Tue, 24 Feb 2009 20:45:33 +0000 – By Liz PeekFinancial Columnist
Please Mr. President, say something reassuring this evening when you address Congress. We realize that the economy is in the doghouse and that we are all to blame. We know that we have been profligate in importing too much from China, wasteful in driving around in our thirsty SUVs and not entirely honest in buying houses that we couldn't afford.
Now we're sorry, and eager to mend our ways. But, we need to know that you will get us out of this mess. That's why we elected you. We need to know that we will not have to live in financial celibacy for the rest of our lives while shopping at Wal-Mart and commuting by bicycle. We need you to tell us that the stimulus bill will put people to work, and that the banking system is sound. (By the way, I don't really understand why we need "stress testing" of the banks to confirm that. My understanding is that the banks have permanently assigned regulators housed in their very offices -- hundreds of them at big banks like Citigroup. I would think you have a pretty good handle on the banks already.)
Fed Chairman Ben Bernanke spoke this morning to the Senate Banking Committee. He was reassuring and said "there is a reasonable prospect" the recession could end this year. Now that's more like it! That's what we need to hear. The stock market is rallying, for a change, in spite of dire reports today on confidence and on housing prices. There is plenty of money on the sidelines waiting to invest in stock prices that are now down nearly 50% -- given any sign of progress, investors will leave Treasuries in the dust and seek the higher returns traditionally found in stocks.
This is important. Economists say that consumer net worth tends to lead GNP by two quarters. Needless to say, sinking home prices have clobbered this measure of our country's well being. But the corker has been the dismal stock market. We need house prices to stabilize, but we will need a rising stock market to help boost the economy.
In other words, Mr. President, now is the time to stop managing expectations lower. This is the time to give your country a little hope, for a change.