The Veridian Blog

Last week was entirely dominated by economic doom and gloom. New Home Sales fell to their lowest level since October 1991, Durable Goods Orders (a measure for manufacturing growth) fell 4.5% last month – over four times analysts’ expectations, and 2^nd quarter Gross Domestic Product was revised downward from a 3.3% growth rate to 2.8%. This means that the economy grew at a slower rate than many had thought during the 2^nd quarter. Finally, on Friday Washington Mutual said its goodbyes in a not-entirely-unexpected announcement of closing its doors. Simply stunning. Yet despite all the technicals, the talk of Wall Street last week was about the merits of the government bailout plan which legislators worked all weekend to present as a 110-page bill but was rejected by the House of Representatives about an hour ago. If there was such a thing as a warning scale for the economy, similar to Homeland Security’s Threat Levels, we would certainly be in the red “Severe” level right now.

Frankly, there is no way to put a positive spin on what is happening to our financial infrastructure.  It’s not good – and worse, it will be some time before we see recovery.  Three to eight years - there - I've put it in writing.  Three to eight years before housing values recover and trust is put back into the secondary market.  

It is good news, however, that the goverment is addressing the matter with a sense of urgency and in my opinion, today's defeat of the rescue bill will bode well in the long-run.  What we need is a solid plan that addresses the root causes of bank failure and loss of liquidity in the credit markets - not one that appeases the political constituents just to get the bill passed. 

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