
Perhaps calling it a “bailout” was a little counterproductive. Whether or not you support a bill to inject liquidity back into the market in an effort to get the credit machine rolling again (and whether or not you believe that such a bill is even necessary) it became pretty clear today that calling the effort a “bailout” certainly contributed to HR 3997 not getting the votes.
Watching MSNBC, CNN, Fox and Bloomberg today, I heard a common thread: Constituents of representatives who voted to defeat the bill simply didn’t want to see their hard-earned money go towards “bailing out” ginormous banks on Wall Street. In other words, President Bush, Speaker Pelosi, Secretary Paulson and the press probably killed the initiative from Day One by calling it a “bailout.” Perhaps if the plan had been referred to as something else, like an “Asset Purchase,” an “economic intervention” or even a “national credit adrenaline injection,” we probably wouldn’t be looking at the Dow’s worst day on record. Regardless of election-season politics, could today’s failure in Washington simply be due to a poor choice of words when it came to giving it an identity?
I’m going to try to briefly accomplish in a few paragraphs what it seems to me our government has completely failed to do in this financial crisis.
No, I don’t have $700 billion of my own to shell out. But to me, Congress’ failure came not today on the House floor, but over the past week as both elected officials and members of the administration failed to translate the crisis into terms that have meaning for everyday Americans.
I’ve heard the phrases “Main Street” and “Wall Street” a lot, but what I haven’t heard is plain explanations of what credit really means and how essential it is to our system of doing business.
Here goes.
If the credit markets should freeze up–which many say is happening and will continue without massive intervention–everyone that borrows money will face a cash crunch. That means companies that take advantage of short-term loans to get by won’t be able to buy raw materials or make payroll. Even businesses that don’t need short-term capital may defer purchases to preserve capital.
If even banks are having a hard time getting money, what does that say for the small and midsize business? The Wall Street Journal had a story on Monday on how companies like McDonald’s may face a squeeze as their franchisees are unable to get loans to purchase or upgrade stores. I suspect that is just one visible example of a growing issue for businesses across the country.
We are stuck trying to move forward with new loans–essentially to keep the economy moving–while dealing with clearly bad ones of the past. While much of the attention has focused on concern over home loans, there are also construction loans and business loans that are at risk of default, risks that grow as those businesses find themselves essentially shut off from getting any new capital, extending the vicious circle.
You don’t have to take it from me.
Here’s C.H. Low, CEO of social-networking software start-up Orbius and a serial entrepreneur.
“When financial markets don’t function well, the ramification is broad,” he said in an e-mail interview on Monday. He said he is disappointed that the bailout is so misunderstood. Even the term bailout, he said, is a misnomer.
“This is an asset purchase, not a 100 percent bailout expense to taxpayer,” he said. “There is risk but also possibility of making a profit. Government’s main function is to do things that private sector cannot handle. This Market Stabilization Bill…is as necessary as having an Armed Forces to defend the country.”
Low noted that the main beneficiary is not Wall Street.
“As an early stage start-up, we rely on venture investments to carry us through a few more stages before we can be self-sustaining,” Low said. “With turmoil, smaller venture funds which fund many early stage companies themselves get anxious and their own investors may be affected and may affect their capital call. We ourselves planned for a rainy day but even we don’t have that much for a prolonged monsoon.”
He said that the seizing up of credit creates uncertainty in every sector. “Doing nothing is the worst of all choices,” he said.
Read the rest of Ina’s piece here.
Whether HR 3997 was a good plan or not – let’s face it, transparency about the latest contents of the bill hasn’t been great, – perhaps if it had been dubbed something other than a “Wall Street Bailout,” our representatives in Washington wouldn’t have been under so much pressure to vote nay on Monday. Lesson: Regardless of how great you think your product is, you probably won’t be able to launch it if you start by calling it the wrong thing.
The words we use matter.
PS: Since it is election season, click here to find out if your elected representative voted on HR 3997 the way you wanted them to. 😉
Fight the Wall Street Bailout
This bailout is nothing but bad news. There is no real crisis, the market sell of is a result of fear mongering by President Bush
The bill allows for foreign banks to dump all of their bad assets into American banks, who can in turn sell the debt to the treasury.
THE AMERICAN PEOPLE SHOULD NOT BE PUT ON THE HOOK FOR WALL STREET, AND ESPECIALLY NOT FOR COMMUNIST NATIONS LIKE CHINA!
Alex, buddy, with all due respect, I think we can safely say that there is indeed a crisis. 😀
I can’t believe that the American people have fallen for the scare tactics out of Washington and Wall street. Remember that some of the people scaring the crap out of you, are the same ones that created this mess. Wall Street will fall with or without the bailout. The bailout is only going to delay the inevitable. We are headed for a depression. Yes, I said the one word nobody wants to hear. But it is coming folks so brace yourselves.
Thanks for the comment.
Other issues we’ll have to deal with in this century:
– The end of oil.
– The end of glacier water feeding the world’s most fertile farmland.
– The end of groundwater reserves feeding America’s midwestern farmlands.
We can make it through all this okay, but we need to be aware that these problems are coming. Economics 101: Scarcity of resources. Our resources are shrinking while the global population is growing. Whether you are talking about wealth generation, access to clean drinking water, access to food or access to healthcare, we are headed for a global depression. This goes well beyond just 401Ks and credit crunches.
The silver lining here is that we are on the doorstep of a transformation which doesn’t have to be negative. Where problems appear, I see opportunities. Opportunities to solve problems, opportunities to innovate, opportunities to invest, opportunities to create entirely new products and markets, and opportunities to make the world better in spite of these scary developments. Some see doomsday; I see opportunity.
Transformation and evolution rarely happen because things are going well. They usually happen as a response to a threat. These things may be scary, they may threaten our comfortable way of life, but in truth, they give us an opportunity to reach the next step in our evolution.
Individuals, governments and organizations who embrace this change as an opportunity to do something special will thrive. Those who hold on to their old ways too long and refuse to respond to these changes won’t.
Either way, we need to keep our eye on the ball and be honest with ourselves about what we know is coming. Denial doesn’t help anyone.
Right now, the fight for wallet share is about to get a lot stiffer.
Thanks for the comment. 🙂
Short simple ideas lead to the strongest branding. Henry M. Paulson Jr. original branding as “the Troubled Asset Relief Program” was cooked from the get go. Too long and too complicated. ?What is an asset relief program? The marketplace branding of Wall Street bail was simple and sticky– everyone knows where Wall Street is and what a bail out is.
Once that branding gets hard wired no amount of spin can reposition it.
They needed something short and sweet from the start- maybe the credit expansion plan.
Allen Adamson
Author BrandSimple and BrandDigital