Lately, my time to blog has been scarce. However, I have enjoyed reacting to my friend Mark Osler's blog. From the beginning, Osler has consistently and adamantly expressed opposition to the financial sector bailout. He continues to inveigh against the practice in this post on the latest "Citigroup" episode in the unfolding melodrama.

However, I am not sure that I have fully expressed my deep anxiety over this financial meltdown on my own turf. If you are interested, you can get a feel for my abject trepidation concerning our current financial crisis.

Three comments from Osler's Razor that capture my dread:

No Auto Bailout!!!!

If Nissan and Honda can make cars profitably in the USA, we should not give GM and Ford any freebies. Let 'em sink or swim.

However, the continuing government bailout/rescue of the financial sector continues to be worth the effort.

In for a penny; in for a pound.

Here is a sad but true fact:

it is better to be a banker than an auto worker.

Why?

Because the sine qua non of any modern economy is liquidity [and banking stability and depositor security]. The banks have a gun to our head. If we lose the banks, we are fourth world.

Massive Bank failures = GREAT DEPRESSION.

Nothing else you can imagine compares to this dreadful looming possibility.

Creative destruction is a part of capitalism--yes. And I am a big proponent of capitalism--yes.

Pull GM's decaying carcass off the road and clear the way for the next innovator.

But that is not the way banking works. Remember, massive bank failures = GREAT DEPRESSION.

The Good News: President-elect Obama is bringing back a group of Wall Street sharpies who are clear-eyed realists. They understand where we are and what needs to be done.

The Car Question is politics; the Bank Question is pure survival.

Of course, none of this may matter. The banks might still fail--but, at this point, that means that they take the whole government down with them.

We cannot save every industry in the coming crisis. But, if we get real lucky, and God really does watch over drunks, fools, and the United States, we just might save the banks—and our own hides.

And this:

The difference between the banking crisis and the tragedy of American automobile manufacturing is that we can survive without American-made cars.

If the government folds its hands and watches banks like Citi go bust, or the other myriad private financial institutions that we have bolstered, or the quasi-public Freddie Mac or Fannie Mae, we will initiate a launch sequence of massive panic.

Right now the thin blue line between society as we have come to know it and complete chaos is the assurance that money and banks are backed by the United States government.

You [Osler] are correct that the liquidity is not coming back as hoped--although we have thus far avoided the Great Crash and the ensuing pandemonium.

And there is some irony that the new President-elect is charging the foxes to guard the hen house--but, the truth is, we just have no other choice.

Or do we?

What is your proposal at this point?

Osler replied:

I think if you are going to intervene, let the weak go bust and bolster two groups-- the strong and the new innovators.

Are you assuming the feds will cover all the losses on all the banks we elect not to prop up?

I don't think we have the ability to do that. That is, I fear this is financially NOT feasible. NOT POSSIBLE.

The only hope for us, in my view, is for the feds to guarantee the banks, pump in massive amounts of fake cash, create the illusion of security, and allow the banks to heal themselves.

No guarantee there--but our best bet.

If we start letting these big banks fail, I fear we put the lie to the house of cards we are counting on to protect us from the cold.