How real is the credit crisis? Given that perception is reality one would assert that indeed we are confronted with a major credit crisis! Historians have written that most financial crises are a crisis of confidence versus a true financial one. Students of the Great Depression of which Chairman Ben Bernancke is one of the most astute, assert that if we had not lost confidence in the system we could have avoided the Great Depression. We undoubtedly have a confidence crisis brought on by the fear-mongering of first the Bush White House; and, then leaders in both the House and the Senate. The media’s continuous coverage has exacerbated the situation as it seeks new and more rabid headlines and stories to grab the viewers and readers attention.

However, one must ask how real is the liquidity crisis from a financial viewpoint? Per Federal Reserve released public data there has been approximately $1.2 trillion dollars injected into the financial system over the past two weeks. For the week ending 09/26/09 banks borrowed at an average daily rate of $188 billion or $940 billion for the week. Again, citing the Federal Reserve, this is the highest borrowing rate for a one week period in its 92 year history. The record for the highest weekly amount borrowed prior to that was $240 billion; and, that record was established the week ending of 09/19/08.

With almost $1.2 trillion of capital infused into banks over the past two weeks, why should Americans believe that $700 billion is needed in the form of a handout for Wall Street? Any reasonable person would recall the famous words of Samuel Clemens (alias Mark Twain), “Figures don’t lie, but liars figure.”

What is truly tragic about the current circumstances is the fact that the White House’s simple solution, nor the House bailout, nor the Senate one will solve the real problem of the absence of mortgage money. Home values continue to slide and more Americans daily find that they have negative equity in their home increasing foreclosure probabilities. The steady decline in housing value makes the mortgage crisis worse because banks can only handle so many foreclosures or near-foreclosures at any given time. As a result, banks will continue to increase creditworthy standards, making the availability of mortgage money decline, which in turn will result in the inability to reduce the massive overhang of inventory in the residential real estate market.

Therefore, is the credit crisis real? Yes! However, is it because the banks have no liquidity as purported by national leadership? No! The Federal Reserve’s injection of almost $1.2 trillion over the past week proves that it already has the necessary tool to resolve liquidity issues. So how does the $700 billion bailout help? In reality it will do virtually nothing except to provide taxpayer relief to the Wall Street executives that created the mess we have through their risky and greedy practices enabled by the deregulation and lack of oversight by the Bush Administration.