Los Angeles, CA — In the wake of a very real threat of collapse of Chrysler Corporation, the Bush Administration came out with a lifesaver of $17.4 billion dollars that will be distributed between GM and Chrysler. But this lifesaver comes with strings attached, as it should be. Allowing these companies to survive should be only but one step to ensure that the economy does not take a huge hit; the other needed step is to make sure that the Big Three get serious about streamlining their products and brands, building cars that people actually want to buy, and doing it in cost-effective ways.

In the meantime, consumer prices continued to drop for the fourth month in a row, and while this may sound like a great thing for consumers, it is yet another serious indication that the economy keeps going down and that we are all getting dragged down with it.

Deflation, a concept that had not been heard by at least two generations of American consumers, is a process by which, in the absence of positive expectations in the retail sector, merchants end up discounting merchandise, and those discounts are usually generated by cutting costs; and the way retailers, wholesalers, and manufactures cut achieve lower costs is usually by reducing wages and laying off workers, who in term, end up joining the unemployment line. Unable to find work in a recession and unable to pay their mortgages, bills, these people stop consuming, further pushing sales down. This is a true downward spiral that further feeds itself, triggering further discounts as retailers see their sales plummet.

Not by coincidence, the Federal Reserve came out swinging last week– pushing interest rates to historic lows, and with that move, propelled a new tidal wave of refinancing applications in the home mortgage sector. However, many applicants who bought at the height of the real estate market will find it difficult to refinance as their homes are worth today much less than what they paid for them, meaning in many cases, negative equity. Unable to refinance, many people will remain at risk of foreclosure.

Slept at the wheel or criminally negligent?

In the meantime, the SEC (Securities and Exchange Commission) is still attempting to explain how “investment guru” Bernard Madoff could have operated for so long and, in that process, bilked thousands of investors for $50 billion!

As more and more details come to the surface– including the knowledge that many in Wall Street had warned the SEC for years that something was seriously wrong with Mr. Madoff’s approach to investing, like his accounting firm being just a small office in the middle of nowhere, many more people, including some members of Congress are wondering how could this happen? How could the SEC have failed to investigate and prevent this from ending in the debacle it did, affecting so many investors here and abroad.

Many experts are also wondering if in fact the SEC looked the other way. In a news wire released last Thursday, the Associated Press reported that the FBI and the SEC itself are now investigating the conduct of SEC’s attorney, Eric Swanson who is married to Madoff’s niece, Shanna, and how this relationship could have facilitated vital information to Madoff’s fraudulent operations.

Apparently, Madoff could have been able to bypass deeper investigations and continue to generate profits with information that was obtained illegally, a practice that is known in the industry as insider trading, and that is prohibited by law. In addition, many are whispering that is very likely that Madoff has not acted along and that it would have been nearly impossible for him to run such a large investment fund without the cooperation and support of accountants, attorneys and other trading experts. Questions are being asked, too, about accounting and auditing giants PriceWaterhouseCooper and KPMG for having extended their seal of approval to Madoff’s investment firms despite many experts’ vocal questioning of Mr. Madoff’s investment strategies.

It is difficult for this analyst and many others to avoid thinking that this is just one of the many seemingly negligent distractions that took place during the years of the GOP Administration, the same Administration that when in “charge” of the Iraq transitional authority could not account for $9 billion dollars. This is, too, the same Administration that in the years prior to this financial debacle refused to regulate financial activity under the premise that more regulations would choke financial markets.

Republicans are not the only ones to be blamed for these calamities; Democratic legislators in Congress have, too, for too long been cozy with the financial lobby and the banking industry. But, and this is a big but, Republicans have been in charge of Congress and the Executive branch, exercising discretion over what legislation got debated and pushed through Congress. Therefore, now, it is the time for them to own up and assume the responsibility and take the heat for their shortcomings that has and continues to impact the lives of so many Americans.

Everyone knows that the next Administration will have to deal with major economic problems and that the impact of this crisis will be felt and suffered by everyone, independent of party affiliation. The latest polls show that people have great expectations of the incoming president. But we can all hope that the next Congress and Mr. Obama will not look the other way, and that investigations will be launched so that everyone is held accountable and no friend of the powerful circle is given a pass from having to answer to the American justice system.

So, bundle up, the economic winter is likely to last far beyond the regular season.

Hernan Molina, Host/Anchor
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www.hernanmolina.com

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