Tuesday, February 10, 2009

Recession, Recovery and Renewables

The fate of renewables and other Green sectors are tied to the fate of the wider marketplace. With trade contracting and one million six hundred thousand jobs lost in the US since last year, we are beginning to tally the scope of this recession. The concern that our economies could collapse is more than just fear mongering to gain political support. A complete meltdown would be disastrous for everyone including those who are committed to Green. In the US, all financial agencies are committed to bringing their full force to bear to arrest this downward slide. Earlier today the Senate passed an economic stimulus bill and US Treasury Secretary Timothy Geithner outlined his banking rescue plan, the second installment of TARP, which he has called the new financial stability plan.

It appears as though the government has gleaned valuable lessons from the 1930s. And as Japan illustrated in the 1990s, stimulating the economy without addressing the banking system will not produce growth.

As Senator Christopher Dodd said in his introduction of Geithner today, this is a "new era of shared responsibility and cooperation." By focusing on jobs, homes, small businesses, and entrepreneurs, the Obama administration is making good on its pledge to develop a long term comprehensive framework. The administration also acknowledges that unfreezing credit is crucial for economic recovery.

Geithner announced some important government financing support "providing financing that private markets cannot now provide." He referenced a plan with a consumer and business financing capacity of one trillion (US).

Encouraging private interests to get involved in purchasing troubled banking assets makes a lot of sense, as do strings that come with federal money. However, these strings mean that the government will be involved in running the banks. Geithner described the disbursement of government money as "loans and investments with terms and conditions [to produce the] largest benefit at the least cost."

Geithner quoted the President saying that the "doers and the makers of things, the innovators who expand enterprise...this is what drives growth." Without specifically ascribing blame to deregulation in the financial markets, he went on to say that the crisis was caused by "a huge boom in credit, with people and governments borrowing beyond their means...There were failures of checks and balances" without appropriate heed to risk. "Governments were slow to act" he continued "policy was behind the curve."

The new financial stability plan will "cost money, involve risk and take time." The short term goal is to stabilize and repair the financial system. But the wider strategy is part of a long term comprehensive approach which will be "sustained until recovery is established." President Obama is committed to reforming the financial sector to avert future crises like the one we are enduring. However, "the success of the financial stability plan requires cooperation here and around the world."

The recovery will only occur if the Obama administration succeeds in its efforts to reassure America, regain trust and rebuild confidence. "Unless we reestablish confidence and restore the flow of credit," Geithner concluded "the recession will be deeper and longer."


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Oct3 said...

I don't know how much passing this will help. Economies go through cycles. I read this interesting article on


on previous recessions. We just need to adjust I guess.