The Christmas rush began even earlier this year. Radio started broadcasting carols weeks before Thanksgiving. The ad blitz seemed to carry an added subliminal message: do your part for the bailout effort. It’s unpatriotic not to shop.

I made my annual pilgrimage to the malls. They weren’t as crowded as I remembered them being in past years. But I still got that queasy feeling as I wandered through the aisles and squeezed between the abundance of merchandise, wondering what would be nice for we who have been naughty. It’s the feeling you get when you’ve eaten too much rich food.

The economy is supposedly on the verge of collapse. Investment firms are stuffed with toxic assets. Banks are scared to lend money because they don’t know who is secure enough to pay them back. States the size of California warn they can’t pay their bills. Maine is faced with its own, daunting, $838 million deficit.

Credit, the grease that lubricates the wheels of capitalism, has reportedly dried up. People are being laid off. The stock market bears no resemblance to any discernible reality. It just flails up and down, trying to find a bottom. Everyone is wondering what sector will be the next to drop. The auto industry? Commercial real estate? Credit card companies?

About the only good news is that prices for oil and gas, which had been through the roof (about $150 a barrel), are now cheap (under $50 a barrel). But then, that’s because global economic activity and demand are down.

The government doesn’t seem to know what to do. First, it says and does one thing. Then another. Bail out Wall Street but not Main Street or Detroit, AIG but not Bear Sterns or Lehman Brothers. Buy toxic assets to get them off the books. Force banks to lend money. Take an ownership interest in banks. But if recent record high values were unjustified and unsustainable, then these measures may be only postponing and making worse the inevitable day of reckoning.

I understand that the goal of government intervention at this point is to ensure a soft landing, to try to prevent the markets from overreacting, which would make the problem worse and the recovery longer. However, recent government efforts to ease the crisis illustrate the difficulty of trying to doctor such a large and complex system.

It is impossible for government to know precisely what to do, much less get it done. The Treasury secretary can tell banks to loan the money they’ve been given, but can’t really stop them from using it to shore up their own reserves or to buy other banks instead.

We need to restore some reason and rationality to our markets and economy. To re-establish some broad, general, basic rules. Reserve requirements. Firewalls. Fiduciary duties. Disclosure.

Perhaps new investment vehicles need to pass some review process to ensure that they bear some rational relation to real value.

Such measures may dampen economic activity somewhat, but it is unrealistic to expect that people will restrain themselves. In the meantime, if we need the government to spend money to get us through the crisis, I say spend it on our neglected infrastructure and public works, and pave the way for recovery.

Halsey Frank, of Portland, is an attorney and former chairman of the Republican City Committee. His column appears monthly in The Forecaster.


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