I promise I’ll get off the subject of The Bailout after this post. But there are a few more things to be said.
Firstly, thank goodness it passed. We obviously don’t know exactly what its effect will be, not to mention its potential unintended consequences. But considering the alternative, it was a good idea, the alternative being the potential for a total meltdown of the economy.
As I mentioned in a previous post, in a crisis it’s sometimes better to be “strong and wrong” than to take no action. And, if nothing else, our government was strong. This is important because much of the crisis was psychological in nature. We’ve all bought into a system that relies on trust, in the most emotional sense of the word. If everybody really had to make good on all the debt out there… well, that’s just an impossibility. And the pork that was used to turn NO votes into YES votes is nothing in comparison to the total scope of the rescue. We can afford it.
Of course, everyone is asking the question, “What’s next?”
My take: The banks will settle down in a couple of weeks and all of us who need a loan will be able to get one. Make that most of us.
As I write, Bank of America has announced a $8 billion plan to re-negotiate the flakey real estate loans it acquired when it bought Countrywide Financial. This involves both valuation and interest rates. And I think it will probably serve as a model for other lenders. As time goes on, the housing market will settle down, and the fundamental cause of the liquidity problem will be solved.
That doesn’t mean that we’re all going to get rich next year. But it does mean that we won’t be seeing sudden order cancellations in mid-run due to the unavailability of credit.
I think this wake-up call about the fragility of the U.S. economy in general can help manufacturing companies by forcing them to re-evaluate their own strengths and ability to withstand a crisis. The question that marketing guru Doug Hall is fond of asking at the beginning of his presentations – “What would happen if you lost your biggest customer?” – is more relevant than ever, and it’s critical to have a Plan B.
In my next post, I’ll be talking about what we at AllBusiness are doing to help you formulate your Plan B, and, more importantly, to make Plan A work better. There’s a lot of news and, hopefully, it won’t be overshadowed by yet another crisis.