enough, the lame-duck Congress (so called because it includes lawmakers who are retiring or were defeated in the recent election) is considering a $25 billion bail-out plan for Motor City. The automakers, who have already gone to Washington hat in hand, have been asked to deliver plans showing their viability.
Vice President Dick Cheney infamously informed former Treasury Secretary Paul O'Neill in 2002: "Paul, Reagan proved deficits don't matter." Now comes news that bailout-mania combined with already out-of-control domestic spending and foreign wars may lead to the first-ever trillion dollar deficit during the current fiscal year.